Reaganomics

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Slide 10

The Beginnings

lifted remaining domestic petroleum price and allocation controls on January 28, 1981

lowered Oil Windfall profits tax in August 1981, helping end the 1979 energy crisis

ended Oil Windfall profits tax in 1988 during 1980s oil glut

Tax Reform Act of 1986, Reagan and Congress sought to broaden the tax base and reduce perceived tax favoritism

(Reeves, 203)

Slide 11

The Growing Economy

income tax rates dropped from 70% to 28% in 7 years

payroll taxes increased

Real Gross Domestic Product (GDP) growth recovered strongly after the 1982 recession at annual rate of 3.4% per year slightly lower than post-World War II average of 3.6%

Unemployment peaked over 10.7% percent in 1982 then dropped during rest Reagan's terms

inflation significantly decreased

job increase of 16 million occurred

Nelson, 64.

Slide 12

Trickle Down Affect

- policies derided as "Trickle-down economics“

due to the significant cuts in the upper tax brackets

- massive increase in Cold War related defense spending caused large budget deficits

- the U.S. trade deficit expansion contributed to Savings and Loan crisis

- cover new federal budget deficits, United States borrowed heavily both domestically and abroad raising national debt $700 billion to $3 trillion

Reagan described the new debt as the "greatest disappointment" of his presidency

(Wikipedia)

Slide 13

Tax Revenue

Number of Years after Enactment

(Wikipedia)

Slide 14

Laffer Curve

Arthur Laffer’s model predicting excessive tax rates reduce tax reveues by lowering production.

Theoretical taxation model

Vogue among some American Conservatives during 1970’s

if tax rates lowered, tax revenues will lower by the amount of decrease in rate

-reverse is true for an increase in tax rates

The Laffer Curve: Past Present and Future

Slide 15

Achievements

American economy did better than any other pre- or post- Reagan years

Median family income grew by $4,000, during Reagan Era and after wards decreased by $1500

Interest Rates, Inflation, and Unemployment decreased faster than pre- and post- Reagan years

Productivity Rate increased, declined and then stayed the same

(Wikipedia)

Slide 16

Perspectives…