Prior to the Reagan Administration, America was in a downward spiral of unemployment and inflation. When Ronald Reagan was elected into office 1981, one of his priorities was to dig the U.S. out of it's economic slump. He introduced his own economic policies which were referred to as, "Reaganomics." He aimed to reduce government spending and control inflation and spurring economic growth through tax cuts and deregulation. Reagan believed in free trade and rejected the idea that the federal government should influence the business cycles with its fiscal policies.

external image REAGANMONEYSPEECH2.jpg

Major Policies

  1. Reduce the growth of government spending
  2. Reduce the marginal tax rates on income from both labor and capital
  3. Reduce regulation
  4. Reduce inflation by controlling the growth of the money supply

These major policies were expected to increase saving and investment, increase economic growth, balance the budget, restore healthy financial markets, and reduce inflation and interest rates.


  • Economic Recovery Tax Act of 1981
    • First Reagan Tax Cuts
    • Reduced individual income tax
    • Incentives for small business and savings
    • Reduced Marginal Income Tax Rate
    • Lowered the Oil Windfall profits tax, helping end the Energy Crisis in 1979
  • Tax Reform Act of 1986
    • Second Reagan Tax Cuts
    • Simplified tax income code
    • Broadened the tax base
    • Eliminated tax shelters
  • Ended the Oil Windfall profits tax in 1988 during the 1980s oil glut (surplus of oil, decreased price)

President Reagan meets with the Press at his Ranch
President Reagan meets with the Press at his Ranch


Most critics of Reaganomics pointed out the huge amount of debt the US was in. Debt tripled from $900 billion dollars to $2.8 trillion dollars during Reagan's tenure. Tax cuts as well as increased government spending increased the deficit even more. A recession occurred in 1982, Reagan's second year in office. Unemployment was over 10% and inflation crippled the economy. Furthermore, during Reagan's Administration, wages decreased. Reagan also created more trade barriers than any other administration since Hoover.


"Reaganomics was the most serious attempt to change the course of U.S. economic policy of any administration since the New Deal." (EconLib ) Ronald Reagan once said, "Only by reducing the growth of government can we increase the growth of the economy." Although Reagan dug the US into a huge deficit, he tried his best to cut taxes and reduce government spending. Critics may argue that reducing government spending shouldn't lead to a deficit, but Reagan still created almost 20 million jobs.

Fun Fact

Jelly Belly created the Blueberry flavor for Ronald Reagan's presidential inauguration in 1981 when over three tons of Jelly Belly beans were consumed during the festivities.

Related Links


Niskanen, William. "Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty." Library of Economics and Liberty. (accessed May 19, 2010).

Friedman, Milton. "Reaganomics - Wikipedia, the free encyclopedia." Wikipedia, the free encyclopedia. (accessed May 19, 2010).

Guma, Greg. "Toward Freedom - The Final Failure of Reaganomics." Toward Freedom - Home. (accessed May 20, 2010).

"Reaganomics." Gale Encyclopedia of U.S. Economic History. Gale Group, 1999. Reproduced in History Resource Center. Farmington Hills, MI: Gale.