Ronald+Reagan

**To what extent was Reaganomics effective in stimulating the economy and solving the nation's problems? Include positive and negative effects.

Ronald Reagan was born February 6th 1911 in Tampico, Illinois. He graduated from Eureka College with a degree in economics and sociology. Reagan then became a radio announcer and then moved to Hollywood to become an actor. He eventually became the president of the Screen Actors Guild. During this experience, his social radar went from left, to right. He was elected governor of California in 1966 and 1970 and defeated Jimmy Carter for the Presidency of the United States in 1980. Reaganomics, or supply-side began being put into effect here, and through his second term as well. Although Reaganomics was considered a new idea, the Germans in reconstruction from World War II had in fact used it. Ludwig Erhard was responsible for this improvement in West Germany by eradication of rationing and price-controls, favoring a free market economy. He cut the marginal tax rate nearly in half. This improvement was seen only in West Germany, not in other countries that received aid through the Marshall plan because they were still practicing demand-side economics, or Keynesian economics.

Ronald Reagan was the 40th president of the United States. This was also a bold economic plan in that it completely through away the old system. Reaganomics began in the 1980's and continues, in some aspect, into today.

Reaganomics was initially implemented in 1981, upon Reagan's arrival in office. Many changes, positive and negative, have been made because of this type of economic plan. Inflation was 12.5 percent on him entering office and only 4.4 percent upon him leaving. Interest rates also fell six points. Many new jobs were created, eight million, and also there was an eight percent growth in private wealth. Prior to Reagan taking office, the unemployment rate was 7.6 percent, whereas upon leaving, unemployment had fallen to the low of 5.5 percent. Although taxes were cut, revenue did not decrease. The United States' Trade deficit grew because of the need to outspend the Soviet Union during the Cold War. The economy grew by one third and the Gross Domestic Product grew by 3.2 percent as a whole and 3.8 percent not including the recession in the beginning of Reagan's term caused by Carter's failure at domestic policies. According to the GDP, debt only increased from 2.6 percent to 2.9 percent, not the proposal that the debt had been tripled. Income also, by the whole, increased four thousand dollars on average for families. Government spending also declined in Reagan’s term, with adjusted inflation, from 4.0 percent to 2.5 percent. Taxes were cut, for example the corporate income tax was reduced from 48 percent to 34, as well as exempting the very poor from income taxes. He eliminated price controls on things like oil and televisions, similar to Ludwig Erhard in West Germany.

Even thought there are a great deal of positive side effects from Reaganomics, critics find many faults with it as well. With Carter, the United States was 994 billion dollars in debt; Reagan nearly tripled that with 2.85 percent increase with 2, 867 billion dollars in debt. In argument to this however, is that in relationship to the GDP and GNP, it barely increased. Along with increasing debt, our trade deficit was quadrupled. The 1986 Tax Reform Act stopped up 500 billion dollars worth of loopholes and tax shelters. This legislation also does the opposite of what Reaganomics is supposed to do. Economists commended the act “because it leveled the playing field for businesses and investments, and made our economy more efficient and productive.” It is projected that growth was only 2.1 percent during the 1980’s for the economy and would have been higher if the tax cut in 1981 would not have happened. Lastly, personal savings dropped 1.5 percent. Reagan also did not initiate any new legislation concerning health, safety, and the environment. Bank failures were also the highest they had been since the Great Depression in the thirties. The tax plans that were passed, excluding the major cuts of twenty-five percent over three years, were developed by Democrats. 125 billion in additional debts were caused because of not reacting fast to the loan and savings crisis, and the Reagan administration enacted many trade barriers making the situation of a quadrupled trade deficit worse. The trend this started is tax cuts. It is a major part of every platform now to either include new tax cuts, or not renew formerly high taxes. George W. Bush defeated Al Gore with that platform and John McCain is promising to continue the Bush taxes. It is kind of like a domino effect from Reagan with tax cuts being the dominoes.**


 * **Percentage of paid income tax** ||
 * **Income** |||||| **Percentage of taxes paid** ||
 * || **1984** || **1986** || **1987** ||
 * **$0 - $15,000** || 5.8% || 4.0% || 2.8% ||
 * **$15,000 - $30,000** || 21.1% || 16.8% || 14.7% ||
 * **$30,000 - $50,000** || 29.0% || 25.9% || 23.0% ||
 * **$50,000 - $100,000** || 22.0% || 24.3% || 27.7% ||
 * **$100,000 - $200,000** || 8.6% || 10.2% || 11.9% ||
 * **+$200,000** || 13.4% || 18.9% || 19.8% ||
 * || 100.0% || 100.0% || 100.0% ||
 * //Source: IRS// ||
 * //Source: IRS// ||


 * This showed that the upper middle class up took progressively more tax burden than in the beginning of Reagan's second term. Critics of Reaganomics accuse the system of making the poor poorer, but how could that be true with tax breaks and in some instances, complete reprieve from income tax?**


 * **Incomes and Social Mobility** ||
 * //(1991 dollars)// ||
 * **Average Family Income of 1977 Quintile Members in** ||
 * **1977 Quintile** || **1977** || **1986** || **% Change** ||
 * **Bottom 20%** || $15,853 || $27,998 || 77% ||
 * **Second 20%** || $31,349 || $43,041 || 37% ||
 * **Third 20%** || $43,297 || $51,796 || 20% ||
 * **Fourth 20%** || $57,486 || $63,314 || 10% ||
 * **Top 20%** || $92,531 || $97,140 || 5% ||
 * **All** || $48,101 || $56,658 || 18% ||
 * //Source: Urban Institute// ||
 * //Source: Urban Institute// ||


 * In addition, how could it be so that the poor got poorer when over a nine year span of time, the lowest twenty percent of the population saw more than fifteen times the growth of the highest twenty percentile?

Reaganomics: To what extent was Reaganomics effective in stimulating the economy and solving the nation's problems? Include positive and negative effects.

Ludwig Erhard was the first to use supply side economics. In West Germany, following WWII, he did this, lowering taxes by almost fifty percent, and getting read of government regulations on goods. This was the precursor to Reaganomics. Ronald Reagan was born February 6th 1911 in Tampico, Illinois. He graduated from Eureka College with a degree in Economics and sociology. This is where his later foundation for Reaganomics began. After graduation, he became an actor. Through his experiences, his political views switched from liberal to conservative. After being the governor of California, he expanded his views on being the 40th president of the U.S., which he did by defeating Jimmy Carter for the Presidency.

Reaganomics was overall more effective in stimulating the economy and solving the nations problems of unemployment and low income than other economic plans proposed by Democrats. Inflation was 12.5 percent on him entering office and only 4.4 percent upon him leaving. Interest rates also fell six points. Many new jobs were created, eight million to be exact, and also there was an eight percent growth in private wealth. Prior to Reagan taking office, the unemployment rate was 7.6 percent, whereas upon leaving, unemployment had fallen to a low of 5.5 percent. Even though taxes were cut, revenue did not decrease. Gross Domestic Product grew by 3.2 percent and average family income increased by four thousand dollars. Government spending also declined in Reagan’s term, with adjusted inflation factored in, it declined from 4.0 percent to 2.5 percent.

Taxes were cut 25 percent over the first three years of his term, which caused, as was said earlier, no decrease in revenue. Although there were many positives to Reaganomics, negatives were also present. Reagan nearly tripled the debt with an increase with 2, 867 billion dollars in debt. This was 2.85 times more than the previous amount of debt during Carter’s term. Reagan also did not initiate any new legislation concerning health, safety, and the environment. Bank failures were also the highest they had been since the Great Depression in the nineteen thirties. In addition to that, the Reagan administration enacted many trade barriers making the situation of a quadrupled trade deficit worse.

Over all as a whole, I think that Reaganomics was effective. It raised income, especially of the lowest 20% and debt did not overall increase debt. It also did not make the poor poorer because the middle class shouldered the majority of the tax burden. It reduced unemployment and inflation making for a stronger economy.**





http://www.youdebate.com/DEBATES/REAGANOMICS.HTM http://www.econlib.org/library/Enc/Reaganomics.html http://lvb.net/item/960 http://www.washingtonpost.com/wp-dyn/articles/A19171-2004Jun5.html http://www.associatedcontent.com/article/12607/a_short_biography_on_ronald_reagan.html