How far did the US economy improve in the 1980s? - CIE HISTORY IAL

TRADE DEFICIT

An excess of imports over exports - US trade deficit of $170 billion by 1986

What did Reagan do to encourage economic growth?

He wanted to stimulate the economy and avoid stagflation from the 1970s by Economic Recovery Tax act 1981- cut tax to 23% which is Top Tax Rate dropping from 70% to 50% The Omnibus Reconcilation Act 1981 - Aimed to cut down federal gvt. spending by cutting 300 programs Congressional budget office estimated $1041 billion dollars Tax relief for the rich enabled them to spend and invest more - new spending would stimulate the economy and create new jobs for middle/lower class

Success on economy?

Inflation dropped from 13.5% in 1980 to 3.8 in 1983 Unemployment went to down 7%

Failure of Reaganomics

People believed that Reagan only cared about the wealthy due to the fact that the tax cut did not affect the 1/5 rich Americans who saw income increase by 14% the poor 1/5 Americans saw a decline in their income by 24% - became even poorer Middle class 3/5 stayed flat Although stock market in Wall Street was increasing - wage increases stayed the same Reagan failed to cut down government spending even when he said he would cut Medicare and Social Security - however he knew this was politically impossible to dismantle them (or else he'd lose older peoples votes) the fact that he couldnt cut down that and his passion for increasing military spending - this accounted to 85% of government spending = continued to rise and national debt increased. by 1984, 13 Million children were under the poverty line

The Strategic Defence Initiation

Reagan sponsored the largest military buildup in US history - MX missile and Space based (Star Wars) missiles and Lazers to attack USSR - This is the major reason that affected the national debt.

REAGANOMICS

The federal economic polices of the Reagan administration, elected in 1981. Wanted to supply-side the economy known as Tickle-Down economy policy

Failure on economy?

US went into a brutal recession in 1982 due to sharp jump of high interest rates Unemployment exceeded 10% Reagan's public approval rate dropped to 35% US in national debt of $1.7 trillion - the first president with this much debt in 200 years

Success of Reaganomics

Wall street saw prosperity and growth in their stocks In 1980 just 4,400 had a income by the end of the year of $1 million dollars. by 1987 more than 35,000 Americans did Stock market shot from 15.9% in 1983 to 29.6% in 1989 due to Congress creation of the 401(K) tax deffer retirement plan - funded pensions for retirement Inflation went down from a double digit and kept increasing to down to 3.5% in 1988 Remarkable for Reagan as Democrats were still controlling congress yet agreed to his proposals

BUDGET DEFICIT

When the government spends more money than it collects in taxes