In fact, the top tax rate for wealthy Americans dropped from 70 percent to 25 percent. The idea of supply-side economics was the slashing government spending, deregulating and, privatizing industries would stimulate the economy into producing more jobs and creating higher wages. At first, high-interest rates lead to a recession that was followed by economic growth for the rich. The GDP of America grew but the wealth divide between the richest and poorest Americans continued to grow. The deficit also ballooned as fewer taxes had to cover more and Reagan ramped up spending to address the cold war.
Ultimately the ending of many New Deal economic policies leads to the rise of wealth inequality in America, where in the 1980s the 1 percent made up around 20 percent of total US wealth now this figure is nearly half of all wealth in the US. Wages for the average American have stagnated despite inflation and increasing costs of living while the wages for the ultra-rich continue to climb. Many regulations in order to prevent predatory business practices were lifted creating some of the most pressing economic issues of the 21st century including the Student Debt Crisis, and the 2008 recession that was both spurred out of deregulation of the banking sector that allowed for inappropriate or even predatory loaning.
Finally, the slashing of social programs particularly for the mentally challenged has lead to a massive rise in homelessness in America. Cities like San Francisco are now overcrowded with massive homeless populations because of the lack of resources available to them.
However, there does seem to be a Liberal backlash to this conservative backlash. Many Democrats today are calling for higher tax rates for the elite class, more social programs for the homeless, free or cheaper college, and more equal wages for all.
This was a great blog that helped me review Reagan's economic policies. It is interesting to see how his choices have affected politics today.
ReplyDeleteI thought this post was very relatable to today. Many people from the wealthy want lower taxes for themselves, and lower income citizens want higher taxes for the wealthy. This makes sense though because the rich would want to keep their money, and wouldn't want to give it to others.
ReplyDeleteI really enjoyed reading your post, as I am very interested in economics. I liked how you analyzed the relationship between politics and the economy. I also wanted to clarify that the purpose of the tax cuts on businesses and individuals was to introduce more money into the market. However, the long-term prosperity of the economy may actually be attributed to the unpopular but successful policies of President George H. W. Bush. Regarding the wealth distribution graph, I found it interesting how the wealth disparity really began to grow in ~2008, almost 20 years after Reagan’s presidency. For the other graph regarding income, the data does not accurately portray the situation, as income from capital gains should not be included. Since the top 1% own large amounts of investments, the trend line is simply following the market movements at large.
ReplyDeleteSource: https://www.investopedia.com/terms/r/reaganomics.asp