Reagan, Ronald (Administration)

RONALD REAGAN CAME TO office in 1981 promising moral reform, tax cuts, smaller government, and deregulation of industry. He also promised to be tough on crime and restore American supremacy in the world. [Page 899]Reagan helped Republicans capture control of the Senate for the first time in 28 years. During Reagan's first 100 days he had several accomplishments. When PATCO, the government union that represented air traffic controllers, went on strike, Reagan fired the controllers and then spent $1.3 billion to hire and train new controllers. Although PATCO was one of two government unions that supported Reagan during the campaign, he wanted to make the point that there were limits to the power of federal employee unions and also show businesses that the administration could be tough on workers. He survived an assassination attempt on March 30, 1981, by John Hinckley, a deranged fan of movie actress Jodie Foster.

Reagan concentrated on fixing the economy during much of his first term. He instituted several draconian measures to deal with stagflation, a new phenomenon consisting of a slow economy and inflation. Reagan supported raising interest rates to tighten up the money supply. It drove down prices, but created a severe recession.

He then demonstrated his faith in supply-side economics by drastically cutting taxes in an effort to boost investment. Reagan convinced Congress to pass a series of across-the-board tax cuts reducing income taxes by 25 percent over a three-year period. To offset this measure he slashed $41.5 billion from unpopular programs designed to help the poor and minorities. He made deep cuts into food stamp, student aid, public-service job, student loan, and mass transit programs.

By 1983 the U.S. economy staged a comeback, as inflation dropped to 4.1 percent by 1988. The unemployment rate fell from 7.5 percent to 5.3 percent as more than 16,753,000 new jobs were added to the economy by 1988. Reagan's promised reductions in spending never materialized, as he engaged in the largest peacetime military buildup in history, spending more than $1.2 trillion on military expenditures during his eight years in office.

To pay for this massive buildup Reagan borrowed heavily, increasing the deficit to $207.8 billion. By 1988 the yearly deficit was at $155 billion, as Reagan had created the largest deficit in American history to that point, more than three times its size when he came to office in 1980. While the economy improved, the gap between the wealthy and poor increased dramatically as the wealthiest two percent of the nation saw more of the nation's wealth concentrated in their hands. The poorest 20 percent of Americans experienced a six percent decrease in their income. Meanwhile the top 20 percent saw an unprecedented 20 percent increase. During Reagan's years, the top one percent experienced a doubling in their after-tax income. By 1989 the top 20 percent earned as much as the other 80 percent combined, and the top one percent earned as much as the middle-fifth of the population. This upward redistribution of wealth was caused by the tax cuts and economic displacement in manufacturing. The top tax bracket was reduced from 70 percent to 31 percent.

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