Capitalism in Practice The Final Lecture!!!

Ronald Reagan was president of the United States for most of the 1980's. He spent his presidential energy focusing on a few targets that were mainly economic in nature. Thus came the term Reaganomics implying some new form of economic policy. Reagan's economic policies showed that the Keynesian idea that government deficits do not necessarily cause inflation was correct.

The economic theory that Reagan followed was previously known as supply-side economics which is a theory some proponents claim was first described by Adam Smith. Supply-siders emphasize the production side of the market. They feel that rather than the government spending money to stimulate the economy, it should lower taxes (both business and personal), lower interest rates, and sell government-owned enterprises which would encourage business expansion. Supply-side theory states that if the private market is free to operate, then wealth will trickle down to the general public.

Reducing business taxes increases the profits businesses can make and thus encourages others to start businesses. Lower personal taxes gives people more to spend. Lower interest rates makes it easier for both businesses and individuals to borrow money and assists businesses that want to expand. Privatizing government companies removes unfair government competition and provides opportunities for private sector employment in these areas. Both Ronald Reagan and British Prime Minister Margaret Thatcher (THATCHERISM) used this extensively.

When President Reagan took office, he was interested in tax reform, reasserting American global economic leadership, and subduing inflation. Reagan pointed out that the national debt was too high and he wanted tax cuts to stimulate the economy. The benefits of more people working and having more money to spend would trickle down to the less fortunate He promised a balanced budget but instead added greatly to the nations debt. Much of what he added to the debt came from his defense buildup