Ronald Reagan's Presidency

Start Free Trial

What has been the relationship between public spending and taxes? How does Reagan propose to change this relationship?

Expert Answers

An illustration of the letter 'A' in a speech bubbles

Before Ronald Reagan came into office, the general consensus was that relatively high levels of taxation were needed to maintain generous levels of public spending. However, Reagan set out to challenge that consensus, arguing that high levels of taxation and public spending were bad for the economy and that far...

Unlock
This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Start your 48-Hour Free Trial

Before Ronald Reagan came into office, the general consensus was that relatively high levels of taxation were needed to maintain generous levels of public spending. However, Reagan set out to challenge that consensus, arguing that high levels of taxation and public spending were bad for the economy and that far from being the answer to all our problems, government was the problem.

What was needed instead was a substantial cut in both personal and business taxes, especially at the higher rates. It was argued that this would stimulate the economy, as consumers and businesses would have more money in their pockets to spend and invest. At the same time, the Reagan Administration drastically cut back on government spending, especially in areas such as welfare, which had become increasingly unpopular with the voters.

But not all areas of public spending were to be cut. Under Reagan, the defense budget increased substantially, which was in line with the Administration's commitment to a more aggressive stance towards the Soviet threat.

In combination, Reagan's fiscal measures had the effect of generating an enormous budget deficit. Not only that, but the Federal government's share of GDP actually increased despite Reagan's stated aim to reduce the size of government.

Approved by eNotes Editorial Team