Reaganomics: Reaganomics, Unleashing Prosperity and Shaping Our Economic Future

By Fouad Sabry

What is Reaganomics

Reaganomics, or Reaganism, were the neoliberal economic policies promoted by U.S. President Ronald Reagan during the 1980s. These policies are characterized as supply-side economics, trickle-down economics, or "voodoo economics" by opponents, while Reagan and his advocates preferred to call it free-market economics.

How you will benefit

(I) Insights, and validations about the following topics:

Chapter 1: Reaganomics

Chapter 2: Economic Recovery Tax Act of 1981

Chapter 3: Supply-side economics

Chapter 4: Government budget balance

Chapter 5: Tax cut

Chapter 6: Economic policy of the Bill Clinton administration

Chapter 7: Fiscal policy of the United States

Chapter 8: United States federal budget

Chapter 9: Fiscal conservatism

Chapter 10: Early 1980s recession

Chapter 11: History of the United States public debt

Chapter 12: Bush tax cuts

Chapter 13: Domestic policy of the Ronald Reagan administration

Chapter 14: Hauser's law

Chapter 15: Laffer curve

Chapter 16: Tax policy and economic inequality in the United States

Chapter 17: Political debates about the United States federal budget

Chapter 18: Deficit reduction in the United States

Chapter 19: Reagan tax cuts

Chapter 20: Economic policy of the Donald Trump administration

Chapter 21: Economic policy of the Joe Biden administration

(II) Answering the public top questions about reaganomics.

(III) Real world examples for the usage of reaganomics in many fields.

Who this book is for

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Reaganomics.

• Language: English
• Publisher: One Billion Knowledgeable
• Release date: Jan 20, 2024

Book preview

Chapter 1: Reaganomics

Reaganomics (/reɪɡəˈnɒmɪks/; Reaganomics (a combination of Reagan and economics credited to Paul Harvey), Reagan and his supporters liked to refer to it as free-market economics.

Reagan gives a televised address from the Oval Office, describing his tax reduction strategy in July 1981.

Increasing military expenditure, balancing the federal budget and slowing the rise of government spending, decreasing the federal income tax and capital gains tax, reducing government regulation, and restricting the money supply in order to minimize inflation were the foundations of Reagan's economic strategy.

Inflation and crude oil price, 1969-1989 (pre-Reagan years highlighted in yellow)

Prior to the presidency of Ronald Reagan, the United States economy saw a decade of chronically high unemployment and inflation (known as stagflation). The number of attacks against Keynesian economic orthodoxy and empirical economic models like the Phillips Curve increased. Political pressure supported stimulus, resulting in a money supply growth. The elimination of President Richard Nixon's wage and price regulations. In 1976, Gerald Ford had harshly opposed Reagan's plan to return a substantial portion of the federal budget to the states.

Reagan characterized his economic promises in his 1980 campaign speeches as a return to the free business principles and free market economy that were prevalent before the Great Depression and FDR's New Deal initiatives. Simultaneously, he garnered support from the supply-side economics movement, which developed in contrast to Keynesian demand-stimulus economics. This movement generated some of the most ardent advocates of Reagan's ideas during his presidency.

A theoretical taxation model based on the elasticity of tax rates, known as the Laffer curve, impacted the proponents' claim that the tax rate reductions would more than offset any increases in government debt. The model of Arthur Laffer predicts that high tax rates diminish prospective tax collections by decreasing the incentive to create; the model also predicts that inadequate tax rates (rates below the optimal level for a particular economy) lead directly to a decrease in tax revenues.

In 1981, Ronald Reagan recognized the influence of the 14th-century Arab thinker Ibn Khaldun on his supply-side economic views. Reagan quoted Ibn Khaldun, who said, Towards the beginning of the dynasty, huge tax revenues were collected from little assessments, and at the end of the dynasty, small tax revenues were collected from enormous assessments. Reagan said that his objective is to get down to tiny assessments and large profits.

On January 28, 1981, President Reagan removed the last domestic fuel price and allocation regulations,

President Ronald Reagan signs the Economic Recovery Tax Act of 1981 at his California ranch.

The federal revenue portion of the GDP declined from 19.6% in fiscal year 1981 to 17.3% in fiscal year 1984, before rebounding to 18.4% in fiscal year 1989. During this era, personal income tax collections decreased compared to GDP, but payroll tax revenues increased relative to GDP.

Annual percent change in real gross domestic product — 1972 through 1988 (Reagan years in red)

Reagan's budgeted years (FY 1982–1989) had an average spending rate of 21,6% of GDP, closely matched with Obama as the highest of any previous president. Early in their administrations, both were confronted with a severe recession. Additionally, the public debt increased from 26% of GDP in 1980 to 41% of GDP in 1988. In monetary terms, the national debt increased approximately threefold from $712 billion in 1980 to $2,052 trillion in 1988.

Line charts showing Bureau of Labor Statistics and Federal Reserve Economic Data information on the monthly unemployment, inflation, and interest rates from January 1981 to January 1989

Monthly unemployment, inflation, rates of interest from January 1981 to January 1989, Bureau of Labor Statistics and Federal Reserve Economic Data findings

Reagan's average monthly employment growth (based on non-farm payrolls) was 168,000, compared to 216,000 for Carter, 55,000 for H.W. Bush, and 239,000 for Clinton. As the population expands, it becomes more difficult to measure the number of employment produced each month over longer intervals. To overcome this issue, we may calculate yearly employment growth percentages by comparing the number of positions at the beginning and end of their terms in office to obtain an annual growth rate. Annual job growth was 2.0 percent under Reagan, compared to 3.1% under Carter, 0.6% under H.W. Bush, and 2.4% under Clinton.

After the recession of 1981, the average unemployment rate was somewhat higher (6.75 percent vs 6.35 percent), productivity growth was lower (1.38 percent versus 1.92 percent), and private investment as a proportion of GDP was slightly lower (16.08 percent vs. 16.86 percent ). After falling behind its trade counterparts in the 1970s, the United States equaled their industrial productivity gains in the 1980s. By 1990, the manufacturing sector's percentage of the nation's gross domestic product had surpassed the post-World War II low reached in 1982 and equaled the level of production obtained in the 1960s when American factories buzzed furiously..

During Reagan's administration, the real GDP expanded by more than $2 trillion, a growth of over one-third. Over Reagan's eight years in office, the GDP compound annual growth rate was 3.6%, compared to 2.7% during the prior eight years.

Under Reagan, Real earnings for the working class resumed their downward trend that started in 1973, but at a slower pace

In every Reagan year, the average real hourly salary for production and nonsupervisory employees stayed below the pre-Reagan level, although at a slower pace. While inflation remained high throughout Reagan's administration and certainly contributed to the drop in wages during this time, Reagan's detractors often assert that his neoliberal policies were responsible for this and also led to wage stagnation in the next