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What Was Reaganomics?

Tricia Christensen
Updated May 16, 2024
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Reaganomics refers to the economic policies of President Ronald Reagan during his presidency. It is also called trickle-down economics, the idea that investing in the top echelon of society, or cutting taxes to corporations, will be of economic benefit to all, allowing corporations to make more money, spark new growth, and thus hire more employees.

There are several parts to Reaganomics. These can be summed up as reducing government spending, reducing regulation, reducing taxes, and controlling the money supply to reduce inflation. The ideas of Reagan, as is true of many Republicans, is that corporations are hampered with government intrusion. They can’t develop and reinvest in the economy as they should when they have to constantly face high taxes and numerous laws or government agencies that force their compliance on a number of issues. This is the laissez-faire or hands off policy, and the Republican Party’s sense that “bigger” government should be avoided. It implies a trust in the goodness of human nature, particularly at the corporate level, which has not always been justified.

The plan of Reaganomics was not fully realized. Certainly corporate taxes were cut significantly, and personal income taxes in certain tax brackets were cut as well. The wealthiest individuals in the country went from paying about 70% in taxes to approximately 28% in taxes.

However tax rates for people in lower income taxes rose, suggesting that the little guy and poorer people were not benefiting from Reaganomics. With fewer government programs, fewer resources were available to the poor. While some government spending was reduced, deficit spending was significantly increased, in part to help rescue the country from the high oil prices of the late 1970s and recession that existed in the country for at least the first two years of Reagan’s presidency. US debt during Reagan’s presidency increased from about 700 billion to over 3 trillion US Dollars (USD), as various economic crises hit the country, and also as a means of compensation for much lower tax on high income bracket taxpayers.

Part of the plan of Reaganomics did see fruition. Under President Reagan, many major industries were deregulated. These include industries like railroads, banking, and airlines. Government spending was cut, though cuts were primarily levied at social programs like education and welfare. Deregulation is still a hotly contested issue among economists and politicians alike. Some see benefits to Reagan’s path and advocate for privatizing other industries, while others believe that Reaganomics removed safeguards from industries which increased corporate greed.

Reaganomics did create income growth, but it tended to reduce people’s ability to save money. The unemployment rate and interest rate declined under Reagan. These facts are used to argue Reaganomics was a workable plan and one that should be returned to.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Tricia Christensen
By Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.
Discussion Comments
By anon320427 — On Feb 17, 2013

It was Jimmy Carter and Ted Kennedy who deregulated the airline industry. Get your facts straight. Because of the Dems deregulating the Airline Industry and disbanding the CAB, the once healthy industry has now become only four major airlines. Reagan had nothing to do with it.

By anon300129 — On Oct 28, 2012

For every dollar Reagan brought in with tax relief, Tip O'Neill's Democrat controlled Congress spent three dollars. Check out government waste by the Congress of the 80's. The Big Dig in Ted Kennedy's and Tip O'Neill's Massachusetts was the biggest rip-off ever!

By anon281266 — On Jul 23, 2012

Part of the plan of Reaganomics did see fruition. Under President Reagan, many major industries were deregulated. These include industries like railroads, banking, and airlines.

Do people know how to fact check? I guess not. Many left-wing deceivers put this out and lazy reporters repeat it. Molly Ivens comes to mind. Carter signed these and it took effect under Reagan. You can look it up. Try an encyclopedia. Bill Clinton signed the bill that helped destroy the world economy, by the way!

By anon273234 — On Jun 05, 2012

Seriously, guys? Basically it was cut taxes on the rich so they hire workers, so workers have money, so they will buy products and stimulate the economy. This didn't work when the lower and working class weren't getting much benefit from it.

Reagan's approach was not helpful and it's considered a failure since it didn't make much difference. Clinton's domestic policies are what helped in the 90's. Not the aftermath of Reaganomics.

By anon271615 — On May 27, 2012

I just want to thank you for the breakdown. I am a dummy with economics, and the Reagonomics was a little confusing, and I was not completely understanding corporate greed within Reagonomics. You spelled it out, and helped it sink in.

By anon150365 — On Feb 07, 2011

in truth as we can see recently, reagonomics destroyed the trucking industry, the airline industry and the broadcasting industry.

by eliminating anti trust laws we now have corporate monopolies running every aspect of business with no competition. reagan put the country on the path to economic ruin.

Lowering the tax rates to the wealth and increasing the tax rate on lower incme earners has done nothing to stimulate the economy. as recent history has proven. bill clinton said it best: "greed has overtaken working to the common good"

By MzV — On Dec 28, 2010

I'm confused. I was just a baby when the idea of Reaganomics came around. I'm a die hard conservative but I don't understand how it works! I've always been a little curious and my Father gave me some advice: if you want to know about something, rather than wait for the answer to come to you, do some digging! I still don't understand the benefits of this idea! Help! lol

By anon91019 — On Jun 19, 2010

seems to me that Reagan's approach to the economy was effective and solved many of the economic problems that he inherited. I also wonder how much his reforms led to the technology boom of the 90's. That seems to be a result of the lower tax burden and corporations' abilities to invest and develop new technologies.

By anon89322 — On Jun 09, 2010

The increase in the federal deficit was not because of the tax cuts. Federal tax receipts doubled by the end of the decade despite the two large tax cuts in his administration.

These policies did not benefit those at the very bottom. But they did benefit the middle class and the working class.

Tricia Christensen
Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia...
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