There are a lot of different economic policies that have been used and are still being used to make the economy better. Among these different policies, one that was worked on the most and got the most severe attempt was the Reaganomics. We present Reagan set these policies during his presidency in the 1980s.

If you are curious to know what Reaganomics is, how it works, and what the impact of this economic policy on the economy is, then this article is just for you. Here, we have mentioned everything that you need to know about this policy and how it works. So, let's jump right into the article and have a detailed look at this concept.

What is Reaganomics?

As mentioned above, Reaganomics is the economic policy that Ronald Reagan presented in the 1980s. This policy was made when Ronald became president after Gerald Ford and Jimmy Carter. The economy was failing terribly and there was no proper system for the economy. The economic growth was prolonged, the unemployment rate was very high, and the inflation was increasing every day.

This was causing a lot of problems for the people, and even it was tough for the government to handle the entire situation. This is when Ronald presents the Reaganomics policy. This policy was based on four main components.

• Reducing the spending by the government
• Reducing the taxing money
• Fewer regulations
• Slowing the supply of money to control inflation

Hence, on the basis of these four factors, Reagan started working on the economy, and it was seen that these played a fantastic role in the betterment of the economy. In the end, with the help of this policy, the government was able to generate a good amount of revenue.

The Basics of Reaganomics

Now that you know what Reaganomics really is, you need to know the basics of this concept. The policy is based on supply-side economics, which is another theory and concept that is used in macroeconomics. According to this theory, there can be an increase in the growth of the economy when taxes are reduced, and there is lower regulation.

Reagan thought that if he would cut the taxes and reduce them, citizens then the government would be able to make more revenue. He also thought that if the goods and services are offered at a lower price, then it will benefit them and decrease the rate of unemployment.

He said that if they reduce the taxes, people can use their money for better business opportunities. This will allow the nation to have better economic growth, and it can also lead to more job opportunities. This will eventually allow the government to have a more extensive tax base and automatically a way to get better revenue.

This policy can also be called the trickle-down because lowering the tax down means that it will increase business opportunities. This will eventually increase the investments in the short term, and then this will allow the society to be a better place as a whole.

Advantages and Disadvantages of Reaganomics

Advantages

Reaganomics was very popular back in the day, and because of this, people were able to get a lot of jobs and other opportunities. Hence, this concept proved to be very beneficial for the people. Following are some of the other benefits that come with this concept.

Inflation Level

The first and most prominent advantage of using this concept was that the inflation level decreased significantly. There was a massive decrease in prices that made people's lives very easy.

Reduction in the Taxes

The taxes were also massively reduced for the people. Not only this, but the corporate, business, and investment people also benefited from this concept because, for them, the taxes were significantly decreased.

Open Market

The rules and regulations were not strictly followed. This deregulation allowed people to have more open and accessible markets, which meant people could make new businesses and quickly launch new products in the markets.

Disadvantages

When there are advantages to something, there are bound to be some disadvantages, too. Following are some of the cons that you will see that come with this concept as well.

Limiting of Social Program

One of the significant disadvantages of this concept was that it limited social gatherings and public meetings.

Increase in Debt

The national deficit and the debt increase a lot. This was because the government reduced the tax, and in order to complete the requirements and fulfill the needs of people, they had to take debt.

Results of Implementing Reaganomics

Now, you might be wondering if Reaganomics had any benefits, and if so, what were the results? Following are some of the fantastic results that were seen after the implementation of this economic policy.

20 Million New Jobs

The first and most impressive change that was found because of this policy was that there were a lot of new job opportunities. This became the catalyst for the economy, and a lot of different and new jobs were opened. New industries were being launched, and all of this allowed about 20 million job opportunities.

Drop of Inflation

Another significant advantage that people got here was there was a drop in inflation. In 1980, the inflation was about 13.5%, and in 1988 it dropped to 4.1%. This was a massive change in the economy because of Reaganomics.

Reduction in Unemployment

The unemployment rate also reduced drastically. There was about 7.6% unemployment at the start of the policy, and then this reduced to 5.5%.

Final Words

Reaganomics is a fantastic policy that changed the entire economy after its implementation. Ronald Reagan presented this, and because of him, he was able to transform the entire US economy and change a lot of other things. Hence, we hope this article was beneficial for you in learning more about Reaganomics.