Political Economy Term Paper

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Reagan era economics and uses the economic era as a foundational support for the economic boom of the 1990's. The writer explores various published works regarding the Reagan Economic era including discussions about the trickle down theory and voodoo economics to lay the building blocks to explain the boom of the 1990's.

The economic boom of the 1990's brought America to heights it had not seen in many years. People were able to purchase what they wanted, when they wanted and in the quantity they wanted. The housing market soared and the quality standard of life seemed to improve more many Americans. It was a decade of self-discovery, and a decade of exciting stock, housing, auto and other economic avenues to explode. It lasted long enough for residents of this nation to become comfortable spending and that comfort drove the spending up. This in turn drove the economy forward and for the 1990's it felt that there was never going to be an end. But there was, and today the nation's economy remains in the slump it has been in since the latter part of the decade. There are many factors that led to the economic boom of the 1990's but perhaps the strongest one was the economic strategy of the Reagan era. The economic policies while President Ronald Regan was at the helm included something that was called the Trickle down theory. The Trickle down theory set the groundwork for the economic boom that followed. Whether one was for or against the economic policies of Reagan and Regan's cabinet there is no doubt that those policies set the stage for one of the most active and successful financial booms of the century.

The simplest explanation of the theory Regan promoted was the pie slice theory. According to the president at the time and his advisors, everybody in America gets a slice of the nations financial pie (ASK SOMEONE ABOUT THE REAGAN YEARS AND YOU'RE LIABLE TO HEAR A VARIETY OF ANSWERS... (http://members.tripod.com/~BluEyedMan/).If the pie were made larger than everybody's share would also increase in size. It was a theory that excited the nation at the time. Those who were struggling imagined the ease of their life if their share of the pie were made larger (ASK SOMEONE ABOUT THE REAGAN YEARS AND YOU'RE LIABLE TO HEAR A VARIETY OF ANSWERS... (http://members.tripod.com/~BluEyedMan/).Those who were already doing well believed that a larger pie would mean larger wealth for them as well. All in the entire plan sounded like a win-win situation. The entire economic plan was built in small steps with the eventual outcome being a bigger pie. That bigger pie was served up during the 1990's and served as a springboard for the boom that created a more comfortable standard of living for virtually millions of Americans.

The economic policies worked to strengthen the economy from the inside out and at all levels. It solidified the expansion of the financial strength of millions while setting the nation up to explode with economic success for the following decade (ASK SOMEONE ABOUT THE REAGAN YEARS AND YOU'RE LIABLE TO HEAR A VARIETY OF ANSWERS... (http://members.tripod.com/~BluEyedMan/).

The boom allowed workers to reap the financial benefits which in turn made retailers and service providers able to increase their sales and their production (Rising B2). It was a circle that began during the tail end of Reaganomics and lasted for a decade. In the mid-decade the employment rate for high school drop pouts was higher than it had been in many years (Rising B2). The boom was so explosive and successful following the Reagan era that the only recession experienced was the most mild and short lived since the Civil War recession (Rising B2). "Does Mr. Reagan deserve credit for economic activity occurring a decade after he left office? Absolutely. He had the political fortitude to "stay the course," withstanding the relentless political and editorial attacks directed his way while the Fed pursued the wrenching process of restoring sound money to the economy. He knew that sound money, deregulation and lower taxes were the keys to long-term growth with low inflation. And he understood that even if the tide floated a few yachts along the way, that was no reason to keep it from reaching smaller boats too (Rising B2)."

While many critics of the Reagan era claim the Trickle Down method only uploaded the wealth of the nation to the wealthy further studies by one would conclude the trickle down methods applied to most residents of America. Research has concluded that 60% of the wealth that was increased did in fact go to the wealthy, however, hat has been the slice of pie since the beginning of economic theory. The wealthy have always received a larger portion of the pie than the poor (Tax pp B04). Regan economics did not set out to hurt the wealthy or to take away part of the pie slice that they had always received. Reagan and his advisors were honest from the beginning that the goal was to increase the size of the entire pie, thereby increasing the income of just about everybody in the nation proportionate to their usual percentage pie slice. The low tax rates and increases generated by the Reagan administration worked to increase the income abilities and spend able income of Americans during the 1990's. "In other words, the low tax rates enacted during the evil Reagan administrations resulted in a much fairer distribution of income than the high tax rates of the sainted Carter administration (Tax pp B04). "

Critics of the Reagan economic era allege the boom of the 1990's was a recovery actually spawned by the end of the Reagan economic era (Economics pg). "While Reagan supporters love to say that under his eight-year reign, more than 3 million new jobs were created, they fail to note that almost half of those were government jobs; jobs paid for with tax dollars that were no longer there because of hefty tax cuts to the wealthy, only adding to the deficit (Economics pg). "

There were many critics to the policy that Reagan instilled and many who believed it would drag the economy down in stead of creating a boom that would last an entire decade (Frank pp). " When deficits and the federal debt soared, Congressional conservatives seized the opportunity to castigate not Reagan, but "tax-and-spend" Democrats. Dozens of books and articles appeared decrying the debt's "burden on future generations." New York's Times Square sported an electronic billboard that flashed the per capita debt minute by minute (Frank pp). The long-term result was to hamstring the American political system for two decades, making it impossible even to broach the topic of new federal spending programs (Frank pp). For supply-- siders, tax cuts have always been the means to a larger end - shrinking the size and mandate of the federal government, and shifting it away from the aim of promoting social welfare. Deficits make the job easier, providing a rationale to cut programs that the public wants (Frank pp). " These are the opinions that have been shared by skeptics but there are economists who believe that the Reagan era economics actually framed the house that became one of the greatest economic recoveries and booms in the history of the nation (Frank pp).

Many economists studied the supply side policies that the Reagan administration implemented (SUPPLY-SIDE TAX CUTS AND THE TRUTH ABOUT THE REAGAN ECONOMIC RECORD by William A. Niskanen and Stephen Moore (http://www.cato.org/pubs/pas/pa-261.html).Studies were conducted that assessed the policies by comparing the nations' economic performance in the Reagan years and the years immediately before and after the era. The study concluded that the economic policies did in fact contribute to the major recovery and explosion of the 1990's. The 1990's were set up and created because of the Reagan era. The study tested eight out of ten variables of economics while examining the American economy against those variables. The end result was conclusive evidence that the Reagan economic era actually provided the backdrop for the 1990's economic success (SUPPLY-SIDE TAX CUTS AND THE TRUTH ABOUT THE REAGAN ECONOMIC RECORD by William A. Niskanen and Stephen Moore (http://www.cato.org/pubs/pas/pa-261.html).

On 8 of the 10 key economic variables examined, the American economy performed better during the Reagan years than during the pre- and post-Reagan years (SUPPLY-SIDE TAX CUTS AND THE TRUTH ABOUT THE REAGAN ECONOMIC RECORD by William A. Niskanen and Stephen Moore (http://www.cato.org/pubs/pas/pa-261.html)." There were many factors that contributed to this boom including real and measurable economic growth that was seeded by the Reagan economic era. The fertile economic ground was planted and hoed by the Reagan administration and it prepared the nation for huge advances during the 1990's. There were several important factors that contributed to Reagan's policies which turned the economy upward for a decade. These factors included:

Real economic growth averaged 3.2% during the Reagan years versus 2.8% during the Ford-Carter years and 2.1% during the Bush-Clinton years.…[continue]

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