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Reaganomics: Inflation
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Reaganomics had its roots in two of Reagan's campaign promises: lower taxes and a smaller government. Reagan reduced income tax rates, with the largest rate reductions on the highest incomes; a time of battling inflation combined with broken promises from the Democratic-controlled Congress to cut spending, Reagan raised deficit spending to its highest level (relative to GDP) since World War II. As a result, there has been endless debate on whether the economic trends of the Reagan years actually came from the free market, or from government stimulus of the kind advocated by Keynesian theorists.
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It was the major task of Reaganomics to provide America with this Time of Sacrifice. This would be accomplished by slow-ing down the economy through bleeding our life-blood (our money supply), by frightening the people (with high interest rates and huge deficits), by vastly exaggerating dangers (of inflation, of debt, of the strength of enemies) and by welfare cuts and planned unemployment which sacrificed symbols of our desires (women, children, the poor, the unemployed.) if our Time of Sacrifice was successful, the guilt-producing surplus of recent
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Weidenbaum acknowledges that Reaganomics did not work painlessly. He points to a number of paradoxes and contradictions in its results: lower inflation and higher budget deficits; lower tax rates and higher levels of government spending (especially for the military); less unemployment and bigger trade deficits; a brief, but extremely deep recession followed by the nation's longest peace-time recovery.
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