President Ronald Reagan's record includes sweeping economic reforms and deep
across-the-board tax cuts, market deregulation, and sound monetary policies to
contain inflation. His policies resulted in the largest peacetime economic boom in
American history and nearly 35 million more jobs.
By reducing or eliminating decades-long social programs and significantly increasing
defense spending, while at the same time lowering taxes and marginal tax rates,
Reagan's approach to handling the economy marked a significant departure from that
of many of his predecessor's Keynesian policies.
Before the tax cut, the economy was battling high inflation, high Interest rates, ...view middle of the document...
for the lowest-income groups were so large because President Reagan doubled the
personal exemption, increased the standard deduction, and tripled the earned
income tax credit (EITC), which offers net cash for single-parent families with children
at the lowest income levels. These changes removed income tax liability altogether
for over 4 million lower-income families.
Inflation-adjusted defense spending increased by 50 percent between 1980 and1989,
it was curtailed when the Cold War ended and fell by 15 percent between 1989and
1993. However, means-tested entitlements, which do not include Social Security or
Medicare, rose by over 102 percent between 1980 and 1993, and they have
continued climbing ever since. Total spending on all national security programs never
equaled domestic spending, even when Social Security, Medicare, and net interest
are excluded from domestic totals. In addition, national security spending fell during
the Administration of the senior President Bush, while domestic spending increased
in both mandatory and discretionary accounts.
The inflation-adjusted rate of growth in federal spending fell from 4% under Jimmy
Carter to 2.5% under Ronald Reagan; however, federal deficit as percent of GDP was
up throughout the Reagan presidency from 2.7% at the end of the Carter
administration. As a short-run strategy to reduce inflation and lower nominal interest
rates, the U.S. borrowed both domestically and abroad to cover the Federal budget
deficits, raising the national debt from $997 billion to $2.85 trillion. By the end of
1983, unemployment had fallen to 8.3 percent, and it continued to decline for the
next five years. The gross national product had grown 3.6 percent in a year, the
largest increase in nearly a decade. Inflation had fallen to below 5 percent. The
economy continued to grow, and both inflation and unemployment remained low.
In 1981, newly elected President Ronald Reagan refocused fiscal policy on the long
run. Proposing sharp cuts in marginal tax rates. The cuts increased incentives to work
and stimulated growth. These were fundamental policy changes that provided the
foundation for the Great Expansion that began in December 1982.
Reagan's tax cuts did end the recession. However, government spending wasn't
lowered, just shifted from domestic programs to defense. The Federal debt almost
tripled, from $997 billion in 1981 to $2.857 trillion in 1989.
Federal spending more than doubled, growing from almost $591 billion in 1980
to$1.25 trillion in 1990. In constant inflation-adjusted dollars, this was an increase
of35.8 percent.As a percentage of GDP, federal expenditures grew slightly from 21.6
percent in 1980to 21.8 percent in 1990.
President Reagan set up the U.S. Gold Commission to study...