What were the sources of the American economic recovery of the 1980s and 1990s? Who benefited from it and who did not, and why was that the case? The American economy during the time period of 1980-1990’s was in a state of regrowth after the federal government’s economic policies of the 1970’s was revised. President Reagan felt the federal government had become too intrusive in state administration with regards to economic policies (American History, 2012). Reagan’s economic plan was largely based on a “supply-side economic theory” in which large tax cuts would encourage people to work longer hours and promote investments.
I find that it is important to address the source of that misinformation/ignorance. Hacker and Pierson comment, “Bartels... Does not contradict our most fundamental point: that public opinion on tax cuts was deliberately shaped by political actors framing policy design to confuse voters, elevate surface support for any tax cuts, and betray clearly expressed public priorities. Though differing explanation are provided, the most compelling counterargument to Bartels centers on the reason why the public is so misinformed.” (Hacker, Pierson 38) Bartel’s claim that voters are unenlightened and make decisions based on this pre-condition is redundant, clearly both articles speak to the political impact
The Roosevelt administration changes issued in an era of prosperity unseen in America for the middle and lower classes. The rise of the working man saw the share of national income going to the top 1% decrease from 24% to around 10% as they failed to recover fully from the great depression and became swamped by an increasing number of government taxes (McQuaig & Brooks, 2010, p.54). Consequently, the rise of wages and workers’ rights, coinciding with heavier taxation to the rich, led to greater equity in income
Second, Reagan cut taxes for corporations and the wealthy-class. The theory of Reaganomics is tax relief for the rich would enable them to spend more money, save money in banks, and make investments. The additional spending from the rich, was supposed to help stimulate the economy and create new jobs. However, the opposite occurred and America suffered a deep recession in 1981-1982. In addition, the high interest rates caused the value of the dollar to rise on the international exchange market, thus American exports decreased and imports increased.
Government expenditure increased due to personal tax credits and more leniency towards applicants for unemployment compensation. Tax changes in the mid 1970’s benefitted the middle to lower income bracket by increasing their disposable income (A Tale of Two Tax Cuts, 2001). In the late 60’s and early 70’s, the US was in an inflationary gap. The Oil Crisis caused a shift to the left in the short-run aggregate supply. It then resulted in a recession.
Were Americans more greedy during the 1980s? The top 1% began to control almost 50% of the US household wealth because of the Reagan tax cuts for the rich and greed. Wall Street business shifted towards more money motivated actions and get rich quick investments. Corporations were more interested in acquiring more assets and smaller companies to gain immediate financial success, instead of investing companies and researching for the future (West, 1994). Greed could certainly account for this new technique utilized in the business world.
What causes a recession is inflation. Inflation is a general increase in prices and the fall in the value of money. Falling confidence in the consumer can be a major cause in leading to a recession. Also, manufacturing orders starting to slow down in the economy, this can lead to less money being produced throughout the economy resulting to a loss of jobs. Since this causes a high unemployment rate many of the people will get on a government welfare program to pay for their family and that is even more money being lost in the economy, making the nation fall into a deeper recession.
If we do increase taxes on the rich, how will we define them? Some of you will be considered rich because of your college funds in the bank. And you will lose half of it. In addition if we tax the rich, the nation’s economy will crash. But you do not have to lose half your college fund, or ruin America.
In order to afford the benefits given to the elderly, the federal government used payroll taxes. Employers and employees were both taxed to furnish the government with the money it needed to adequately dispense the benefits. Furthermore, the Act was estimated to reach an annual taxation bill of $2.6 billion by 1949 and 3.4 billion by 1980. The employers and employees had little to say about this taxation, and many believed that this would lead to the demise of Social Security (“Social Security Act Is Viewed As Jobs Diminisher” 1935). The Christian Science Monitor, a newspaper, stated, “‘Between the steady, dependable, competent worker and the irregular, unreliable and incompetent one, the burden of taxes and benefits is disproportionately in favor of the later....’” (“Social Security Act Is Viewed As Jobs Diminisher” 1935).
The Great Depression was a major turning point for the United States’s economy because it changed the relationship between the government and the economy. Before the Great Depression, the economy was a Laissez-faire style market where the government had no influence on private party transactions and businesses. After the Stock Market Crash of 1929, the people of the United States sought for reliefs from the government. The Government responded by creating tax reforms, benefiting the stock market, wheat prices, employment, and the number of bank suspensions, and providing comfort for the people. As a result of their disparity, the people put their trust in the government in hopes that they would repair the broken economy.
Of coarse many can and will argue that we have representation and we have presidents and governors and mayors and so many chiefs and we could not argue that point nor would we. This is only to say that when a society is handcuffed to a tax burden such as the IRS having the ability to take property and freedom from American citizens for lack of payment of taxes than there is an issue and a problem that needs to be addressed here in America. Flat Tax
Rather than helping the farmers which it was designed to do, it turned out to be the one of the nation 's highest protective tariff(TEXT PAGE 740) This served as a low blow to all international countries America was involved with. Not only did the tariff economically isolate America from the world, but it also created a financial chaos among America 's trading partners. It literally sent America and other nations into a deeper depression(DOCUMENT D). In addition to this, during the nineteen twenties, stock prices were rapidly increasing and because of this, “buying on margin” became very popular. This “buy now, pay later” form of credit worked well with a rising market, but not with a declining one(DOCUMENT B).
In the 1920’s America felt that its society would continue its climb towards success. People were buying goods on credit with the expectation that they would easily pay their debts with the raises they would get from there every increasing paychecks. However, this extreme success of America led to an extreme downturn in it 's economics. With the bank runs on Black Tuesday, the overproduction of goods, and people’s extreme debt, America plunged itself into the Great Depression. The president of the time, Herbert Hoover, did little to help the straining economy.
In President Franklin D. Roosevelt 's first term he was faced with the job of stabilizing the United States economy at the height of the Great Depression. Roosevelt 's administration changed the role of the federal government from being more traditional and centered on self-improvement and self-government into an active government involved in economic and social issues. The “New Deal” policy and programs of FDR transformed American politics but were not effective in reversing the economy. The failure to completely fix the economy, the unconstitutionality of some programs and the exclusion of large groups of people made the “New Deal” ineffective despite these facts this was an incredibly popular program solidifying the Democratic base for
Inheriting an unenviable situation with the burst housing bubble and the banking crisis, President Obama’s response was a government stimulus package to try and stimulate growth in the economy. Additionally he raised taxes on the wealthy and increased spending for government programs, such as the Affordable Care Act. While this broad strokes are an attempt to fix the economy as a whole, and have met with some measure of success (Hartung, 2014) the larger issues are still unresolved. The American middle class hasn’t grown, it continues to stagnate in terms of employment and wages not rising to meet rising costs. (Mishel, et al) To use an example of a current policy that is potentially hurting small business owners, The Affordable Care act requires employers to offer insurance packages to their employees.