How did Reagan's policies contribute by stimulating the economy?How did Reagan's policies contribute by stimulating the economy?

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litteacher8's profile pic

litteacher8 | High School Teacher | (Level 3) Distinguished Educator

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There is no evidence that supply side economics stimulated the economy. In fact, there is plenty of evidence that it leads to stagnation and inflation. It's basic common sense. If you give a poor person money, he spends it. If you give a rich person money, he puts it in the Caymans.
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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

Posted on

If one believed in the notion of Reagonomics, then Reagan's policies helped to stimulate the economy by easing government intrusion into business practices and helping to allow the marketplace to generate its own dynamic.  The principle that Reagan operated under in terms of economics as well as his administration was that "Government is the problem, not the solution."  The appeal to conservative ideology helped to empower businesses, reduce the taxation on them, as well as develop the notion of "trickle down" economics, which stipulated that everyone "wins" when businesses wins.  To some extent, this was believed by many and helped contribute to the overall growth in many sectors during the Reagan Years.  The other part of this might be the simple economic truth which suggested that after a period of stagnant economic activity and growth, contraction gave natural way to expansion.

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brettd | High School Teacher | (Level 2) Educator Emeritus

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As was the case historically during and after the Civil War, World War I and World War II and then the Cold War, large scale military spending stimulated economic growth.

Over the first five years of his presidency, Reagan spent over $1 trillion on the military, including an aggressive buildup in numbers of troops and nuclear weapons.  The manufacturing of these weapons and outfitting of these soldiers, their bases, and construction of new ships in the navy created tens of thousands of jobs and spin-off jobs.  The drawback to this kind of economics (called Reaganomics at the time) is that many of the jobs disappear as soon as the spending goes down - they're only temporary.

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

This is a matter of some debate.

Conservatives woud argue that Reagan's tax cuts caused the economy to improve via what is called "supply-side" economics.  They would say that the tax cuts encouraged people to work harder and businesses to expand more.

Liberals would point out that Reagan never really cut spending the way he said he was going to.  In particular, he increased defense spending a great deal.  Liberals would argue that the spending was really what stimulated the economy.

No one can really know because both happened together.

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