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Content Reading Guide: President Ronald Reagan:
Trickle Down Economics and Cold War Defense Spending
PresidentRonald Reagan, a Republican, supported an economic theory dubbed Trickle Down Economics. This meant he wanted to lower taxes and reduce funding for government programs. His concept was that, when the government heavily taxed citizens, it meant less money was being used in the economy to purchase services and goods. Reagan believed that, if the government reduced taxes, especially on the rich, the money people were then allowed to keep would be spent and create an economic boom. Reagan cut funding to programs such as student loans to college students, free school lunches, welfare, food stamps, job training, Medicaid, and other social programs. Reagan also felt there were too many “rules” in the economy and this slowed down businesses. He wanted to reduce the government rules for television companies, phone companies, banking, and other industries. Think of it like this. FDR, during the New Deal of the 1930s and 1940s, wanted a strict referee for the economy. Reagan wanted a very lenient referee. When the government reduces rules for businesses, it is called deregulation.
Reagan cut funding to many social programs that provided economic assistance to the middle class and poor. Yet, the Cold War was still a focus for the USA. Reagan pumped huge amounts of money into defense spending to ensure the USA remained more powerful than the Soviet Union of Russia in terms of military might. He ordered the building of the Strategic Defense Initiative. He claimed it could stop misses from hitting the USA. He even insinuated it could use lasers to achieve this goal. It was nicknamed “Star Wars.” Democrats argued it was too expensive, unrealistic, and would simply increase hostility with the USSR.
In the early 1980s, at the start of Reagan’s term, the American economy struggled. Unemployment reached around 10%. The second half of Reagan’s first term saw an economic turnaround. Starting in 1983, the economy began to improve. Inflation, a massive problem in the 1970s, stabilized. The Democrats critiqued Reagan’s economy, despite the improvements. They asserted that the economy was making the very wealthy even more prosperous and the poor continued to suffer under worse economic situations. Reagan’s massive defense spending created a budget deficit, meaning the government spent more than it took in, despite the cuts to social programs, this increased the national debt.
Prior to Reagan, and since FDR was Elected in the 1930s, the Supreme Court was dominated by liberal judges. Sandra Day O’Conner, Antonin Scalia, and Anthony M. Kennedy were appointed to the court by Reagan. William Rehnquist, the most conservative judge, was named chief justice. The Religious Right, like those who supported the televangelist pastor, Jerry Falwell, and his political group, the Moral Majority, wanted Reagan to appoint judges that went against the liberal trend that had limited the prayers of school staff, passed Roe v. Wade, and pursued other liberal social rulings.