A Look Into the Economic Policy Commonly Called Reaganomics

One of the economics terms most commonly heard of these days is Reaganomics. This is the economic policy that was released by President Ronald Reagan and his economic team with the hopes of doing four things. First, he wanted to cut government spending. Second, he wanted to cut taxes. Third, he wanted to control the money supply so that inflation did not become a problem. Finally, the fourth thing he wanted to do was deregulate the economy. By doing these four things, it was believed that the economy would flourish. Whether it worked or not is an entirely different topic.

First, looking at the tremendous government spending, what Reagan wanted to do was go in and try and cut programs that were sucking up tax dollars. The mentality was that if there was a smaller government, not as much money would be needed to fund all the dozens of programs that the United States government ran. By doing this, one of two things would occur: first, the budget would be smaller and in direct response to that, the amount of money that the United States government needed to take in to sustain themselves would greatly diminish.

Because of the desire to cut the government, Reagan also cut taxes. His belief was that because the government didn’t need the money, he could cut taxes and that would promote further economic growth in the country. It was around this time that the idea of “trickle-down” was proposed. The way that worked was that by offering tax cuts to the rich, it would allow the money to trickle down so that it would then hit those not so fortunate. The rich would be able to hire more people, expand their businesses, and effectively provide more to their employees. So, what can be taken from this was that it was the rich that benefited the most from these tax cuts. The rich were at one point taxed 70% and under Reagan, that dropped to 28%.

One of the things that is important in America is preventing inflation. Those that have taken World History would know that in Germany after World War I, it was cheaper to burn money than it was to buy wood to burn for a fire place. This was because money had lost all its value. By printing more bills, the value of that dollar decreases. Therefore, Reagan wanted to firmly control how much money was created so that inflation did not occur. Inflation can be detrimental to a nation’s economy.

Finally, Reagan wanted to deregulate the economy. He didn’t want the government getting involved. In his opinion, it was the free-market that would have fixed any problems that happened in the economy. The government shouldn’t get involved because all that happens is that those that are favored benefit. If the government didn’t get involved, the economy would flourish more because capitalists could be capitalists.

Reaganomics is one of the most widely known economic policies and one that modern day Republicans try and stay attached to. One question that comes up, though, is whether or not it worked. Did Reaganomics work? It depends. A deep look into, though, would require another whole article. In quick terms, though, Reaganomics did work to an extent; however, it only would work if the first step was actually followed. Don’t cut spending and at the same time cut taxes, what you wind up with is a whole lot of debt.

Jacob is the owner of a political commentary web publication. One of the topics that does come up from time to time is whether or not Reaganomics actually worked. Who really knows?

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