What is a flat tax?

As noted in the case, University of Chicago economist, Milton Friedman advocated a flat tax. What is a flat tax?

How does a flat tax impact economic growth?

How is it different from Keynesian philosophy?

Question: The deficits generated by ERTA, TEFRA and The Tax Reform Act resulted in a 186% increase in the U.S. deficit over the debt inherited by the Regan administration. What were the 4 major factors contributing to the deficit increases? Explain.

Question: As noted in the case, one of the most hotly contested debates surrounding the Reagan tax legislation was the extent to which the reduction in government redistribution through taxation and social policy contributed to rising inequality. (Exhibit 14) The rich got richer, and the poor got poorer.

What is trickle down economics?Why was it a failure as noted by the economist Paul Krugman in the case?

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TOM NICHOLAS
JOHN MASKO
MATTHEW G. PREBLE
Reaganomics: Impact and Legacy
The American taxing structure, the purpose of which was to serve the people, began instead to serve the
insatiable appetite of government. If you will forgive me, you know someone has likened government to a baby. It
is an alimentary canal with an appetite at one end and no sense of responsibility at the other.
— Ronald Reagan, March 11, 1981 1
On Election Day 1980, Republican presidential candidate Ronald W. Reagan defeated his opponent,
incumbent Democratic President James E. Carter, Jr. by more than 8.1 million votes (see Exhibits 1 and
2). 2 Reagan was elected largely on his promises to improve the state of the U.S. economy, which had
suffered prolonged “stagflation” through the 1970s—a decade marked by high inflation, high interest
rates, and rising unemployment (see Exhibits 3, 4, and 5).
Reagan and his supporters believed that the economy had stalled in part due to the overextension
of the federal government. As Washington had assumed new responsibilities over the preceding
decades in such areas as health care, education, housing, and welfare, it required more money from its
citizens and businesses to fund these commitments. Arguing that “in our present crisis, government is
not the solution to our problem; government is the problem,” 3 Reagan believed that by cutting taxes,
driving down government spending, and reducing the strain of regulations on business, his
administration could propel America to a new decade of growth and prosperity (see Exhibits 2, 6, 7, 8,
9, 10 and 11).
While the economy grew under Reagan and after he left office, observers were divided on the extent
to which his program deserved credit—and if it did, which parts: tight monetary policy, spending cuts,
tax cuts, or reduced regulation. “Reaganomics,” which inspired a generation of conservative legislative
programs, left a complex legacy, including changes in the role of government, reliance on deficitfinancing, and disagreement over whether the policies’ benefits were enjoyed equally by all Americans.
Reagan’s Early Years
Reagan was born in 1911 in rural Tampico, Illinois, but spent most of his youth in the nearby town
of Dixon with his parents and older brother. 4 Shy and introverted as a child, Reagan branched out by
serving as captain of his high school football and swim teams and as president of the student body and
Professor Tom Nicholas and Associate Case Researcher John Masko and Senior Case Researcher Matthew G. Preble (Case Research & Writing
Group) prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard
Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2019, 2020 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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Reaganomics: Impact and Legacy
the drama club. 5 After graduating high school in 1928, Reagan entered Illinois’s Eureka College to
study economics. 6 His college career mirrored his high school years—captaining the swim team,
playing football and track, and serving as student body president. 7 Reagan worked as a radio
broadcaster after college, and his job included calling Chicago Cubs baseball games. 8 He traveled to
Los Angeles for the team’s annual spring training and reported on them from there. 9 On one such trip
in 1937, he secured a screen test in front of a Hollywood casting director. 10 His successful audition
earned him a contract with Warner Brothers and launched his professional acting career. 11
Hollywood
Between 1937 and 1964, Reagan appeared in 54 movies. 12 His most enduring role was college
football star George Gipp in Knute Rockne All American, which would earn him the nickname “the
Gipper” later in his political career. Reagan married actress Jane Wyman in 1940. 13 While Wyman’s
career was slower to take off than Reagan’s, she ultimately surpassed him in stardom and critical
acclaim. 14 In 1948, the couple divorced. 15 One reporter explained: “[S]he found him a bore who talked
incessantly about union politics [. . .] and other subjects in which she had little interest.” 16
Reagan’s interest in union politics came about through his membership in the Screen Actors Guild
(SAG). 17 He first became involved with the union’s leadership in the early 1940s, and was elected
president five times between 1947 and 1951, and again in 1959. 18 He also served on the board from 1947
through 1960. 19 During this time, Reagan helped address issues ranging from compensation for actors
whose movies were replayed on television, to Congressional investigations into suspected communist
sympathizers within the acting community. 20 Reagan remarried in 1952 to actress Nancy Davis. 21
Reagan’s Political Transformation
Reagan appeared in fewer movies in the 1950s, in part due to his obligations to a new employer:
General Electric (GE). Starting in 1954, Reagan hosted a weekly national television program called GE
Theater. 22 He also travelled the country meeting and speaking to GE workers—250,000 people over
time—as, in one observer’s words, “a kind of goodwill ambassador from the home office.” 23 This was
a transformative experience for Reagan:
After a year or two, Reagan began to also speak about the pride of working hard and
not waiting on the government to take care of you, about the importance of helping the
needy on a privatized basis, not allowing wasteful government programs to feed
themselves first before helping their beneficiaries. [. . .] Reagan was always confronted by
people afterwards concerned about government interference, overregulation and
bureaucratic obstacles in their business. 24
Before joining GE, Reagan had been a registered Democrat and had actively campaigned for
Democratic candidates. 25 He had supported enlarging federal social programs, including those
introduced in President Franklin Roosevelt’s New Deal. 26 In the mid-1940s, he advocated for
government-run health care and utilities companies. 27 A decade later, however, Reagan’s view on the
appropriate role of government in business and in citizens’ lives had shifted dramatically. He would
back Republican Vice President Richard Nixon’s 1960 presidential campaign against Democratic
Senator John Kennedy, of whom Reagan said, “Under the tousled boyish haircut [. . .] is old Karl
Marx.” 28 But it was not until 1962 that he registered as a Republican. 29 “I didn’t leave the Democratic
Party [. . .]. The party left me,” he later explained. 30
As the two dominant political parties in the U.S., the Republican and Democratic parties
represented different principles and ideologies, though each party contained people who had both
2
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conservative and liberal views on the role of government. At the turn of the 20th century, for example,
some Republicans had supported more robust federal involvement in areas such as civil rights and
business regulation, while some Democrats were the strongest advocates for limiting federal power.
The 1960s, however, saw many Americans, like Reagan, undergo a shift in party alignment, in which
those with more expansive views of government tended to identify as Democrats, and those with
conservative views as Republicans. This divide would continue to intensify over subsequent decades.
The Origins of Modern U.S. Conservatism
While political conservatism had long existed in the U.S., it was not until the mid-20th century that
it organized into a political movement. Historically, expansions in federal authority usually were
followed by reversions to more limited, localized authority. But during the Great Depression of the
1930s, Roosevelt’s New Deal increased the scope of federal power by creating new responsibilities for
government in areas such as employment, welfare, and labor relations. World War II brought further
growth in government spending, after which no similar reversion occurred. Before the Great
Depression, federal spending had represented around 3% of GDP. 31 During, it grew to around 8%. 32
After World War II, spending never fell below 10% of GDP, and by the mid-1950s, it exceeded 15%. 33
Some of this expansion was due to increased spending on the emerging Cold War between the U.S.
and the Soviet Union. 34 The Cold War was to many U.S. leaders not just a strategic conflict, but a clash
of incompatible political, economic, and social visions. While most leaders acknowledged this
emerging threat, opinions differed on how to confront it. The dominant approach of the U.S. security
establishment in the 1940s and 1950s was “containment,” a strategy of outlasting one’s enemy by
inhibiting its expansion. 35 Opponents of containment argued, however, that the strategy was
insufficient to stop the spread of communism, and that the objective should instead be to defeat it
completely. 36 Some critics further believed that an expanding federal bureaucracy and welfare state in
the U.S. weakened the country by emulating the exact sort of centralized power it claimed to oppose. 37
Many of these dissenting individuals came together to form the conservative movement. 38
Economic Liberalism
While the roots of conservative philosophy stretched far back in time, 20th century U.S. conservatism
had a distinct economic focus. One of the most important influences was the rise of “liberal” or
“classical” economics, in which economists such as F.A. Hayek and Milton Friedman positioned
themselves against the two dominant economic forces of the early 20th century: socialism and
Keynesianism. The former was a system of planned economies and subordination of individual means
to the centrally-determined needs of society. The latter was an economic school founded by John
Maynard Keynes that advocated full employment and held that the only way to achieve it was by
ensuring high demand for goods and services. 39 When the free market did not create sufficient demand
and the economy fell into recession, Keynesians prescribed government spending to revive it. 40
Economic liberals’ concerns with these forces were that they: 1) produced inadequate results; and
2) incorrectly assumed that central planning and wealth redistribution could coexist with democracy.
Hayek wrote: “It is now often said that democracy will not tolerate ‘capitalism.’ If ‘capitalism’ means
here a competitive system based on free disposal over private property, it is far more important to
realize that only within this system is democracy possible. When it becomes dominated by a collectivist
creed, democracy will inevitably destroy itself.” 41 Friedman agreed: “I know of no example [. . .] of a
society that has been marked by a large measure of political freedom, and that has not also used
something comparable to a free market to organize the bulk of economic activity.” 42
3
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Reaganomics: Impact and Legacy
The notion of liberty was at the core of Hayek’s and Friedman’s thinking, and for Friedman, liberty
and government existed in constant tension. He wrote: “Government is necessary to preserve our
freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power
in political hands, it is also a threat to freedom.” 43 The solution to this paradox, Friedman argued, was
to make government power as “limited” and “dispersed” as possible, and to put government solely in
the business of preserving order and providing basic services. 44
Friedman opposed graduated taxation, whereby tax rates increased with incomes, which aimed to
stimulate consumer demand through redistribution. 45 He reasoned that this gave different economic
strata differing stakes in democracy. 46 Under graduated tax systems, “large numbers could vote to
impose on others taxes that did not also affect their own tax burden.” 47 Friedman instead advocated a
flat taxation system:
[A] flat rate [. . .] on taxable income as presently reported and presently defined, that
is, above present exemptions and after all presently allowable deductions, would yield as
much revenue as the present highly graduated rate. In fact, such a flat rate [. . .] would
yield a higher revenue because a larger amount of taxable income would be reported for
three reasons: there would be less incentive than now to adopt legal but costly schemes
that reduce the amount of taxable income reported (so called tax avoidance); there would
be less incentive to fail to report income that legally should be reported (tax evasion); the
removal of the disincentive effects of the present structure of rates would produce a more
efficient use of present resources and a higher income. 48
Friedman was similarly skeptical toward government spending. He found most Keynesian
justifications for high spending—for “pump priming,” the prevention of secular stagnation, or as a
“balance wheel” to compensate for reduced consumer spending—to be less efficient than leaving the
money in the private sector. 49 He advocated ending government spending for purposes of stimulus or
wealth redistribution, and described any amount of deficit spending as a tax on the future. 50
Friedman disagreed with Keynesian economists who claimed that government spending had a
“necessarily expansionary” effect. 51 Government spending, he contended, worked against creativity
and enterprise: “The [U.S.] has continued to progress; its citizens have become better fed, better clothed,
better housed, and better transported; class and social distinctions have narrowed; minority groups
have become less disadvantaged; popular culture has advanced by leaps and bounds. All of this has
been the product of the initiative and drive of individuals co-operating through the free-market.” 52
Friedman and most other “Chicago School” economists were also monetarists, meaning they
advocated for controlling inflation by increasing the money supply inversely to the expansion of the
economy. 53 In a recession, monetarists advocated for the carefully controlled release of money to spur
the economy, typically reverting thereafter to an anti-inflationary tight money approach. 54
Goldwater, the 1964 Presidential Election, and the Conservative Movement
The first major U.S. political figure to represent the ideals of the new conservative movement was
Republican Senator Barry Goldwater. First elected in 1953, Goldwater developed a reputation as a
fierce anticommunist and opponent of expanding social welfare programs. 55 He articulated his
philosophy in his book The Conscience of a Conservative, where he defined conservatism as “the art of
achieving the maximum amount of freedom for individuals that is consistent with the maintenance of
the social order.” 56 While conservatism was “not an economic theory,” it did have “economic
implications.” 57 He explained: “[Man] cannot be economically free, or even economically efficient, if
4
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he is enslaved politically; conversely, man’s political freedom is illusory if he is dependent for his
economic needs on the State.” 58
Goldwater argued for a flat income tax and viewed the use of taxation to redistribute wealth as
unconstitutional. While acknowledging that “every citizen has an obligation to contribute his fair
share,” he believed that “government does not have an unlimited claim on the earnings of
individuals.” 59 To reduce an onerous tax burden and avoid adding to the national debt, he concluded,
“the government must begin to withdraw from a whole series of programs that are outside its
constitutional mandate—from social welfare programs, education, public power, agriculture, public
housing, urban renewal and all the other activities that can be better performed by lower levels of
government or by private institutions and individuals.” 60 He continued: “The need for ‘economic
growth’ [. . .] will be achieved, not by the government harnessing the nation’s economic forces, but by
emancipating them. By reducing taxes and spending we will not only return to the individual the
means with which he can assert his freedom and dignity, but also guarantee to the nation the economic
strength that will always be its ultimate defense against foreign foes.” 61
On the Soviet Union, Goldwater believed that the U.S.’s objective had to be absolute victory. 62 “I
deplore the huge tax levy that is needed to finance the world’s number one military establishment,” he
wrote. 63 “But even more do I deplore the prospect of a foreign conquest, which the absence of that
establishment would quickly accomplish.” 64
The 1964 Election
In January 1964, Goldwater announced his candidacy for that year’s presidential election. Just two
months earlier, Democratic President John Kennedy had been assassinated. His Vice President, Lyndon
Johnson, had entered the presidency with a transformative legislative agenda. Through his “Great
Society,” Johnson sought to eradicate poverty and expand access to health care and social services
through the creation of federal programs like Medicare and Medicaid. In March, Johnson presented
the Economic Opportunity Act of 1964 to kick off his “War on Poverty.” In July, Johnson signed another
landmark law, the Civil Rights Act of 1964, outlawing segregation in public places and discrimination
in employment and education. 65 Johnson ran for reelection in 1964 on his legislative accomplishments.
The Republican Party, meanwhile, faced internal schism. On one side was a liberal old guard who
had controlled the party for decades and supported New York Governor Nelson Rockefeller for the
party’s nomination. 66 On the opposing side were what one historian described as Goldwater’s “middleclass revolutionaries,” united behind a banner of low taxes, limited government, states’ rights, and
anticommunism. 67 Goldwater won the nomination, but his Election Day loss to Johnson was one of the
worst in U.S. history to date. He won only six states and 52 electoral votes. 68 This defeat was a
significant setback for conservative Republicans: the next two Republican presidents, Richard Nixon
and Gerald Ford, were moderates. There was, however, a silver lining for Goldwater’s supporters: a
new standard bearer for the conservative movement, Ronald Reagan.
Reagan’s Political Rise
In July 1964, Reagan had delivered a campaign speech for Goldwater that came to be called “A Time
for Choosing.” In the speech, Reagan predicted that the booming economy of the 1960s would be shortlived. 69 Growth could not continue, he argued, while taxes accounted for more than one-third of GNP,
inflation continued to rise, and the U.S. kept borrowing. 70 Without greater fiscal sensibility, Reagan
worried that the U.S. could lose the Cold War. 71 The speech made him a national political figure.
5
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Reaganomics: Impact and Legacy
That year, Reagan ended his acting career to seek a new role as governor of California. He secured
the California Republican Party’s nomination to run against incumbent Democratic Governor Pat
Brown in the 1966 gubernatorial election. Brown later described his initial reaction to facing Reagan in
the election: “We thought the notion was absurd and rubbed our hands in gleeful anticipation of
beating this politically inexperienced, right-wing extremist and aging actor in 1966.” 72
The California Democratic Party’s strategy was to portray Reagan as a far-right candidate. The party
even published a document titled Ronald Reagan, Extremist Collaborator. 73 But the message did not
resonate with voters. 74 Reagan proved successful at courting moderates, and he won the governorship
with 58% of the vote. 75 In 1970, he was reelected to a second four-year term. 76 His main
accomplishments in eight years as governor included reforming government-run welfare systems and
addressing the state’s budget deficit. 77 He solved the latter problem, in part, through tax increases. 78
After leaving office in early 1975, Reagan set his sights on the presidency. At the time, the
Republican Party was recovering from the resignations of Vice President Spiro Agnew in 1973 and
President Richard Nixon in 1974 over separate ethics scandals. Gerald Ford, who had led the minority
Republican Party in the House of Representatives until 1973, unexpectedly replaced Nixon as president
in 1974, having been appointed to the vacant vice presidency the previous year. Initially, Ford was a
popular president, but by early 1976, his approval rating had dropped to 46%. 79
Reagan therefore decided to challenge Ford for the party’s nomination in the 1976 election. When
delegates cast their ballots at that year’s party convention, however, Reagan lost by a count of 1,187 to
1,070. 80 In the general election, the Democratic Governor of Georgia, Jimmy Carter, won a tight victory
over Ford. 81 Reagan did not disappear from public life though, and by 1980, conditions would be ripe
for his conservative platform.
The U.S. Economy in the 1970s
The U.S. economy of the 1970s was characterized by stagnant growth, high unemployment, and
high inflation, an unusual combination which necessitated a new term: “stagflation.” Such a scenario
defied conventional economic assumptions. 82 As one observer explained:
[E]conomists and policymakers believed that they could lower unemployment
through higher inflation [. . .]. In the 1970s, the Fed [the U.S. Federal Reserve] pursued [. .
.] “stop-go” monetary policy, which alternated between fighting high unemployment and
high inflation. During the “go” periods, the Fed lowered interest rates to loosen the money
supply and target lower unemployment. During the “stop” periods, when inflation
mounted, the Fed would raise interest rates to reduce inflationary pressure. 83
These alternating tactics proved ineffective. Unemployment initially fell under Carter, but then
started to creep up before spiking at the end of a short recession. 84 By the end of Carter’s term,
unemployment was back where it had been when he took office: 7.5%. 85 Inflation, in terms of the
annual consumer price index, also increased steadily to 13.5% in 1980. 86 While national GDP grew
steadily between 1977 and 1981, 87 initial annual gains in median family income were wiped out in 1980
(see Exhibit 12). 88 Reagan would be able to use the flat economy to his advantage during his
presidential campaign by asking voters: “Are you better off now than you were four years ago?” 89
The Role of Government
Meanwhile, the federal government was taking in more money than it ever had to cover an
expanding budget (refer to Exhibit 8). 90 In 1962, the total outlay of the federal government had been
6
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$106.8 billion. 91 By 1980, this figure was $590.9 billion. 92 Driving the increase were defense spending
and rapid growth in federal funding for social security benefits and entitlement programs, as well as
various forms of non-defense discretionary spending. 93 Programs created or expanded during
Johnson’s mid-1960s War on Poverty required the federal government to allocate more money for
healthcare (e.g., Medicare and Medicaid), public education (e.g., the Elementary and Secondary
Education Act of 1965), housing, and benefits to low-income individuals (e.g., the Food Stamp
Program) than ever before. The federal government was increasingly challenged to fund its
commitments through tax revenues alone, and soon started running an annual budget deficit (refer to
Exhibit 6). From the early 1950s through the early 1970s, the federal government typically operated
with either a slight budget surplus, or, more commonly, a slight deficit. 94 A period of prolonged deficit
spending began in 1970, with the annual deficit hitting $59 billion in 1980. 95
At the same time that the federal government’s scope was increasing, public faith in government
was declining. In one poll conducted in late 1964, the “% who trust the govt [sic] in Washington always
or most of the time,” had been 77%. 96 Between then and 1980, however, public confidence had been
shaken by the government’s management of the Vietnam War, the ethics scandals that led to Agnew’s
and Nixon’s resignations, and the activities of federal law enforcement and intelligence agencies—
including spying on U.S. citizens—made public by Congress through the Church Committee hearings
in 1975. 97 By late 1980, just 25% of those polled said they trusted the federal government. 98
The 1980 Election: Carter vs. Reagan
By 1980, the economic and political conditions were auspicious for a candidate seeking to roll back
the influence of the federal government, and Reagan again sought the nomination in that year’s
presidential election. His economic philosophy was rooted in an approach described by proponents as
“supply-side” economics, which one analyst described as “the application of microeconomic theory to
the effects of fiscal policy on the incentives to work, save, and invest.” 99 This meant that supply-siders
advocated broad-based tax cuts to promote employment, savings, and investment; pushed for deficit
control through spending reductions; and promoted tight monetary policy to control inflation.
Supply-siders argued that short-term revenue losses from tax cuts would be offset by the long-term
growth that the tax cuts unleashed, and the reduced incentives that lower tax rates created to take
advantage of tax shelters and loopholes. 100 These views were identified with economist and Reagan
advisor Arthur Laffer, who argued there was a tax rate greater than 0% and less than 100% at which
revenues were maximized, and beyond which people were either discouraged from productivity or
encouraged to cheat. 101 Supply-side economics, according to another economist and Reagan advisor,
constituted “the greatest challenge to a reigning economic dogma since the overthrow of classical
economics in the 1930s.” 102
But the supply-side approach had its skeptics. Reagan’s chief opponent for the Republican
nomination George H. W. Bush, for one, referred to an income tax plan endorsed by Reagan as “voodoo
economics.” 103 Still, when it came time for Republicans to select their candidate at the party convention,
they overwhelmingly chose Reagan. 104
Reagan faced Carter in the 1980 race. By that point, Carter had lost much of the strong public
support he had enjoyed early in his administration. 105 He experienced a brief spike in popularity in the
aftermath of the 1979 seizure of the U.S. embassy in Tehran, Iran, 106 when U.S. citizens and diplomats
were taken hostage, but his support dropped as the hostage crisis dragged on for 444 days. Carter’s
challenges were compounded by an oil crisis in 1978 and 1979 that temporarily limited the amount of
7
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Reaganomics: Impact and Legacy
oil produced globally, 107 and by a brief economic recession in 1980. 108 The U.S.’s relationship with the
Soviet Union was also fraying after more than a decade of improvements. 109
Reagan campaigned on these broad issues, proclaiming in his acceptance speech at the Republican
National Convention: “We face a disintegrating economy, a weakened defense and an energy policy
based on the sharing of scarcity.” 110 Unemployment, inflation, and taxes featured prominently in
Reagan’s understanding of the country’s economic troubles. 111 “We are taxing ourselves into economic
exhaustion and stagnation, crushing our ability and incentive to save, invest and produce,” he said. 112
“When I talk of tax cuts, I am reminded that every major tax cut in this century has strengthened the
economy, generated renewed productivity and ended up yielding new revenues for the government
by creating new investment, new jobs and more commerce among our people.” 113 On inflation, he
noted, “Many have seen their savings eaten away by inflation. Many others on fixed incomes [. . .] have
watched helplessly as the cruel tax of inflation wasted away their purchasing power.” 114
Carter attacked Reagan as holding far-right views out of step with most voters. 115 But on Election
Day 1980, Reagan won the vote in 44 states, giving him a resounding 489 Electoral College votes to
Carter’s 49 (refer to Exhibit 1). 116 Votes from demographic groups and constituencies that tended to
align with Democrats, such as union members, and from regions which often voted Democratic, such
as parts of the Midwest, contributed to Reagan’s victory. 117 The term “Reagan Democrats” was created
to refer to voters who were traditionally or nominally Democrats, but now supported Reagan. In the
words of two reporters writing the day after Reagan’s election, “Despite the President’s [i.e., Carter’s]
efforts to fasten voters’ attention on foreign affairs, it became evident throughout the night that the
state of the economy was the country’s leading preoccupation.” 118
The Reagan Presidency
On Inauguration Day, January 20, 1981, Reagan addressed the nation for the first time as president.
He focused on the core issues he had campaigned on: unemployment, taxes, and inflation. 119 He also
made clear his view of how the federal government had contributed to the current situation, and how
its role should change going forward. He said:
For decades we have piled deficit upon deficit, mortgaging our future and our
children’s future for the temporary convenience of the present. [. . .] You and I, as
individuals, can, by borrowing, live beyond our means, but for only a limited period of
time. Why, then, should we think that collectively, as a nation, we’re not bound by that
same limitation? [. . .] In this present crisis, government is not the solution to our problem;
government is the problem. From time to time we’ve been tempted to believe that society
has become too complex to be managed by self-rule, that government by an elite group is
superior to government for, by, and of the people. Well, if no one among us is capable of
governing himself, then who among us has the capacity to govern someone else? All of
us together [. . .] must bear the burden. The solutions we seek must be equitable, with no
one group singled out to pay a higher price. [. . .] It is time to check and reverse the growth
of government, which shows signs of having grown beyond the consent of the governed.
It is my intention to curb the size and influence of the Federal establishment and to
demand recognition of the distinction between the powers granted to the Federal
Government and those reserved to the States or to the people. 120
Reagan had been elected to cut taxes and spending, but the former proved easier to deliver than the
latter. Historians disagreed on whether Reagan fully believed that large tax cuts would stimulate
enough economic growth to make up for lost revenue, or whether he was making a “political bet” that
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big tax cuts would force Congress to cut spending. 121 The administration itself was divided on this
question: according to one economist, “Most of the top Reagan administration officials didn’t think the
tax cut would pay for itself. They were counting on spending cuts to avoid blowing up the deficit.” 122
Monetary Policy
Before Reagan could cut taxes, he had to deal with an immediate economic issue: inflation. After
peaking at 14.8% in March 1980, the monthly inflation rate had declined to 11.8% by the time Reagan
took office, above the 3% to 4% rates that indicated a healthy, stable dollar. 123 The mildly antiinflationary trend Reagan inherited was in part due to the work of Federal Reserve Chairman Paul
Volcker, who Carter had appointed in 1978. 124 Volcker was the first doctrinaire monetarist to hold the
position. 125
Volcker tried to control inflation through strict regulation of the money supply. 126 In the short term,
this led to recession in 1980, and then in 1981 into 1982. Dependent on the easy credit access of the loose
money days, the economy contracted, unemployment spiked, and the dollar plummeted. 127 As one
observer explained, “In late 1980 and early 1981, the Fed once again tightened the money supply [. . .].
Despite this, long-run interest rates continued to rise. [. . .] [p]ossibly because the market believed the
Fed would back down from its tight policy when unemployment rose. This time, however, Volcker
was adamant that the Fed not back down: ‘We have set our course to restrain growth in money and
credit. We mean to stick with it.’” 128 Volcker ultimately prevailed, helping to achieve both a low rate
of inflation and a return to economic growth by the end of 1982. 129 The Reagan administration
supported Volcker’s tight money agenda throughout the 1980s. 130 When Volcker retired in 1987,
Reagan replaced him with another monetarist, Alan Greenspan. The anti-inflationary effects of Fed
policy, supported by the administration, laid the groundwork for the centerpieces of Reagan’s
economic agenda: tax reform, spending cuts, and deregulation.
Tax Policy
During Reagan’s presidency, the federal government undertook three major tax policy initiatives.
The first was an income tax cut package called the Economic Recovery Tax Act (ERTA) passed in 1981.
The second, passed a year later, was a tax adjustment measure proposed by a bipartisan group of
legislators to cut deficits called the Tax Equity and Fiscal Responsibility Act (TEFRA). The last measure,
the Tax Reform Act, was a combined effort of Reagan’s Treasury Department and House and Senate
Republicans to further reduce marginal tax rates and close tax loopholes, which passed in 1986.
Economic Recovery Tax Act (ERTA)
The ERTA, an adaptation of legislation first proposed by Representative Jack Kemp and Senator
William Roth, proposed to reduce individual income tax rates (within all five income tax brackets) by
10% per year starting on July 1, 1981. 131 The cumulative result of this policy would have been a drop
in the top marginal tax rate from 70% to 50% (refer to Exhibit 11), and in the bottom marginal rate from
14% to 10% by 1984—an overall tax rate decrease of some 27%. 132 The package also promised several
attractive business tax reforms, including an increase in businesses’ deductions for asset depreciation,
tax credits for research and development, and corporate income tax decreases for small businesses. 133
The proposal, however, faced opposition in the Democrat-controlled Senate. Concerned about its
impact on the deficit, the Senate Budget Committee rejected the proposal on April 10, 1981. 134 Two
weeks later, Reagan spoke before a joint session of Congress: “I believe it’s essential that the Congress
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Reaganomics: Impact and Legacy
approve this package,” he exhorted, “which I believe will lift the crushing burden of inflation off of our
citizens and restore the vitality to our economy and our industrial machine. [. . .] The American people
now want us to act and not in half measures. They demand and they’ve earned a full and
comprehensive effort to clean up our economic mess.” 135
Congress passed the ERTA in the summer of 1981 almost exactly as the administration had
proposed, with the only significant adjustment being to reduce the first annual tax rate cut to 5%
instead of 10%, and to delay that tax cut until autumn 1981. 136 The net effect was a reduction in ERTA’s
overall individual income tax rate cut from 27% to 23%. 137 The ERTA was still the largest tax cut in U.S.
history at the time, and measured as a percentage of GDP, it remained the largest tax cut in history as
of 2019. 138 It was also the first federal tax measure to index tax brackets for inflation, protecting
taxpayers from suddenly finding themselves in a higher tax bracket without actually having more
income. 139
But these tax cuts came into effect just as an economic recession was beginning. The recession
officially started in July 1981 and would not end until November 1982. 140 Over these 15 months,
unemployment rose to 10.8% (see Exhibit 3). 141 Some industries were particularly hard hit: nearly onequarter of all automotive workers were out of a job at the end of 1981. 142 The recession was due in large
part to the Fed’s efforts to bring down the inflation rate by constricting the money supply. 143
Tax Equity and Fiscal Responsibility Act (TEFRA)
Opponents of supply-side economics attacked Reagan’s policies in the recession. One economist
wrote that “the failed supply-side experiment has restored faith in Keynesian economics in a way that
scholarly debate never can.” 144 As the government ran a large deficit in 1981, Office of Management
and Budget (OMB) Director David Stockman speculated that the administration might have to go back
on some of its tax cut promises. 145 One reporter, relaying details from a conversation with Stockman,
said: “Revisions of the original tax-cut plan would probably be the easiest compromise. A modest delay
in the effective date would save billions and, besides, many conservatives in Congress were never
enthusiastic about the supply-side tax-cutting formula. In order to win its passage, the administration
was ‘prepared to give a little bit on the tax bill,’ [. . .] which would help cure his problem of deficits.’” 146
As deficits rose into 1982 and the recession deepened, Reagan agreed to support a measure to raise
tax revenues by $95 billion, provided that it preserved the ERTA’s individual income tax cuts. 147 Any
additional tax revenue would have to be raised from other sources, such as business or excise taxes. 148
The bill that Congress drafted fit these requirements. The only changes the bill made to the ERTA were
in its business provisions, eliminating, for example, additional asset depreciation allowances that were
to take effect in 1985 and 1986. 149 The legislation, named TEFRA, raised much of its revenue from excise
taxes. For instance, passenger airline ticket taxes rose from 5% to 8%, and cigarette taxes doubled. 150
TEFRA’s biggest revenue impacts, however, came from the elimination of business tax loopholes and
tax breaks for investment dividends, along with increases in the Federal Unemployment Tax rate. 151
While it left the ERTA’s income tax reductions unchanged, TEFRA was the U.S.’s largest peacetime
tax increase. 152 Reagan, however, referred to it as “a limited loophole-closing tax increase,” and claimed
he supported it in return for an agreement from Democrats “to cut spending by $280 billion during the
same period” in subsequent budgets. 153 Those cuts never materialized. As Reagan later wrote, “the
Democrats reneged on their pledge and we never got those cuts.” 154 Attorney General Edwin Meese
later noted: “I believe that the TEFRA compromise—the ‘Debacle of 1982’—was the greatest domestic
error of the Reagan administration. It was a complete departure from our tax-cutting mandate, failed
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to reduce the growth of government spending, (and) did not decrease the deficit. [. . .] Judged by the
results, TEFRA was not only a mistake, it was an abject lesson in how not to reduce the deficit.” 155
Others in the administration, however, saw TEFRA as a victory. Dismissing opponents as
ideologues, one official wrote that “TEFRA proved to be a watershed [. . .] separating those who
opposed any tax increases and those who supported a well-crafted tax increase in the presence of a
huge deficit.” 156 Congress, he went on, “managed to approve a complex tax measure in an election year
with a significant increase in receipts, without increasing any tax that was visible to most voters.” 157
By year’s end, the recession was over. So too was the cycle of stagflation, for which one observer
from the Fed credited the institution and Volcker: “By October 1982, inflation had fallen to 5[%] and
long-run interest rates began to decline. [. . .] The threat of inflation was not completely gone [. . .].
However, the commitment of Volcker and his successors to aggressively targeting price stability helped
ensure that the double-digit inflation of the 1970s would not return.” 158
The economy took off in 1983: real GNP rose and unemployment fell. 159 As Reagan looked to his
1984 re-election campaign, he announced a second tax reform effort. In his 1984 State of the Union
address, he revealed that he had asked his administration for “an historic [tax] reform for fairness,
simplicity and incentives for growth. I am asking [Treasury] Secretary Don Regan for a plan for action
to simplify the entire tax code so all taxpayers, big and small, are treated more fairly.” 160
On Election Day 1984, Reagan defeated his Democratic opponent by nearly 16.9 million in the
popular vote to clinch a second term (refer to Exhibit 1). 161 “The economic recovery helped,” one
observer said, “but interviewers and exit pollers found a preference for Reagan even among voters
who disagreed with administration policies, because for them he represented leadership, patriotism,
and optimism.” 162
Tax Reform Act
For the final wave of tax reforms, Reagan requested a bill that would deliver additional income tax
cuts while remaining revenue neutral. 163 The bill that Reagan’s staffers came up with, however, seemed
counter to his spirit of tax cutting and deregulation. In an effort to deliver a further 7% cut to individual
income taxes by 1990, the bill’s authors proposed increasing corporate income tax receipts by 36%. 164
One White House official was aghast, writing that, “It is an illusion to believe that one can reduce the
effective tax on individuals by increasing corporate taxes. In a closed economy the corporate income
tax reduces proportionately the after-tax rate of return on all types of capital.” 165
The White House created a counterproposal that increased corporate income tax receipts by 23%
instead. 166 It also provided for an extension of the ERTA’s low small business tax rates. 167 Capital gains
for businesses were excluded from corporate income taxation, and depreciation allowances
strengthened. 168 Reagan then sent this package to Congress. The reconciled House and Senate bills,
signed by the president in October 1986, were similar to Reagan’s original proposal, with total revenues
from individual income taxes projected to decline 6% by 1990, while greatly simplifying and flattening
the individual income tax structure by collapsing the number of tax brackets from 15 (with rates
ranging from 0% to 50%) to two. 169 The law allowed a “bridge” year in 1987 with five tax brackets (11%,
15%, 28%, 35%, and 38.5%), before dropping to two brackets—15% and 28%—in 1988. 170 Business
income tax revenues were projected to increase by 25% through the elimination of several loopholes
and deductions (refer to Exhibit 9). 171 In parallel, the number of corporate income tax brackets declined
from seven to five (15%, 25%, 34%, 39%, and 34%), with a bridge year in 1987. 172
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Reaganomics: Impact and Legacy
Spending and Deficits
One of Reagan’s most oft-stated goals during the 1980 campaign was to rein in growing government
spending. In terms of reducing government spending as a share of GDP, Reagan was able to achieve
this goal (refer to Exhibit 7). 173 And while total federal outlays increased under Reagan, they did so at
a slower rate than previously. Compared to a 17.2% increase in outlays during the Carter presidency,
outlays increased by 14.5% during Reagan’s first term and 7.4% during his second. 174 According to one
economist, spending under Reagan by the conclusion of his presidency accounted for 1% to 2% less of
GDP than it would have had he not been president. 175
Even as Reagan curbed this spending growth, however, his administration posted major deficits
every year of his presidency, each of which exceeded any one-year deficit prior to his presidency (refer
to Exhibit 6). The deficits combined to add $1.86 trillion to the national debt, a 186% increase over the
debt he inherited. 176 Under Reagan, debt held by the U.S. public increased from 24% of GDP to 39%. 177
Administration insiders and economists disagreed on how to allocate blame for the deficits between
spending and tax policy. Complicating matters was the fact that any changes to the annual budget
required Congress’s approval. One administration economist attributed the deficit growth to four
major factors: (1) growth in “uncontrollable” federal outlays (i.e., “mandatory” budget items such as
Social Security and Medicare, which had comprised only 25% of the federal budget fifteen years earlier
but comprised 70% of the budget by 1981); (2) the large proportion of the 30% of “controllable”
spending devoted to national defense; (3) growth in real spending caused by disinflation; and (4) the
fact that Congress seemed only willing to undertake a “housecleaning” budget in the first year of
presidential administrations, tending toward more complacent budgeting in the remaining three, when
the president’s electoral mandate was weaker. 178
Spending in the Reagan Administration by Sector
Defense One of Reagan’s key campaign themes was that the U.S. was falling behind the Soviet
Union in military preparedness, an area in which he accused his predecessors of “a decade of
neglect.” 179 During his first term, the two powers were engaged in an arms race and fighting for
footholds in the developing world, and the Soviet Union was intervening in Afghanistan to suppress
an anti-communist rebellion. 180 Long-time Soviet General Secretary Leonid Brezhnev died in 1982; his
two successors both died within a year of taking office. Reagan was in his second term before the Soviet
Union produced the younger, reformist leader in Mikhail Gorbachev.
By the time Gorbachev, entered office, almost all of Reagan’s defense spending increases had
already occurred. With bipartisan consensus around the need for increased military readiness,
investments easily passed Congress during Reagan’s first term. 181 The defense budget grew by 16%
per year for the first four years of his administration, compared with 10% per year under Carter. 182 In
his second term, Reagan’s per year defense growth rate fell to 9%, but even so, defense spending grew
at a greater rate than the federal budget as a whole. 183 When Reagan took office, defense had
represented 46% of the discretionary budget. 184 By the time he left, it was 64%. 185
Non-defense discretionary spending Non-defense discretionary spending declined under
Reagan. 186 While some specific categories did grow, these were mostly categories considered relevant
to the Cold War. For example, the international affairs budget, which included the State Department,
grew by 50%. 187 In most remaining areas of non-defense discretionary spending, however, Reagan’s
budgets implemented large cuts. Most dramatically, federal spending on energy declined by almost
75% and the Department of Commerce’s budget declined by more than half. 188
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Social programs and entitlements Reagan reduced the growth of social programs (a category
that included mandatory entitlements) from 4.6% per year under Carter to 2.5% in his first term. 189 The
administration’s primary approach was to increase the stringency of eligibility requirements and
consolidate individual federal grants for state or local government programs into block grants.
The administration cut federal income and food assistance for welfare recipients who were above
the poverty line, and cut the growth of federally-subsidized housing (see Exhibit 13 for the share of the
population at or below the poverty line and Exhibit 14 for the top 10% income share). 190 The
administration lobbied Congress to allow states to impose work requirements for individuals receiving
benefits under the main cash assistance program, Aid for Families with Dependent Children. 191 Reagan
also consolidated grants for primary and secondary schools into block grants, and privatized the main
federal job placement program. 192, 193 Funding for federal housing assistance programs, which Reagan
aimed to return to state government control, fell by more than two-thirds. 194 One economist explained:
“The general effect of the changes in these programs was to reduce the level of both federal funding
and federal control. The basic structure of these programs, however, was maintained.” 195
One category in which Reagan was politically unable to restrain spending was farm subsidies. These
programs represented only 1.5% of the federal budget when Reagan took office but ballooned in his
first term by 19% per year. 196 This explosion was exacerbated by a 20% drop in the price of American
farmland. 197 The net result was that by 1985, the federal government was paying $21 billion in farm
subsidies for benefits worth $4 billion. 198 Having relied on Midwestern support in the 1980 election
and campaigned on a pro-farm platform, the administration did little to stop the farm subsidy
explosion. 199
The reach of Reagan’s social program reforms was also limited by the challenge of altering the
funding of mandatory programs such as Social Security, which could not be changed without passing
a bill through Congress superseding their authorizing legislation. When Reagan took office, Social
Security was running severe deficits. 200 One problem was that the program’s annual “Cost of Living
Increase” was tied to the Consumer Price Index, which tended to overstate the rate of inflation. 201
In his first year, Reagan had asked his OMB to generate a policy proposal ensuring the long-term
fiscal health of the Social Security system. Stockman presented a proposal centered on reducing costs:
he proposed a cut in benefits for early retirees from 80% to 55%, among other reforms. 202 These reforms
were not widely popular, and as one analyst explained: “Reagan did what any beleaguered president
would do: he pulled his foot off the third rail of the political subway and proposed a bipartisan national
commission to study the issue.” 203 This commission ended up passing legislation which supplemented
the fund’s shortfalls with a payroll tax increase. 204 When Reagan left office, office, Social Security
occupied close to the same proportion of federal outlays (20%) as when he entered. 205
While Reagan tried to institute reforms to Social Security, he left Medicare and Medicaid largely
alone. These programs had grown exponentially since the 1960s. During the 1970s alone, Medicare and
Medicaid spending quintupled. 206 This growth reflected a combination of increased enrollment,
increased utilization of health services, and increased provider costs. 207 Though growth rates slowed,
spending continued to increase, doubling during Reagan’s time in office. 208 Reagan’s approach led one
official to remark: “For the most part the health programs were reviewed by substantive specialists,
with little involvement of the political officials in the Reagan administration.” 209
One later observer, taking stock of Reagan’s actions, remarked that “[L]eaving the momentum of
huge federal entitlement programs in place along with large increases in defense spending—this
together with the constricted flow of tax revenues—was a formula for ballooning budget deficits. [. . .]
Its continuing inertial force served to squeeze domestic programs with politically weak constituencies
and to make any major new domestic program initiatives extremely costly in political terms.” 210
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Reaganomics: Impact and Legacy
Deregulation
Reducing the size, scope and reach of the federal government played a prominent role in Reagan’s
campaigns, but delivering on these promises proved difficult. When Reagan took office, the federal
government employed some 3 million people across its various agencies and departments. 211 By the
time Reagan left, this number had grown to 3.2 million. 212 And despite his intention to eliminate the
federal Departments of Education and of Energy, Congress blocked him from action. 213
Removing established regulations was also harder to accomplish than simply reducing the
introduction of new ones. The Reagan administration produced 159 “economically significant rules,”
over eight years. 214 By comparison, H. W. Bush’s administration produced 181 such rules during just
four years, while the Clinton and W. Bush administrations created 361 and 358 economically significant
rules over two terms (each). 215 President Obama authorized 490 rules. 216 By another metric used to
measure the impact of federal regulations—the number of pages in the Code of Federal Regulations—
Reagan was able to slow, if not reverse, growth. Between 1970 and 1980, the number of pages roughly
doubled to 102,195. 217 By 1988, the number stood at 117,480. 218
As one observer noted, “[I]t was deregulation that continued to be justified on the grounds of
economic efficiency and not a conservative/libertarian philosophy of limited government. And when
deregulation produced obvious economic and social problems [. . .], regulations quickly ensued
without a nod to any principles of limited government.” 219 He continued, “In practice, Ronald Reagan
handed down to the future a combination of rhetorical and financial pressures that did restrain the
growth of domestic government. But he and his administration did little to enact—or even prepare the
groundwork for—an agenda of limited government. The overall result was to consolidate rather than
roll back America’s middle-class welfare state.” 220
Reagan’s Legacy: Then and Now
After serving the maximum two terms allowed by the U.S. Constitution, Reagan left office on
January 20, 1989. He was succeeded by H. W. Bush, who defeated his Democratic opponent in the 1988
presidential election. During Reagan’s last year in office, his approval rating averaged 53%. 221
Unemployment was at its lowest since 1974. 222 Real family income had increased, 223 and disposable
income per capita had grown 18% between 1982 and 1990. 224 Industrial production grew 48% during
that same period. 225 Even tax receipts nearly doubled, to $1.03 trillion. 226
Observers at the time painted a mixed picture of Reagan’s economic record. Supporters highlighted
the number of jobs created during Reagan’s tenure (18.7 million) and the strong economy as signs of
his policies’ positive impact. 227 “The amount of wealth produced during this seven year period [1982
to 1989] was stupendous—some $30 trillion worth of goods and services,” wrote one of Reagan’s
former advisors in 1990. 228 He continued, “[N]et asset values—including stocks, bonds and real
estate—went up by more than $5 trillion between 1982 and 1989, an increase of roughly 50 percent.” 229
Supporters also pointed to Reagan’s efforts to reduce regulatory burdens and reform the tax
structure. 230 As one political scientist noted, “Instead of the then-prevailing capital formation
approach, which led business to compete with liberals for tax preferences, thereby delegitimizing the
tax system, he chose to level the playing field, relying on competition rather than subsidy.” 231 In 1988,
one economist said, “On balance, the Reagan years were successful from an incentivist [i.e., supplyside] perspective. Tax rates were cut, regulation reduced, and the importance of cutting spending
emphasized, all steps in reducing disincentives generated by government intervention.” 232
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Critics had a much different assessment. One believed that Reagan had under-delivered on his
economic promises and that his policies had little positive impact. 233 The Nobel Prize-winning
economist Franco Modigliani, writing in late 1988, remarked:
[O]f the many goals that the Reagan Administration had set for itself, only one was
achieved reasonably closely, that of wringing inflation out of the economy. [. . .] But even
that success was accomplished by policies widely different from those announced. It was
not achieved by a vigorous fixed policy, or by following monetarist prescription. It was
based instead on targeting income to the disregard of monetary targets, and it was carried
out by a man appointed by Carter and not particularly sympathetic to Reaganomics. [. . .]
In other important respects, such as output and productivity growth, the record is at best
mediocre [. . .]. It was by and large poorer than that of Carter, and distinctly inferior to
that of the golden period of Keynesian influence—the Kennedy/Johnson Administration
before the Vietnam War.” 234
A 1990 poll of 220 academics ranking all 41 presidents to that point ranked Reagan as the 22nd best—
two spots ahead of Carter, and four behind H.W. Bush. 235
Later Evaluations
In 1994, Reagan announced that he had Alzheimer’s disease. 236 He lived privately until passing
away in June 2004 at age 93. 237 A public opinion poll conducted a few months before his death showed
that the public considered Reagan the third-greatest president of all time, behind only Kennedy and
Abraham Lincoln, and one spot ahead of Franklin Roosevelt. 238 “He helped to shift American politics
to the right. He articulated the ideas of conservatism better than almost any other politician,” one
historian said. 239 “He pushed for policies including tax cuts, deregulation and a very hawkish stand [.
. .] that I think remain integral to the Republican Party and have shaped American politics since.” 240
Public opinion of Reagan’s time in office remained high in the years after his death. In 2018, 21% of
people in one survey picked Reagan when responding to the question “Which president has done the
best job during your lifetime?” 241 Professional observers also rated him highly. A 2017 survey of
historians identified Reagan as the 9th best president, ahead of Johnson (10th) and Woodrow Wilson
(11th), and behind Thomas Jefferson (7th) and Kennedy (8th). 242 A 2018 survey of 170 political scientists
also ranked Reagan 9th. 243 On the specific dimension of economic management, historians ranked
Reagan 16th, 244 while another group of presidential scholars ranked him 18th. 245
Inequality
One of the most hotly contested aspects of Reagan’s legacy was the extent to which the reduction in
government redistribution through taxation and social policy during his administration contributed to
rising inequality (refer to Exhibit 14). “The Reagan economy was a one-hit wonder,” declared Nobel
Prize-winning economist Paul Krugman. 246 He elaborated: “Yes, there was a boom in the mid-1980s,
as the economy recovered from a severe recession. But while the rich got much richer, there was little
sustained economic improvement for most Americans. By the late 1980s, middle-class incomes were
barely higher than they had been a decade before [. . .].” 247 Fellow Nobel Prize-winner Joseph Stiglitz
concurred: “I trace the inequality to a particular set of decisions that we took when we lowered the tax
rate from 91% down to very low levels at the top, where we stripped away regulations. So the result of
that was not a more dynamic economy, but a more unequal society. We tried the experiment of trickledown. [. . .] [W]e can say fairly definitively that it was a failure.” 248
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Supply-side economists disagreed with the “trickle down” depiction. As the Stanford economist
Thomas Sowell wrote, “’Trickle down’ has been a characterization and rejection of what somebody else
supposedly believed. [. . .] No recognized economist of any school of thought has ever had any such
theory or made any such proposal. It is a straw man.” 249 He continued:
The very idea that profits ‘trickle down’ to workers depicts the economic sequence of
events in the opposite order from that in the real world. Workers must first be hired, and
commitments made to pay them, before there is any output produced to sell for a profit,
and independently of whether that output subsequently sells for a profit or at a loss. With
many investments, whether they lead to a profit or a loss can often be determined only
years later, and workers have to be paid in the meantime [. . .]. The real effect of tax rate
reductions is to make the future prospects of profit look more favorable, leading to more
current investments that generate more current economic activity and more jobs. 250
A 2011 Congressional Budget Office analysis of the roots of growing U.S. inequality in post-tax
income concluded that the two primary factors were: (1) widening disparities between pre-tax incomes
and (2) an increasing proportion of capital gains to labor income. 251 The progressivity and size of taxes
and transfers could be factors in defraying income disparities, but were only a reaction to those forces
rather than a root cause. 252 The study found that in 2007, federal taxes and transfers reduced the
average income difference between pairs of U.S. households by about $16,000. 253 In 1979, federal taxes
and transfers had reduced the average income difference by $11,900. 254
Though debate over Reagan’s legacy continued to rage, there was little debate over his impact. As
future President Barack Obama reflected on the campaign trail in 2008: “Ronald Reagan changed the
trajectory of America in a way that [. . .] Richard Nixon did not and in a way that Bill Clinton did not.
He put us on a fundamentally different path because the country was ready for it.” 255 David Gergen,
presidential advisor to Reagan, noted how Reagan’s political success stemmed from the persuasiveness
of his personality: “He recognized that to stir people, you must give voice to their own deep desires,
inspiring them to believe they can climb mountains they always thought were too high.” 256
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Reaganomics: Impact and Legacy
Exhibit 1a
Source:
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Electoral College Maps: United States Presidential Elections, 1976 and 1980
National Archives and Records Administration, U.S. Electoral College, Historical Election Results, “Electoral College
Box Scores 1789-1996,” https://www.archives.gov/federal-register/electoral-college/scores.html#1980, accessed
April 2019.
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Reaganomics: Impact and Legacy
Exhibit 1b
Source:
Electoral College Maps: United States Presidential Elections, 1984 and 1988
National Archives and Records Administration, U.S. Electoral College, Historical Election Results, “Electoral College
Box Scores 1789-1996,” https://www.archives.gov/federal-register/electoral-college/scores.html#1980, accessed
April 2019.
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Reaganomics: Impact and Legacy
Exhibit 2
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U.S. Presidents and GDP Growth, 1953 through 2019
President
Time in Office
Party
Annual GDP Growth
Dwight D. Eisenhower
John F. Kennedy
Lyndon B. Johnson
Richard M. Nixon
Gerald R. Ford
James Carter
Ronald Reagan
George H.W. Bush
William J. Clinton
George W. Bush
Barack Obama
Donald J. Trump
1953-1961
1961-1963
1963-1969
1969-1974
1974-1977
1977-1981
1981-1989
1989-1993
1993-2001
2001-2009
2009-2017
2017-present
Republican
Democrat
Democrat
Republican
Republican
Democrat
Republican
Republican
Democrat
Republican
Democrat
Republican
2.4%
5.5%
5.2%
2.5%
3.1%
3.4%
3.4%
2.0%
3.7%
1.7%
2.1%
2.9%
Source:
Casewriters, compiled from “The Presidents Timeline,” The White House Historical Association,
https://www.whitehousehistory.org/the-presidents-timeline; and Justin Fox, “Guess Which Presidents Really
Oversaw Economic Booms,” Bloomberg, August 1, 2018, https://www.bloomberg.com/opinion/articles/2018-0801/ranking-presidents-economic-records-by-gdp-growth, both accessed March 2019.
Note:
GDP growth is “annualized real GDP growth from first quarter in office to last quarter.”
Exhibit 3
Source:
Unemployment Rate, January 1, 1970 through January 1, 2000
Casewriters, adapted from “Civilian Unemployment Rate,” Federal Reserve Bank of St. Louis, updated February 1,
2019, https://fred.stlouisfed.org/series/UNRATE/, accessed February 2019.
19
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Reaganomics: Impact and Legacy
Exhibit 4
Source:
Casewriters, adapted from “Inflation, Consumer Prices for the United States,” Federal Reserve Bank of St. Louis,
updated October 26, 2018, https://fred.stlouisfed.org/series/FPCPITOTLZGUSA, accessed March 2019.
Exhibit 5
Source:
Inflation Rate in Terms of Consumer Price Index, January 1, 1970 through January 1, 2000
Effective Federal Funds Rate, January 1, 1970 through January 1, 2000
Casewriters, adapted from “Effective Federal Funds Rate,” Federal Reserve Bank of St. Louis, updated October 26,
2018, https://fred.stlouisfed.org/series/FEDFUNDS, accessed March 2019.
20
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For the exclusive use of A. Alcivar, 2024.
Reaganomics: Impact and Legacy
Exhibit 6
Source:
Federal Government Budget Surplus or Deficit, January 1, 1970 through January 1, 2000
Casewriters, adapted from “Federal Government Budget Surplus or Deficit,” Federal Reserve Bank of St. Louis,
updated October 26, 2018, https://fred.stlouisfed.org/series/M318501A027NBEA, accessed March 2019.
Exhibit 7
Source:
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U.S. Federal Net Outlays as a Percent of GDP, January 1, 1970 through January 1, 2000
Casewriters, adapted from “Federal Net Outlays as Percent of Gross Domestic Product,” Federal Reserve Bank of St.
Louis, updated October 26, 2018, https://fred.stlouisfed.org/series/FYONGDA188S, accessed March 2019.
21
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Reaganomics: Impact and Legacy
Exhibit 8
Source:
Federal Government Current Tax Receipts, January 1, 1970 through January 1, 2000
Casewriters, adapted from “Federal Government Current Tax Receipts,” Federal Reserve Bank of St. Louis, updated
October 26, 2018, https://fred.stlouisfed.org/series/W006RC1Q027SBEA, accessed March 2019.
Exhibit 9 Federal Corporate Tax Revenue as a Share of Pre-Tax Corporate Profits, January 1, 1970
through January 1, 2000
Source:
Casewriters, compiled from “Federal Government Current Tax Receipts: Taxes on Corporate Income,” and “Corporate
Profits after Tax (without IVA and CCAdj),” Federal Reserve Bank of St. Louis, dated October 26, 2018,
https://fred.stlouisfed.org/series/B075RC1Q027SBEA and https://fred.stlouisfed.org/series/CP, accessed March
2019.
22
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Reaganomics: Impact and Legacy
Exhibit 10
Source:
Total Factor Productivity Growth (5 year moving average), 1970 through 2000
Casewriters, adapted from Robert C. Feenstra, Robert Inklaar and Marcel P. Timmer (2015), “The Next Generation of
the Penn World Table” American Economic Review, vol. 105, no. 10, (2015) 3150-3182, available for download at
www.ggdc.net/pwt , accessed March 2019.
Exhibit 11
Source:
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Top Marginal Income Tax Rate, 1970 through 2000
Casewriters, adapted from “U.S Individual Income Tax: Tax Rates for Regular Tax: Highest Bracket,” Federal Reserve
Bank of St. Louis, dated October 26, 2018, https://fred.stlouisfed.org/series/IITTRHB, accessed March 2019.
23
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Reaganomics: Impact and Legacy
Exhibit 12
Source:
Casewriters, adapted from “Real Median Family Income in the United States,” Federal Reserve Bank of St. Louis, dated
October 26, 2018, https://fred.stlouisfed.org/series/MEFAINUSA672N, accessed March 2019.
Exhibit 13
Source:
Real Median Family Income, January 1, 1970 through January 1, 2000
Percent of People at or Below the Poverty Line, 1970 through 2000
Casewriters, adapted from United States Census Bureau, Small Area Income and Poverty (SAIPE) Program, “Annual
Social and Economic Supplement (ASEC) of the Current Population Survey,” revised May 8, 2017,
https://www.census.gov/programs-surveys/saipe/guidance/model-input-data/cpsasec.html, accessed April 2019.
24
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Reaganomics: Impact and Legacy
Exhibit 14
Source:
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Top 10 Percent Income Share, 1970 through 2000
Casewriters, adapted from Emmanuel Saez and Thomas Piketty, “Income Inequality in the United States, 1913-1998,”
Quarterly Journal of Economics, vol. 118, no. 1, (2003), pp. 1-39, https://eml.berkeley.edu/~saez/pikettyqje.pdf,
accessed April 2019.
25
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Reaganomics: Impact and Legacy
Endnotes
1 Ronald Reagan, “Remarks before a Joint Session of Canadian Parliament, March 11, 1981,” Ronald Reagan Presidential
Foundation and Institute, https://www.reaganfoundation.org/ronald-reagan/reagan-quotes-speeches/remarks-before-ajoint-session-of-the-canadian-parliament-ottawa/, accessed April 2019.
2 The Editors of Encyclopedia Britannica, “United States Presidential Election of 1980,” Encyclopedia Britannica,
https://www.britannica.com/event/United-States-presidential-election-of-1980#ref285420, accessed February 2019.
3 Gerhard Peters and John T. Woolley, “Inaugural Address,” January 20, 1981, as published by The American Presidency
Project, University of California Santa Barbara, https://www.presidency.ucsb.edu/documents/inaugural-address-11,
accessed February 2019.
4 “Life & Times, 1911-1934 |Childhood Years,” The Ronald Reagan Presidential Foundation and Institute,
https://www.reaganfoundation.org/ronald-reagan/reagans-life-times/, accessed January 2019.
5 “Life & Times, 1911-1934 |Childhood Years.”
6 “Life & Times, 1911-1934 |Childhood Years.”
7 “Life & Times, 1911-1934 |Childhood Years.”
8 “Life & Times, 1911-1934 |Childhood Years.”
9 “Life & Times, 1935-1964|Hollywood & Beyond,” The Ronald Reagan Presidential Foundation and Institute,
https://www.reaganfoundation.org/ronald-reagan/reagans-life-times/, accessed February 2019.
10 “Life & Times, 1935-1964|Hollywood & Beyond.”
11 “Life & Times, 1935-1964|Hollywood & Beyond.”
12 “Ronald Reagan’s Films,” Ronald Reagan Presidential Library & Museum, January 31, 1996,
https://www.reaganlibrary.gov/sreference/ronald-reagan-s-filmography, accessed February 2019.
13 “Life & Times, 1935-1964|Hollywood & Beyond.”
14 Steve Gorman, “Reagan’s First Wife, Actress Jane Wyman, Dead at 90,” Reuters, September 10, 2007,
https://www.reuters.com/article/idINIndia-29449420070911, accessed February 2019.
15 Gorman, “Reagan’s First Wife, Actress Jane Wyman, Dead at 90.”
16 Lloyd Shearer in Parade, as quoted in “Jane Wyman Found Ex-Husband Reagan a ‘Bore,’” United Press International,
November 26, 1982, https://www.upi.com/Archives/1982/11/26/Jane-Wyman-found-ex-husband-Reagan-abore/4341407134800/, accessed March 2019.
17 “Ronald Reagan 1947-1952, 1959-1960,” SAG AFTRA, https://www.sagaftra.org/ronald-reagan, accessed February 2019.
18 “Ronald Reagan 1947-1952, 1959-1960.”
19 “Ronald Reagan 1947-1952, 1959-1960.”
20 “Ronald Reagan 1947-1952, 1959-1960.”
21 “Life & Times, 1935-1964|Hollywood & Beyond.”
22 “Life & Times, 1935-1964|Hollywood & Beyond.”
23 “Life & Times, 1935-1964|Hollywood & Beyond.”
24 “Life & Times, 1935-1964|Hollywood & Beyond.”
25 “The Crist Switch: Top 10 Political Defections—Ronald Reagan, 1962,” Time, 2018,
http://content.time.com/time/specials/packages/article/0,28804,1894529_1894528_1894518,00.html, accessed March 2019.
26 “Life & Times, 1935-1964|Hollywood & Beyond.”
26
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Reaganomics: Impact and Legacy
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27 “Life & Times, 1935-1964|Hollywood & Beyond.”
28 “The Crist Switch: Top 10 Political Defections.”
29 “Life & Times, 1935-1964|Hollywood & Beyond.”
30 “The Crist Switch: Top 10 Political Defections.”
31 Federal Reserve Bank of St. Louis, “Federal Net Outlays as Percent of Gross Domestic Product,” updated February 1, 2019,
https://fred.stlouisfed.org/series/FYONGDA188S, accessed March 2019.
32 “Federal Net Outlays as Percent of Gross Domestic Product.”
33 “Federal Net Outlays as Percent of Gross Domestic Product.”
34 Christopher Chantrill, “Defense Spending,” USGovernmentSpending.com,
https://www.usgovernmentspending.com/defense_spending, accessed March 2019.
35 George Kennan, “Long Telegram,” February 22, 1946, via Wilson Center Digital Archive,
https://digitalarchive.wilsoncenter.org/document/116178.pdf, accessed March 2019; and John Gaddis, Strategies of
Containment (New York: Oxford University Press, 2005).
36 Barry Goldwater, The Conscience of a Conservative (Princeton: Princeton University Press, 2007), p. 115.
37 Ronald Story and Bruce Laurie, The Rise of Conservatism in America, 1945-2000: A Brief History with Documents (New York:
Bedford/St. Martin’s, 2007), Introduction.
38 Story and Laurie, The Rise of Conservatism in America, Introduction.
39 Sarwat Jahan, Ahmed Saber Mahmud, and Chris Papageorgiou, “What Is Keynesian Economics?” Finance & Development
51:3, September 2014, https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm, accessed March 2019.
40 “Keynesian Economics,” Encyclopaedia Britannica, January 3, 2019, https://www.britannica.com/topic/Keynesian-
economics, accessed March 2019.
41 F.A. Hayek, The Road to Serfdom, Bruce Caldwell, ed. (Chicago: University of Chicago Press, 2007), p. 110.
42 Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 2002), p. 9.
43 Friedman, Capitalism and Freedom, p. 2.
44 Friedman, Capitalism and Freedom, pp. 2-3.
45 “Proportional Versus Progressive Taxation,” Economics Concepts, 2015,
http://www.economicsconcepts.com/proportional_vs_progressive_taxation.htm, accessed March 2019; and Friedman,
Capitalism and Freedom, p. 175.
46 “Proportional Versus Progressive Taxation,” Economics Concepts, 2015,
http://www.economicsconcepts.com/proportional_vs_progressive_taxation.htm, accessed March 2019; and Friedman,
Capitalism and Freedom, p. 175.
47 “Proportional Versus Progressive Taxation”; and Friedman, Capitalism and Freedom, p. 175.
48 Friedman, Capitalism and Freedom, p. 175.
49 Friedman, Capitalism and Freedom, pp. 75-76.
50 Jonathan Bydlak and Corie Whalen, “Remember Milton Friedman: Spending Is Taxing,” RealClearPolicy.com, December 17,
2012, https://www.realclearpolicy.com/articles/2012/12/18/remember_milton_friedman_spending_is_taxing_382.html,
accessed March 2019.
51 Friedman, Capitalism and Freedom, p. 79.
52 Friedman, Capitalism and Freedom, pp. 199-200.
53 “Inflation,” Encyclopedia Britannica, February 20, 2019, https://www.britannica.com/topic/inflation-economics#ref1232563,
accessed January 2019.
54 “Keynesian Economics,” Encyclopedia Britannica.
27
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55 “Barry Goldwater,” Encyclopedia Britannica, February 7, 2019, https://www.britannica.com/biography/Barry-Goldwater,
accessed February 2019.
56 Barry Goldwater, The Conscience of a Conservative (Princeton, NJ: Princeton University Press, 2007), p. 5.
57 Goldwater, The Conscience of a Conservative, p. 2.
58 Goldwater, The Conscience of a Conservative, p. 4.
59 Goldwater, The Conscience of a Conservative, p. 54.
60 Goldwater, The Conscience of a Conservative, p. 61.
61 Goldwater, The Conscience of a Conservative, p. 62.
62 Goldwater, The Conscience of a Conservative, p. 87.
63 Goldwater, The Conscience of a Conservative, p. 107.
64 Goldwater, The Conscience of a Conservative, p. 107.
65 “Lyndon Johnson Signs Civil Rights Act of 1964,” History.com, https://www.history.com/topics/us-presidents/lyndonjohnson-signs-civil-rights-act-of-1964-video, accessed February 2019.
66 Bruce Frohnen, “Rockefeller Republicans,” First Principles, January 17, 2012,
http://www.firstprinciplesjournal.com/articles.aspx?article=542&theme=home&loc=b, accessed February 2019.
67 Richard Norton Smith, “Nelson Rockefeller’s Last Stand,” Politico Magazine, October 21, 2014,
https://www.politico.com/magazine/story/2014/10/nelson-rockefellers-last-stand-112072, accessed February 2019.
68 Historical Presidential Elections, 270 to Win, https://www.270towin.com/historical-presidential-elections/, accessed
February 2019.
69 Ronald Reagan, “Address on Behalf of Senator Barry Goldwater: ‘A Time for Choosing,’” October 27, 1964, American
Presidency Project, University of California Santa Barbara, https://www.presidency.ucsb.edu/documents/address-behalfsenator-barry-goldwater-time-for-choosing, accessed February 2019.
70 Reagan, “Address on Behalf of Senator Barry Goldwater: ‘A Time for Choosing.’”
71 Reagan, “Address on Behalf of Senator Barry Goldwater: ‘A Time for Choosing.’”
72 Matthew Dallek, The Right Moment: Ronald Reagan’s First Victory and the Decisive Turning Point in American Politics,” as
quoted in David Kopel, “Ronald Reagan’s ‘Extremism’ and the 1966 California Gubernatorial Election,” Encyclopedia
Britannica Blog (blog), Encyclopedia Britannica February 4, 2011, http://blogs.britannica.com/2011/02/ronald-reagan%27s%22extremism%22-and-the-1966-california-gubernatorial-election/, accessed March 2019.
73 David Kopel, “Ronald Reagan’s ‘Extremism’ and the 1966 California Gubernatorial Election,” Encyclopedia Britannica Blog
(blog), Encyclopedia Britannica February 4, 2011, http://blogs.britannica.com/2011/02/ronald-reagan%27s-%22extremism%22and-the-1966-california-gubernatorial-election/, accessed March 2019.
74 David Kopel, “Ronald Reagan’s ‘Extremism’ and the 1966 California Gubernatorial Election.”
75 Kopel, “Ronald Reagan’s ‘Extremism’ and the 1966 California Gubernatorial Election.”
76 Totton J. Anderson and Charles G. Bell, “The 1970 Election in California,” The Western Political Quarterly, vol. 24, no. 2 (June,
1971), p. 252, accessed via JSTOR, March 2019.
77 “Ronald Reagan,” Encyclopedia Britannica, updated February 2, 2019, https://www.britannica.com/biography/Ronald-
Reagan, accessed March 2019.
78 Casey Tolan, “How Jerry Brown Fits in Among California’s Greatest Governors,” The Mercury News, December 24, 2018,
https://www.mercurynews.com/2018/12/23/jerry-brown-california-greatest-governors-history/, accessed March 2019.
79 Jeffrey M. Jones, “Gerald Ford Retrospective,” Gallup, December 29, 2006, https://news.gallup.com/poll/23995/gerald-
ford-retrospective.aspx, accessed March 2019.
28
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80 Lee Edwards, “Delegate Battle of ’76: When Reagan Almost Beat Ford,” Newsweek, April 23, 2016,
https://www.newsweek.com/delegate-battle-1976-reagan-almost-unseated-ford-449843, accessed March 2019.
81 The Editors of Encyclopedia Britannica, “United States Presidential Election of 1976,” Encyclopedia Britannica,
https://www.britannica.com/event/United-States-presidential-election-of-1976, accessed March 2019.
82 Tim Sablik, “Recession of 1981-1982,” FederalReserveHistory.org, Federal Reserve Bank of Richmond, November 22, 2013,
https://www.federalreservehistory.org/essays/recession_of_1981_82, accessed February 2019.
83 Sablik, “Recession of 1981-1982.”
84 “Civilian Unemployment Rate,” Federal Reserve Bank of St. Louis, updated February 1, 2019,
https://fred.stlouisfed.org/series/UNRATE/, accessed March 2019.
85 “Civilian Unemployment Rate,” Federal Reserve Bank of St. Louis.
86 “Inflation, Consumer Prices for the United States,” Federal Reserve Bank of St. Louis, updated October 26, 2018,
https://fred.stlouisfed.org/series/FPCPITOTLZGUSA, accessed March 2019.
87 “Gross Domestic Product,” Federal Reserve Bank of St. Louis, updated December 21, 2018,
https://fred.stlouisfed.org/series/GDP, accessed February 2019.
88 “Real Median Family Income in the United States,” Federal Reserve Bank of St. Louis, updated September 12, 2018,
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89 “Ronald Reagan,” Encyclopedia Britannica.
90 Office of Management and Budget, “Table 2.1: Receipts by Source: 1934-2021,” The White House,
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Budget, “Table 8.1: Outlays by Budget Enforcement Act Category: 1962-2021,” The White House,
https://obamawhitehouse.archives.gov/omb/budget/Historicals, accessed March 2019.
91 Office of Management and Budget, “Table 8.1: Outlays by Budget Enforcement Act Category: 1962-2021.”
92 Office of Management and Budget, “Table 8.1: Outlays by Budget Enforcement Act Category: 1962-2021.”
93 Office of Management and Budget, “Table 8.1: Outlays by Budget Enforcement Act Category: 1962-2021.”
94 “Federal Government Budget Surplus or Deficit (-),” Federal Reserve Bank of St. Louis, updated November 20, 2017,
https://fred.stlouisfed.org/series/M318501A027NBEA, accessed February 2019.
95 “Federal Government Budget Surplus or Deficit (-),” Federal Reserve Bank of St. Louis,
96 “Public Trust in Government: 1958-2017,” Pew Research Center, December 14, 2017, http://www.peoplepress.org/2017/12/14/public-trust-in-government-1958-2017/, accessed March 2019.
97 Thomas Young, “40 Years Ago, Church Committee Investigated Americans Spying on Americans,” The Brookings
Institution, May 6, 2015, https://www.brookings.edu/blog/brookings-now/2015/05/06/40-years-ago-church-committeeinvestigated-americans-spying-on-americans/, accessed March 2019.
98 Young, “40 Years Ago, Church Committee Investigated Americans Spying on Americans.”
99 William A. Niskanen, Reaganomics: An Insider’s Account of the Policies and the People (New York: Oxford University Press,
1988), p. 18.
100 Thomas Sowell, “Trickle-Down” Theory and “Tax Cuts for the Rich” (Stanford: Hoover Institution Press, 2012), p. 3.
101 Arthur Laffer, “The Laffer Curve: Past, Present, and Future,” The Heritage Foundation, June 1, 2004,
https://www.heritage.org/taxes/report/the-laffer-curve-past-present-and-future, accessed March 2019.
102 Lawrence Lindsey, The Growth Experiment: How the New Tax Policy is Transforming the U.S. Economy (New York: Basic
Books, 1990), p. 5.
103 Brian Domitrovic, “George H. W. Bush’s Voodoo Rhetoric,” Forbes, December 2, 2018,
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March 2019.
29
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104 “Ronald Reagan,” Encyclopedia Britannica.
105 “Presidential Approval Ratings — Gallup Historical Statistics and Trends,” Gallup,
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106 “Presidential Approval Ratings — Gallup Historical Statistics and Trends.”
107 Laurel Grafe, “Oil Shock of 1978-79,” Federal Reserve History, Federal Reserve Bank of Richmond, November 22, 2013,
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108 Tim Sablick, “Recession of 1981-82,” Federal Reserve History, Federal Reserve Bank of Richmond, November 22, 2013,
https://www.federalreservehistory.org/essays/recession_of_1981_82, accessed March 2019.
109 “Détente,” Encyclopedia Britannica, https://www.britannica.com/topic/detente, accessed March 2019.
110 Ronald Reagan, “Address Accepting the Presidential Nomination at the Republican National Convention in Detroit,” July
17, 1980, published in The American Presidency Project, University of California, Santa Barbara,
https://www.presidency.ucsb.edu/documents/address-accepting-the-presidential-nomination-the-republican-nationalconvention-detroit, accessed March 2019.
111 Ronald Reagan, “Address Accepting the Presidential Nomination at the Republican National Convention in Detroit.”
112 Ronald Reagan, “Address Accepting the Presidential Nomination at the Republican National Convention in Detroit.”
113 Ronald Reagan, “Address Accepting the Presidential Nomination at the Republican National Convention in Detroit.”
114 Ronald Reagan, “Address Accepting the Presidential Nomination at the Republican National Convention in Detroit.”
115 “Ronald Reagan,” Encyclopedia Britannica.
116 “United States Presidential Election of 1980,” Encyclopedia Britannica, https://www.britannica.com/event/United-Statespresidential-election-of-1980#ref285420, accessed February 2019.
117 Harold Jackson and Alex Brummer, “A Landslide Makes it President Reagan,” The Guardian, November 5, 1980,
https://www.theguardian.com/world/1980/nov/05/usa.alexbrummer, accessed February 2019.
118 Jackson and Brummer, “A Landslide Makes it President Reagan.”
119 Ronald Reagan, Inaugural Address Online by Gerhard Peters and John T. Woolley, “Inaugural Address,” January 20, 1981,
The American Presidency Project, University of California Santa Barbara,
https://www.presidency.ucsb.edu/documents/inaugural-address-11, accessed February 2019.
120 Reagan, “Inaugural Address.”
121 Olivier Jean Blanchard, “Reaganomics,” Economic Policy, vol. 2, no. 5, (October 1987), p. 17.
122 David Wessel, “What We Learned from Reagan’s Tax Cuts,” Brookings Institution, December 8, 2017,
https://www.brookings.edu/blog/up-front/2017/12/08/what-we-learned-from-reagans-tax-cuts/, accessed March 2019.
123 “Historical Inflation Rates: 1914-2019,” US Inflation Calculator,
https://www.usinflationcalculator.com/inflation/historical-inflation-rates/, accessed March 2019.
124 Ben S. Bernanke, “Monetary Aggregates and Monetary Policy at the Federal Reserve: A Historical Perspective,” Board of
Governors of the Federal Reserve System, November 10, 2006,
https://www.federalreserve.gov/newsevents/speech/bernanke20061110a.htm, accessed March 2019.
125 Dan Cameron, “Understanding The Federal Reserve and its Monetary Stimulus Schemes,” Medium, June 30, 2018,
https://medium.com/@dancameron04/monetary-stimulus-the-federal-reserve-and-the-great-recession-cffbe555095e, accessed
March 2019.
126 Arthur B. Laffer and Stephen Moore, The End of Prosperity: How Higher Taxes Will Doom the Economy, if we Let it
Happen (New York: Threshold Editions, 2008), p. 99.
127 William Poole, “President’s Message: Volcker’s Handling of the Great Inflation Taught Us Much,” Federal Reserve Bank of
St. Louis, January 2005, https://www.stlouisfed.org/publications/regional-economist/january-2005/volckers-handling-ofthe-great-inflation-taught-us-much, accessed March 2019.
30
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128 Tim Sablik, “Recession of 1981-1982,” FederalReserveHistory.org, Federal Reserve Bank of Richmond, November 22, 2013,
https://www.federalreservehistory.org/essays/recession_of_1981_82, accessed February 2019.
129 Kimberly Amadeo, “US Inflation Rate by Year from 1929 to 2020,” The Balance, updated March 28, 2019,
https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093, accessed March 2019.
130 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 165.
131 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 73.
132 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 73.
133 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, pp. 75-76.
134 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 75.
135 Ronald Reagan, “Address before a Joint Session of the Congress on the Program for Economic Recovery,” April 28, 1981,
Ronald Reagan Presidential Library and Museum, https://www.reaganlibrary.gov/research/speeches/42881c, accessed
March 2019.
136 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 75.
137 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 75.
138 Louis Jacobson, “Donald Trump Wrong That His Tax Plan is Biggest Cut Ever,” Politifact, October 26, 2017,
https://www.politifact.com/truth-o-meter/statements/2017/oct/26/donald-trump/donald-trump-wrong-his-tax-planbiggest-cut-ever/, accessed March 2019.
139 Laffer and Moore, The End of Prosperity, p. 95.
140 Federal Reserve Bank of St. Louis, “Civilian Unemployment Rate,” updated February 1, 2019,
https://fred.stlouisfed.org/series/UNRATE/, accessed February 2019.
141 Federal Reserve Bank of St. Louis, “Civilian Unemployment Rate.”
142 Sablik, “Recession of 1981-1982.”
143 Sablik, “Recession of 1981-1982.”
144 Alan S. Blinder, “Keyes Returns after the Others Fail,” The New York Times, February 19, 1984,
https://www.nytimes.com/1984/02/19/business/business-forum-keynes-returns-after-the-others-fail.html, accessed March
2019.
145 William Greider, “The Education of David Stockman,” The Atlantic, December 1981,
https://www.theatlantic.com/magazine/archive/1981/12/the-education-of-david-stockman/305760/, accessed March 2019.
146 Greider, “The Education of David Stockman.”
147 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 77.
148 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 77.
149 Niskanen, Reaganomics: An Insider’s Account of the Policies and the People, p. 77.
150 Merlin G. Briner, “Tax Equity and Fiscal Responsibility Act of 1982,” Akron Tax Journal, Volume 1, 1983,
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Reaganomics: Impact and Legacy
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