The increase in real GDP would put downward pressure on the price level and reduce inflation. Supply-siders also believed that the budget deficit would not increase substantially as a result of the tax cut. Even if it did increase, it would be offset by increased saving due to the lower taxes. Many economic critics today and in the 1980’s questioned the effectiveness of Reagan s policies, also known as Reaganomics. Economists still argue whether Reagan’s actions were helpful or harmful to the United States economy.
To increase their taxes would be appropriate and this would be stream lining taxes at a time when the economy needs a boost. The Keynesian economists would look at government spending as a means for the government to stop the little growth the economy has had and is to have. The government spending would make it so the people would not have the money to spend within the states and they would have to go without needs and desires. This in turn would be the money that could be used within the economy.
They both entered office with a declining economy on the brink of recession and their main aims were to secure the country’s wealth. Both Reagan and Thatcher sought to become financially stable economies and both achieved this largely by cutting income tax rigorously making it very difficult for any following administration to raise it thereafter. It was a noteworthy strategy of both administrations to reduce the power of the government. They did this by privatising nationally owned enterprise, dismantling the welfare state and reducing the power of the unions therefore transferring economic power form state back into private hands. Neither managed to curb public spending totally but they did manage to change attitude towards it which transferred to subsequent governments.
Running Head: REAGAN-SIDE ECONOMICS Reagan-Side Economics Ebony Stanley Park University Running Head: REAGAN-SIDE ECONOMICS Reagan-Side Economics During his administration, President Ronald Reagan implemented supply-side economics. Believing that the current tax rates were too high and were detrimental to “individual initiative and saving” by Americans, Reagan’s administration felt that supply-side economic policy would be beneficial (Gordon 2009). The thought process of supply side economics rests in the effect of lowering income tax rates. Those who embraced this economic policy theorized that lowering the tax rate would increase the amount of work and saving by the American people. They went on to further say that the increase
I do not agree with her as well on raising the bank reserve requirements as it can restrain lending from banks and as a result it will shrink the economy growth. After analyzing my colleagues’ recommendations, and as the president’s senior economic advisor, I recommend the following: * We should lower income taxes. This shall increase the aggregate demand as the consumer disposable income will increase, which leads to an increase in the consumer spending. If the consumer spending increases, it will bring back up the flow of business and operations which means more jobs opening in the market and low unemployment rates. * Lowering banks’ interest rates.
However, pensioners will be hit hard because the extra income they earn from saving will have dramatically reduced, making them worse off. On the other hand, savers may leave the pound for better interest rates in other countries (hot money), causing a fall in the demand for the pound. As a result the value of the pound will fall, making exports cheaper and there will be an injection of net exports. In conclusion, the impact of loose monetary policy will be beneficial to the economy because extra consumption and investment will cause AD to increase which will increase economic growth. However, it takes a long time for changes in interest rates to feed through to consumption and investment and by then the economy may have gotten worse.
This was mostly due to the fact that the Federal Reserve, as directed by the President, raised interest rates to curb inflation (millercenter.org). Unfortunately for President Reagan, the blue-collar works that largely supported him bared the brunt of this recession. His tax policy and his slashing of social programs made him look insensitive in the eyes of the public. Luckily, he “stayed the course” in regard to the Federal Reserve interest rate policy as it squeezed inflation out of the economy. As a result, President Reagan’s second term was met with great prosperity for people
His agenda focused on cutting taxes, balancing the budget, and withdrawing support from social welfare programs, and returning some power the state governments. Reagan believed that if these goals were accomplished, that the federal government would save billions of dollars and help stimulate the
The presidency of Jimmy Carter (1977-1980) attempted to “recapture a disillusioned citizenry” but was held back by Carter’s conformity to the political boundaries of the American system. While Carter’s term seemed to dig him into a hole as well as complicate matters for everyday people, the Reagan-Bush presidency “transformed the federal judiciary, never more than moderately liberal, into a predominately conservative institution,” (Zinn 574). Corporate America quickly became the greatest beneficiary of the Reagan-Bush years, and the concern for “the economy, which was a short-hand term for corporate profit” dominated any concern for the lower and middle class. All while the quality of life was degrading and the environment rotting. While Reagan-Bush did manage to enforce several Acts for the benefit of the people, with the Gulf War and other economic/environmental calamities, their presidencies seemed to leave a bitter taste in the mouths of Americans.
The President also revisited a tax cut that was originally proposed by the Kennedy administration but shot down by conservatives, as they believed it would raise the federal deficit. Johnson’s attempt was successful, however, and the tax cut contributed to what would become a thriving