1. Reaganomics What effect does a changing economy have on American society?

2. Directions 1.Read the handout and decide what you will do in each of the five areas. 2.Fill out handout 2 and decide what you will do about federal spending. – If you are cutting the budget, decide where the money will come from. 3.Discussion on the budget 1.Read the handout and decide what you will do in each of the five areas. 2.Fill out handout 2 and decide what you will do about federal spending. – If you are cutting the budget, decide where the money will come from. 3.Discussion on the budget

3. Reduce Federal Spending Would you cut the federal budget? Which programs would you cut and why? Would you cut the federal budget? Which programs would you cut and why?

4. Lower income-tax rates for individual and businesses Would you lower income-tax rates for individual and businesses? How would this help with the economy? Would you lower income-tax rates for individual and businesses? How would this help with the economy?

5. Decrease government regulation of business Would you decrease government regulation of business? How would this help with the economy? Would you decrease government regulation of business? How would this help with the economy?

6. Fight inflation by keeping interest rates high Would you fight inflation by keeping interest rates high? How would this help with the economy? Would you fight inflation by keeping interest rates high? How would this help with the economy?

7. Balance the federal budget Would you balance the federal budget? How would this help with the economy? Would you balance the federal budget? How would this help with the economy?

8. The Conservative (Reagan) Revolution Response to overgrown government entitlement programs – $300 billion annually Goals of conservative movement – Shrink the size of the federal government and reduce spending – Promote family values and patriotic ideals – Stimulate business by reducing government regulations and lowering taxes – Strengthen national defense Response to overgrown government entitlement programs – $300 billion annually Goals of conservative movement – Shrink the size of the federal government and reduce spending – Promote family values and patriotic ideals – Stimulate business by reducing government regulations and lowering taxes – Strengthen national defense

9. Reagan’s Government Spending Policies Made an attempt to cut but was largely unsuccessful Tried to slow its growth – Increased defense spending by $28 billion Possibly led to end of the Cold War – Proposed cutting Social Security payments to early retirees After pressure, Reagan dropped the idea Formed a commission to study the problem Cuts in education, protection, transportation, and general government – Saved only $10 billion Federal budget rose to almost $500 billion Made an attempt to cut but was largely unsuccessful Tried to slow its growth – Increased defense spending by $28 billion Possibly led to end of the Cold War – Proposed cutting Social Security payments to early retirees After pressure, Reagan dropped the idea Formed a commission to study the problem Cuts in education, protection, transportation, and general government – Saved only $10 billion Federal budget rose to almost $500 billion

10. Reagan’s Tax Cuts Congress passed and Reagan signed a law to lower tax rate – 5% in 1982 – 10% in 1983 – 10% in 1984 – Tax rate for wealthiest Americans dropped from 74% to 50% – Also cut taxes on businesses May have caused the large economic expansion of the 1980s – At the time the longest peacetime expansion in American history Congress passed and Reagan signed a law to lower tax rate – 5% in 1982 – 10% in 1983 – 10% in 1984 – Tax rate for wealthiest Americans dropped from 74% to 50% – Also cut taxes on businesses May have caused the large economic expansion of the 1980s – At the time the longest peacetime expansion in American history

11. Reduction of Regulations Some industries benefited – Oil and banking Weakened antitrust laws against large businesses Positives- decreased regulation reduced costs and increased investment and expansion Negatives- fewer regulations meant businesses could be riskier or unethical – Banking industry had many savings and loans companies go bankrupt Cost the government over $500 billion Some industries benefited – Oil and banking Weakened antitrust laws against large businesses Positives- decreased regulation reduced costs and increased investment and expansion Negatives- fewer regulations meant businesses could be riskier or unethical – Banking industry had many savings and loans companies go bankrupt Cost the government over $500 billion

12. Interest Rates The percentage that banks charged borrowers on the unpaid portion of their loans High interest rates prevented inflation but discouraged investment Federal Reserve did not lower them – President Reagan did not intervene – 1983 economy rebounds and interest rates fall The percentage that banks charged borrowers on the unpaid portion of their loans High interest rates prevented inflation but discouraged investment Federal Reserve did not lower them – President Reagan did not intervene – 1983 economy rebounds and interest rates fall

13. Balanced Budget Impossible when government spending increases while tax cuts are enacted Deficit – What the government still owes after taxes are collected – Grows from $79 billion in 1981 to $113 billion in 1982 Impossible when government spending increases while tax cuts are enacted Deficit – What the government still owes after taxes are collected – Grows from $79 billion in 1981 to $113 billion in 1982