Reaganomics Facts: Good, Bad, Failed or Successful?

Today we have prepared one very interesting discussion for you – Reaganomics facts: good, bad, failed or successful? Interested? Good, stay with us then!

When Ronald Reagan became the President of the United States of America, the recession was increasing drastically, culminating in its worst year in 1981-1982. Meanwhile, the unemployment rate was marching in double figures, standing at 10.8 percent in 1980. The inflation rate, not to be outdone, was 13.5 percent in 1980. Interest rates meanwhile won this race at 21.5 percent in the same year. Reagan established policies in order to combat the economic spiral America was stuck in. Whether these policies succeeded or not has been the source of debate for decades now.

In my opinion, Reaganomics were not just a success but a roaring success. The change in the economic climate of the US is yet to be paralleled by any president before or since. This sentiment is shared by many and I will attempt to prove why I formed this argument.

Of course, Reaganomics has also had its detractors who have argued that wages remained stagnant during the period and that all Reagan did was help the rich and the businesses while raising taxes on the middle class and the poor to fuel the improvement in the economy. While there may be a point to such arguments, the overall impact of Reagan’s economic policies ushered in a new era for the United States, and solidified its position as the only superpower in the world. He is probably part of the reason why the US is featured on the list of 20 Richest Countries in the World by GPD Per Capita.

This is why I have always been surprised that Reagan’s popularity only increased well after his term was over, and when he was in office, his approval rate was nothing special. In fact, it often dipped below 50 percent, with the worst being 35 percent in 1982, mainly due to the rise in the unemployment rate. When the Iran-Contra scandal hit, nearly a third of the Americans actually wanted the resignation of who they believed to be one of their greatest ever presidents.

Further myths have also endured such as the belief that Reagan was a hawk, when the reality was quite the opposite. This can be seen in how Reagan refused to respond to Middle Eastern terrorism by bombing the countries because of the innocent lives that would be collateral damage in this regard. Personally, I would welcome a president with such a stance, especially considering the damage the US has done to the Middle East with its recent interference.

What is the Iran-Contra scandal, you ask? Well, when an arms embargo had been declared on Iran, the US secretly sold the country weapons. This was done initially to secure US hostages in the country and also provide funding to the Contras in Nicaragua. When the scandal broke, the people were livid at being lied to and, naturally, the support plummeted, though Reagan’s actual involvement in the scandal is still being disputed. So, lets try and answer this question: reaganomics facts: good, bad, failed or successful?

What exactly were Reaganomics?

Reagan’s economic policies were established to turn around the aforementioned situation. First of all, and probably the most important part of the policies, Reagan established major tax cuts to encourage businesses to grow. The top income tax rate was deducted from 70 percent to 50 percent. Meanwhile, for the remainder of the tax income brackets, the rates were reduced by 25 percent. However, it is simply a popular myth that Reagan only cut taxes. In fact, apart from his first and last year as President, he actually increased various taxes, such as payroll taxes, and corporate taxes. The latter represented the greatest tax increase rate in history in 1986.

He also reduced federal spending by 5 percent or over $30 billion. In current year terms, this would be an unfathomable $175 billion cut. Remember, these cuts came when the Cold War was at its peak and defense building saw a significant increase in spending. Despite this, non defense expenses were decreased so significantly that the net spending kept falling.

In order to maintain and even improve the value of the dollar, money supply was decreased significantly to ensure that demand outstripped supply; therefore, the currency was not devalued.  Furthermore, deregulation was enforced by Reagan, and as price controls were removed from natural gas and oil, production improved significantly, which in turn actually cut the price of oil in half. So, are this fact, among the other reaganomics facts: good, bad, failed or succesfull?

Did Reaganomics improve the economy?

The question reaganomics facts: good, bad, failed or succesfull?; leads to another question, an absurd one that is still being asked when the evidence is clear for everyone to see. I have already mentioned the condition the country was in. A less competent person in charge may have seen the US go back to the days of the Great Depression. The Reagan administration saw the longest peacetime expansion in history which is yet to be broken. Meanwhile, the economy increased by a third. That means the increase in the economy was the equivalent of adding West Germany’s economy to the country. 20 million jobs were created in this period and unemployment, which was in double figures, fell to just over 5 percent. Even the inflation rate fell to 6.5 percent in 1982.

The real per capita disposable income improved as a result of such policies, which in turn saw the improvement in the standard of living in the country by 20 percent. Poverty rates fell significantly, too, by one-sixth, negating claims that these policies burdened the lower classes. The stock market improved so much, that the improvement was unmatched by any previous decade. This improvement didn’t just last till his administration but also until 2007, which is considered to be the greatest wealth creation period in world history.

The contrasting arguments

What follows is another answer to the question – reaganomics facts: good, bad, failed or successful? The main criticism of Reagan’s policies is that they oppressed the poor and made life harder for them. However, that is simply an attempt to subvert his influence and reduce the gains he made during his Presidency. The truth is, Reagan actually attempted and mostly succeeded in exempting most of the poor from having to pay federal income taxes. How did he achieve this task? Basically by doubling the personal exemptions allowed. Hence, families with income under $14,000 paid little to no taxes at all, which allowed them to spend this money on their necessities. In 1986, the Tax Reform Act was passed, which further helped the poor.

As I mentioned earlier, the inflation rates decreased significantly which was excellent news for the poor. This, combined with the rise in employment meant that the poor actually enjoyed a better standard of living during the Reagan era.  Another way that the media tried to detract from Reagan’s achievements was by citing inequality in pay structures. Mainly, the media would claim that the proportion of income earned by the bottom 20 percent fell in Reagan’s time. However, they ignored the fact that the total income of the bottom 20 percent actually increased. It’s just that the total wealth also increased vastly and the remaining 80 percent earned a greater proportion of that wealth.

Reaganomics vs Obamanomics

President Obama’s term is about to end. So how does he compare to Reagan? Unsurprisingly, he does not come out of this looking too good. Obama’s policies were the complete antithesis to what Reagan implemented, which is surprising since Reagan’s success was there for everyone to see. I’m not saying Obama has been a bad President; he has actually managed quite some achievements on his own, but they still do not compare to what Reagan managed.

For example, while Reagan decreased federal spending significantly, Obama actually increased it by around 28 percent in just his first two years in office, according to Forbes. Obama also saw a fall in the value of the dollar, as he did not reduce supply as Reagan did to control inflation. The contrast is so significant that while Reagan practiced deregulation, Obama has further regulated various industries, including finance and energy, which has been viewed as a negative move by many. This is why while Reagan had an economic growth of 7.1 percent, his counterpart Obama managed only 2.8 percent in the same period. While unemployment fell by 3.3 percent in the Reagan administration, Obama only managed to reduce it by 1.3 percent. During Obama’s term in 2010, the Census Bureau stated that the Americans who were in poverty were the highest in the last 51 years. Another important consideration is that Reagan achieved all this success while battling an out of control inflation rate. In contrast, Obama’s term has seen inflation rise significantly.

Once again, I reiterate that I am not criticizing Obama or accusing him of being a bad President. I think he did really well considering the problems he inherited, and while he may have slipped on occasions, he did a pretty good job. It’s just that when compared with Reagan and his achievements, they pale in comparison.

All in all, there can be no doubt that Reagan was one of the best Presidents the country has ever seen, and any attempt to devalue his contributions should be strongly condemned. There is nothing to contradict that Reaganomics were not just a good idea, but extremely successful as well.

But, what do you think, are the reaganomics facts: good, bad, failed or successful?