Why did Reagonomics result in a widening of the gulf between the wealthy and the poor?
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The tax cut benefits of the early 1980s, plus the gigantic amount of government spending, particularly on military contracts, concentrated money in the hands of the wealthiest Americans. Because Reagan was a business conservative, he believed in deregulating them to a large extent, which allowed them to operate in the most efficient manner possible. This often meant layoffs and consolidations, along with wage cuts and a decline in union membership. None of those things bode well for the economic lower classes.
Indeed, the answer to such a question is going to be dependent on one's own political persuasions and beliefs. Those who are in staunch support of Reagan and his philosophies will point to the period of sustained economic growth that happened in America during the 1980s. They will argue that this might have happened because of the cyclical nature of capitalism, but Reagan's less interventionist approach to government is what allowed this growth to happen. Reducing taxes on businesses as well as ensuring that there are fewer restrictions on the private sector to make money and reinvest more of it into the American economy is what triggered such a period of material prosperity. There will be critics to this approach, though. These thinkers could primarily point to the decrepit condition of urban centers during Reagan's tenure. These areas had been funded through government resources that were taken away during the Reagonomic approach of government being seen "as the problem." At the same time, the lack of urban renewal programs helped to create centers of crime and hubs of languish that were not as open to the economic prosperity of the time period.
I'm not sure we'll ever know this for sure, but as a fiscal conservative, Regan's policies made sense to me then and make sense to me now especially with regard to taxes. Each one of us has a limited amount of money for "discretionary" spending (what's left after we pay the bills for the things that keep us alive). When the government takes this money for us in the form of taxes, we have less to spend. When we have less to spend, we buy less; when we buy less fewer people are needed to produce goods and services so they lose jobs, and things get worse.
So the more money we get to keep, the more we can spend, the better for the economy and all of us. The problem is the size of government and what it is trying to do. The more it does, the more money it needs, and it's go to come from somewhere. But I don't think anyone is sure how economic crises are "solved." I have heard that Roosevelt's New Deal (lots of government spending) did not get us out of the Depression --- the War did.
Based on the way I see things, it believe Regan's policies (cutting taxes and the size of government) helped end stagflation and stimulate economic growth.
This is, of course, a matter of opinion.
Conservatives argue that Reagan's tax cuts stimulated the economy and got it out of the recession that it had been in (the one that included stagflation). Liberals point out that the economy actually got worse for the first year of Reagan's presidency.
As far as the gap goes, the argument goes that Reagan's tax cuts and other policies gave money to the rich. At the same time, his cuts in spending for social purposes made the poor get poorer. So the idea is that he favored the rich with tax cuts while taking away programs that were meant to help the poor. This, too, is a matter of opinion.
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