Reaganomics

The term “Reaganomics” describes the economic policies of Ronald W. Reagan’s administrations between 1981 and 1988. More broadly it has been used to identify the economic, political, and social approaches to government associated with what has been termed the conservative movement since the 1980s, closely identified with the policies of Margaret Thatcher in the United Kingdom.

Reagan set out his economic policies in his 1981 Program for Economic Recovery. Referred to as “supply-side economics,” the major objectives were to reduce taxes, to limit federal spending and the level of government regulation, and to balance the budget. The rationale was that the economy would be stimulated by increased consumer spending and improved business confidence, and that reductions in government regulation would initiate a competitive and more efficient economy. The Reagan administration maintained that it had achieved its objectives in the lowering of inflation from 10.4 percent in 1980 to 4.2 percent in 1988, while unemployment fell from 7 percent in 1980 to 4.2 percent in 1988, and marginal tax rates were reduced. However, federal spending was not reduced and the budget not balanced, primarily due to a large increase in defense spending.

Critics contend that the inflation rate fell as a result of the ongoing strict “monetarist” policies of the independent Federal Reserve Board and not “supply-side” fiscal policies. They further argue that Reaganomics’ cuts in taxes and social spending were short-sighted. Proponents credit it with the revival of the American economy in the 1980s and 1990s.

—Steve Hardman