Reaganomics Quiz

1980 election

Reagan wins, former actor and former governor of California

Economic Conditions:

High-interest rates, Control inflation, Prevented borrowing or expansion

Economic Conditions:

Decline in Productivity, 10% unemployment (11 mill), Most since 1940

Economic Conditions: Farm Crisis

Borrowed when prices were high (so were interest rates), Prices dropped- not able to pay back loans, Lost farms and bankruptcies rose

Supply-Side Economic Theory

Lower taxes on businesses & individuals, Invest & Spend extra $$, Creating prosperity & economic growth- Offset the tax cut

Reagan → Balance Budget (Revenue = Spending)

Revenue > Spending → Budget Surplus Revenue < Spending → Budget Deficit

Supply-Side Economics: 1. Reduce taxes

Especially on the wealthy and large corporations, Trickle-down theory; More investment = business expansion = more jobs = more productivity = more money to spend

Supply-Side Economics: 2. Increase Government Spending

Military and Defense spending

Supply-Side Economics: 3. Cut Domestic Programs

Welfare, food stamps, Medicare

Supply-Side Economics: 4. Reduce the size of Government

Deregulation

Successes in Reaganomics

Confidence restored, Economy recovered, Inflation down to 14% → 4%, Interest rates down 12% → 8%, Unemployment down 10% → 5.5%- More money for consumers to help spend in the economy

Failures of Reaganomics

Tax cut- Benefited the wealthy the most, Social Programs Cut- Poverty increased, No help for the farmers, No Balanced Budget (campaign promise), Budget Deficit & increased national debt

What is the National Debt?

$34,636,000,000,000+

Causes of the Debt

Budget Deficits- Spending > Revenue, Borrowing Money → Government sells to investors...Savings Bonds, Treasury Bills, Treasury Notes, Treasury Bonds

Is the Debt a problem?

Social Security Trust- $3 trillion, Other Government Trust- $1 trillion- Already paid for through taxes

Debt held by Public:

$27.7 trillion, Debt held by Americans- $20.4 trillion, Debt held by foreign countries- $7.3 trillion (Japan 12%, China 11%)

Supply-side Economics

lower taxes will boost the economy as businesses and individuals invest their money, creating prosperity and economic growth that will offset the tax cuts

What was the main idea in Reaganomics?

high taxes took too much money away from investors, and that tax cuts could provide extra money to expand businesses and create new jobs

What was cut to try to balance the budget?

food stamps, school lunches, Medicare payments, unemployment compensation, and student loans. Congress passed most of these cuts

What some examples of how Reagan deregulated the US?

end price controls on oil and gasoline, deregulation in broadcasting, banking, and automotive industries soon followed. Increased oil drilling, mining, and logging on public land