Seeds: Reaganomics, otherwise known as supply side economics, or trickle down economics, is the economic policy of America’s 40th president, Ronald Reagan.
Core: Essentially, Reaganomics is based on the idea that an increase in the wealth of the upper class, through tax cuts and decreased government regulation on business, will “trickle down” to positively affect the lower classes with higher wages and an increased number or job opportunities. President Reagan famously enacted the trickle down theory by cutting the tax rates of the upper class from 70% to 50% in 1981 and to 28% in 1986. As well as this, Reaganomics also included a decrease in government spending, except for military expenses, where spending was increased.
Skin: The debate over whether or not Reaganomics actually works rages on today. Republicans traditionally believe that Reaganomics helps everyone, no matter what class they’re in, given that both the unemployment rate and inflation rate went down and the GDP went up during Reagan's two terms (GDP = gross domestic product, which is an indicator of the “health” of the economy). Democrats tend to believe that the money accrued by the upper class stays there, helping only the wealthy, and expanding the wealth gap (the poverty rate during Reagan's two terms increased), leaving the poverty stricken to remain poverty stricken. These diverging theories on Reaganomics largely shape the economic policies of each party.
Leaves: Although the American economy grew exponentially during President Reagan’s time in office, the mixture of tax cuts and a dramatic increase in defense spending (Reagan increased the defense budget by 35%) led the government’s debt to triple from $1 billion to $3 billion. This debt forced Reagan’s successor, President George H.W. Bush, to raise taxes after assuring the nation, “Read my lips, no new taxes” (poor George). This leads some to believe that Reaganomics cannot work in the long term while it helped during his presidencies, while others believe that the expansion of the American economy during the 80’s (especially after the recession of the 70s) is proof that Reaganomics can and does work.
Food For Thought: Do you believe that Reaganomics works? Is Reaganomics to blame for the growing wealth gap or is it simply the result of changing demographics, independent of economic policies?