What Is The Impact Of Reagan's Economic Policy

Throughout President Ronald Reagan’s’ campaign of 1980, a recipe aimed at fixing the nations economy then was born. President Reagan asserted that excessive government regulation, massive social spending programs and undue tax burden hindered growth. President Reagan suggested a 30% tax cut that would be rolled out in 3 years while in office. Most of the tax cut would go to the upper income level individuals to enable the rich invest and create more jobs. These major policy modifications were aimed at increasing economic growth, restoring healthy financial markets, balancing the budget, increasing savings and investments and reducing inflation and interest rates.
The outcome of these policy changes was however mixed. The Federal Reserve Board had an initial believe that the reduction in tax would heat up inflation and in turn increase interest rates. Instead, it ignited a deep recession in 1981and 1982. The high interest rates level made the dollar value to rise on the foreign exchange market resulting in prices going up for American goods. This resulted in an increase in imports and a decrease in exports. The economy however stabilized in 1983showing tremendous growth in the remaining years of President Reagan’s tenure.
The annual increase in spending by the federal department declined from 4.0% (during carters reign) to 2% during Reagan’s reign. The defense department saw major spending awarding major government contracts to upgrade the nation’s defense systems even proposing a space-based missile defense system. President Reagan however did not make any substantial changes to social security and Medicare but significant reductions in domestic programs were proposed. These changes in economic policies were found to be favorable to the economy although disappointing in comparison to what was