QUICK FACTS: Politics, News, Economy, Religion, History…for busy people!

Reaganomics: The Success of President Reagan’s Economic Policies

Posted by FactReal on January 30, 2012

Summary of Forbes’ article dated 5/5/2011:
When President Reagan entered office in 1981, he faced actually much worse economic problems than Obama faced in 2009:
  • Three worsening recessions starting in 1969 were about to culminate in the worst of all in 1981-1982.
  • Unemployment soaring into double digits at a peak of 10.8%.
  • Roaring double-digit inflation, with the CPI at 11.3% in 1979 and 13.5% in 1980 (25% in two years).
  • Double digit interest rates, with the prime rate peaking at 21.5% in 1980.
  • The poverty rate started increasing in 1978, eventually climbing by 33%, from 11.4% to 15.2%.
  • A fall in real median family income that began in 1978 snowballed to a decline of almost 10% by 1982.
  • From 1968 to 1982, the Dow Jones industrial average lost 70% of its real value, reflecting an overall collapse of stocks.
Reagan conservative policies amounted to the most successful economic experiment in world history:
  • 20 million new jobs were created.
  • Unemployment fell to 5.3% by 1989.
  • The top income tax rate was cut from 70% to 28%.
  • The Reagan Recovery took off once the tax rate cuts were fully phased in.
  • Total federal spending declined to 21.2% of GDP in 1989 (even with the Reagan defense buildup, which won the Cold War.)
  • Eliminated price controls on oil and natural gas. Production soared, and aided by a strong dollar the price of oil declined by more than 50%.
  • Real per-capita disposable income increased by 18% from 1982 to 1989 (meaning the American standard of living increased by almost 20% in just 7 years.)
  • The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak.
  • The stock market more than tripled in value from 1980 to 1990 (a larger increase than in any previous decade.)
  • The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990 (when the tax increases of the 1990 budget deal killed it.)
  • During this 7-year recovery, the economy grew by almost one-third (equivalent of adding the entire economy of West Germany to the U.S. economy.)
  • In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years.
  • The inflation from 1980 (in the Carter era) was reduced from 13.5% to 3.2% by 1983.
    (The contractionary, tight-money policies needed to kill this inflation inexorably created the steep recession of 1981 to 1982, which is why Reagan did not suffer politically catastrophic blame for that recession.)
  • The Reagan Recovery kicked off a historic 25-year economic boom (with short recessions in 1990 and 2001.)
  • The period from 1982 to 2007 is the greatest period of wealth creation in the history of the planet. In 1980, the net worth–assets minus liabilities–of all U.S. households and business was $25 trillion in today’s dollars. By 2007, net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the 25-year boom than in the previous two hundred years.
  • Economic growth averaged 7.1% over the first 7 quarters.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s