Economic Policies of Ronald Reagan - Assignment Example

In contrast, the Democrats maintain that the beneficial economic changes that took place in the 1980s were not a consequence of Reagan's policies, whereas any negative alteration as a result of his failed measures. At the time when Ronald Reagan entered office, the American economy was facing one of the highest rates of inflation since 1947. Reagan supported income tax cuts and reductions in social welfare spending, and he focused on reviving the economy, which was suffering a high rate of inflation combined with an economic recession.

His fiscal policies are generally referred to as "Reaganomics". As a result of the tax reductions taken and the increase in the defense-related expenditure (the consequence of the ongoing Cold War), great economic growth and expansion were observed together with an improvement of the job market. While these factors made President Reagan very popular among the general population, a fraction of economic experts criticized his measures as too liberal. And they were right: in order to cover federal budget deficits complicated by increased spending by Congress and by the fact that Reagan never submitted a balanced budget to Congress, the US borrowed heavily both domestically and abroad.

The deficits in the budget soon became evident creating enormous increases in the national debt, which tripled from $1 to $3 trillion (circa 40% of the domestic gross product, the highest level since 1963); the country owed more to others than it was owed. Similarly, federal tax receipts doubled from $130.2 to $263.7 billion. In order to alleviate the situation, he appointed the Greenspan Commission, which resolved the crisis through a series of reforms which included, for example, increases in the payroll tax.