Reaganomics

What caused the positive economic changes for the United States during the 1980s? In the years prior to the Reagan administration, the United States’ economy experienced something called stagflation. In the 1980s the economy saw positive changes. The policies enacted by the Reagan administration, or ‘Reaganomics’, are responsible for the positive changes in the United States’ economy.

In the years prior to the Reagan administration the United States experienced a suffering economy. For around 10 years stagflation had grown rampant. Stagflation is the combination of a stagnant economy due to rising unemployment coupled with increasing inflation. Before stagflation, the United States experienced a time of great prosperity from World War 2 until the 1960s. The reason for this prosperous time was based on the huge production of war materials created by World War 2. The United States sailed on the back of this industry until it died by the late 60s to early 70s (Source 1 // Shmoop Editorial Team). In 1960, the United States was officially in a recession, and by 1970 it had become much more serious. The industry from World War 2 had died, stagflation was on the rise, and the administrations of the time were not helping.

Lyndon B. Johnson became president in 1963. As many know LBJ had the mandate to get things done. His most notable achievement being ‘The Great Society’. While The Great Society was a great thing for many people and achieved never before seen progress in civil rights and poverty, it was very expensive. The Vietnam War that LBJ escalated was very expensive as well. As it is noted in McDougal Littell’s The Americans, “In February 1964 Congress passed a tax reduction of over $10 billion into law” (Source 10). While tax cu...

... middle of paper ...

...cally reduced inflation during Reagan’s tenure. Reducing inflation by controlling the supply of money was a large success and was great for the economy.

So what facilitated the positive growth in the US economy in the 1980s? Reaganomics was responsible for this growth through the virtue of supply-side economics, reduction of government spending, reduction of marginal tax rates, reduction of regulation, and the reduction of inflation. Reaganomics beat stagflation by boosting the stagnant economy, and by reducing inflation. Altogether President Reagan’s policies were very successful: he created 20 million new jobs, dropped inflation from 13.5 percent to 4.1 percent, dropped unemployment from 7.6 to 5.5 percent, and increased real gross national product by 26 percent (Source 5). Future presidents should keep Reaganomics in mind when writing their own economic policies.