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Essay on An Introduction to Reagonomics
Reaganomics:
The best sign that our economic program is working," former President Ronald Reagan once quipped during his second term, "is that they don't call it 'Reaganomics' anymore." Indeed, the phenomenal success of Reaganomics can be discerned easily by examining the performance of the U.S. economy before he arrived, while he was in office and after he departed. (The Washington Times, 2004)
Definition
Economic program utilized during the Reagan administration, which emphasized low taxes, low social services spending and high military spending. Contributed to low interest rates, low inflation, and large budget deficits.
An Explanation of Reaganomics
Reaganomics or supply-side economics is a highly politicized term, which can be interpreted many different ways. In brief, Reaganomics has two key ideas: lower taxes and smaller government. Or in Reagan's words "government is the problem."
Classical economists such as Adam Smith stress the importance of specialization and trade. For example, if farmer trades wheat for horseshoes from a blacksmith, then the farmer is more productive and society is better off than if the farmer had attempted to manufacture horseshoes him. However, classical economists have struggled mightily to explain and offer solutions to the periodic business cycles of boom and bust.
During the Great Depression, Keynesian economists saw the vast numbers of unemployed workers and suggested that the government should "prime the pump" through government borrowing for job creation programs. During the New Deal, the WPA and other programs put this theory into action. Keynesian economists justified this government spending, by claiming through the multiplier effect -- one employed worker's salary will benefit 5 other workers etc. Critics argued that government, being a political entity, is an inept distributor of economic resources.
One school of critics, the monetarists, argued that government could better stimulate the economy by manipulating the money supply..........
