Reagan - Essay Example

Download file to see previous pages... Ronald Reagan’s major focus during his first term was reviving the economy his administration inherited, which was plagued by a new phenomenon known as stagflation
(a stagnant economy combined with high inflation). His administration fought double-digit inflation by supporting Federal Reserve Board Chairman Paul Volcker’s decision to
tighten the money supply by dramatically hiking interest rates. Economist Milton Friedman said, “Reagan understood that there was no way of ending inflation without monetary restraint and a temporary recession”. Friedman feels there were three key elements inherent in Reagan’s fiscal policy. Which was primarily designed to curb social spending and increase defense spending. Reagan according to Friedman, accomplished this in three ways:(1) by slashing tax rates and so cutting Congress’s allowance.
(2) by being willing to take a severe recession to end inflation. In the opinion of Friedman, no other post-war president would have been willing to back the Volcker Fed in its tough stance in 1981-82. I can testify from personal knowledge that Reagan knew what he was doing. He understood that there was no way of ending inflation without monetary restraint and a temporary recession. As in every area, he stuck to his guns and looked to the long term.(3)and in some ways the least recognized, by attacking government regulations. The federal Register records the thousands of detailed rules and regulations that federal agencies churn out in the course of a year....
and his detractors did not have such a regal assessment of his policies; "Reagan's theory

was really 'trickle down' economics borrowed from the Republican 1920's (Harding-

Coolidge-Hoover) and renamed 'supply side'. Cut tax rates for the wealthy; every one

else will benefit. The supply side rhetoric 'was always a Trojan horse to bring down the

top rate'. Many middle-class and poor citizens figured it out, even if the reporters did

not". (Greider)

Two years into Reagan's presidency, the United States experienced its worst

recession since the Great Depression, with unemployment peaking at 10.8 per cent.

Rather than take responsibility, Reagan attempted to blame the 1982 recession on his

predecessor, Jimmy Carter. -Ronald Reagan, nationally televised campaign speech,

October 24, 1980-(federal deficits totaled #252 billion under Carter. By the end of the

Reagan presidency, federal deficits would total $1.4 trillion.

Early in his presidency, Reagan chose as his economic advisors a group that

espoused a radical economic theory called "supply-side". The supply siders told Reagan

that if he gave tax cuts to the top brackets (the wealthiest individuals) the positive effects

would "trickle down" to everyone else. Tax cuts they argued, would produce so much

growth in the economy that America could just outgrow its deficits. Reagan bought into

the supply side theory, which is why in 1981 he predicted that there would be a "drastic ...Download file to see next pagesRead More