Reflecting on the Days of Reaganomics: Pres. Ronald Reagan Brought Financial Greatness Back to America by Reducing Regulation, Government Spending, Marginal Tax Rates, and Inflation

By Smith, Craig R. | USA TODAY, September 2004 | Go to article overview

Reflecting on the Days of Reaganomics: Pres. Ronald Reagan Brought Financial Greatness Back to America by Reducing Regulation, Government Spending, Marginal Tax Rates, and Inflation


Smith, Craig R., USA TODAY


WHEN THE NAME Ronald Reagan is uttered, a multitude of images and impressions of one of the most popular presidents of all time immediately come to mind. Though some may not choose to remember Reagan as the greatest president ever to grace the While House. none can deny that his love for American ideals and his passion for the miracle of self-government remain unmatched in modern times.

Reagan brought financial greatness back to America and ended the Cold War--giving the U.S. back its dignity alter Vietnam and the humiliation of Iron taking American citizens hostage.

His political, economic, and moral contributions to our country and the world will be felt for many generations to come. He truly was a man of the people, by the people, and for the people.

Reagan defeated communism, stopped runaway inflation, cut government spending, and called a Presidential Commission to study returning to the gold standard. "Reaganomics" was the most serious attempt to change the course of U.S. economic policy of any Administration since Franklin Roosevelt's New Deal. "Only by reducing the growth of government," Reagan maintained, "can we increase the growth of the economy."

Reagan's 1981 Program for Economic Recovery had four major policy objectives. It sought to reduce: regulation, government spending, marginal lax rates, and inflation. These changes, in turn, were expected to increase saving and investment, spur economic growth, balance the budget, restore healthy financial markets, and reduce inflation and interest rates. Reagan delivered on all counts, although not to the extent that he and his supporters had hoped.

Reaganomics set the stage for major expansion in the 1990s--the so-called Goldilocks Economy--but not without a fair amount of pain along the way. The fruit of trickle-down, or supply side economics that Reagan established brought the U.S. out of its 1982 recession and set the stage for the greatest growth the world ever has seen, before or since.

* Tax rates were cut by more than two-thirds to 28%, creating 19,000,000 jobs.

* The inflation rate dipped from 13.5% to 4.8%.

* Interest rates dropped from 22% to 11%.

* Unemployment went from 7.5% to 5.4%.

* The Dow jumped from 860 to 2,753. Prior to Reagan taking office, the highest the Dow had seen was 1,020. Reaganomics was responsible for doubling the Dow from the old high--tripling it from the time he became president.

* Gross domestic product doubled from 2.7 to 5.4 trillion dollars.

Reaganomics appears to be the economic model that George W. Bush is following with his massive tax cuts and defense spending boosts. However, unlike Reagan, Pres. Bush does not appear interested in major spending cuts or trimming government regulations.

The primary difference between Reagan and Bush is their commitment to cut the Federal government down to size. Reagan was willing to make hard choices, which required Americans to sacrifice. Bush, however, realizes that today's citizenry is so spoiled with cheap money that a return to the discipline of Reaganomics easily could cost him reelection.

A look back

Inflation was rampant during the early years of Vietnam and Pres. Johnson did nothing to stop it. Then LBJ's successor, Richard Nixon, took the country completely off the gold standard and implemented wage and price controls. All that did was cause long lines at the gas station. After Jimmy Carter assumed office, there was the infamous Iranian hostage crisis and the invasion of Afghanistan by the Soviet Union. Luckily for the nation, Reagan subsequently whipped Carter in a landslide and moved into the Oval Office in January, 1981. The hostages renamed home the day after Reagan was sworn in.

On the economic front, Reaganomics rode a decade-long wave before fading. The bursting of the dot. …

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