Reaganomics refers to the economic policies of President Ronald Reagan during his presidency. It is also called trickle-down economics, the idea that investing in the top echelon of society, or cutting taxes to corporations, will be of economic benefit to all, allowing corporations to make more money, spark new growth, and thus hire more employees.
There are several parts to Reaganomics. These can be summed up as reducing government spending, reducing regulation, reducing taxes, and controlling the money supply to reduce inflation. The ideas of Reagan, as is true of many Republicans, is that corporations are hampered with government intrusion. They can’t develop and reinvest in the economy as they should when they have to constantly face high taxes and numerous laws or government agencies that force their compliance on a number of issues. This is the laissez-faire or hands off policy, and the Republican Party’s sense that “bigger” government should be avoided. It implies a trust in the goodness of human nature, particularly at the corporate level, which has not always been justified.
The plan of Reaganomics was not fully realized. Certainly corporate taxes were cut significantly, and personal income taxes in certain tax brackets were cut as well. The wealthiest individuals in the country went from paying about 70% in taxes to approximately 28% in taxes.
However tax rates for people in lower income taxes rose, suggesting that the little guy and poorer people were not benefiting from Reaganomics. With fewer government programs, fewer resources were available to the poor. While some government spending was reduced, deficit spending was significantly increased, in part to help rescue the country from the high oil prices of the late 1970s and recession that existed in the country for at least the first two years of Reagan’s presidency. US debt during Reagan’s presidency increased from about 700 billion to over 3 trillion US Dollars (USD), as various economic crises hit the country, and also as a means of compensation for much lower tax on high income bracket taxpayers.
Part of the plan of Reaganomics did see fruition. Under President Reagan, many major industries were deregulated. These include industries like railroads, banking, and airlines. Government spending was cut, though cuts were primarily levied at social programs like education and welfare. Deregulation is still a hotly contested issue among economists and politicians alike. Some see benefits to Reagan’s path and advocate for privatizing other industries, while others believe that Reaganomics removed safeguards from industries which increased corporate greed.
Reaganomics did create income growth, but it tended to reduce people’s ability to save money. The unemployment rate and interest rate declined under Reagan. These facts are used to argue Reaganomics was a workable plan and one that should be returned to.