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Concept
Reaganomics
Summary
Reaganomics (reɪgəˈnɒmɪks; a portmanteau of Reagan and economics attributed to Paul Harvey), or Reaganism, were the neoliberal economic policies promoted by U.S. President Ronald Reagan during the 1980s. These policies are characterized as supply-side economics, trickle-down economics, or "voodoo economics" by opponents, while Reagan and his advocates preferred to call it free-market economics.
The pillars of Reagan's economic policy included increasing defense spending, balancing the federal budget and slowing the growth of government spending, reducing the federal income tax and capital gains tax, reducing government regulation, and tightening the money supply in order to reduce inflation.
The results of Reaganomics are still debated. Supporters point to the end of stagflation, stronger GDP growth, and an entrepreneurial revolution in the decades that followed. Critics point to the widening income gap, what they described as an atmosphere of greed, reduced economic mobility, and the national debt tripling in eight years which ultimately reversed the post-World War II trend of a shrinking national debt as percentage of GDP.
Prior to the Reagan administration, the United States economy experienced a decade of high unemployment and persistently high inflation (known as stagflation). Attacks on Keynesian economic orthodoxy as well as empirical economic models such as the Phillips Curve grew. Political pressure favored stimulus resulting in an expansion of the money supply. President Richard Nixon's wage and price controls were phased out. The federal oil reserves were created to ease any future short term shocks. President Jimmy Carter had begun phasing out price controls on petroleum while he created the Department of Energy. Much of the credit for the resolution of the stagflation is given to two causes: renewed focus on increasing productivity and a three-year contraction of the money supply by the Federal Reserve Board under Paul Volcker.
In stating that his intention was to lower taxes, Reagan's approach was a departure from his immediate predecessors.
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Libertarian conservatism
Libertarian conservatism, also referred to as conservative libertarianism and conservatarianism, is a political and social philosophy that combines conservatism and libertarianism, representing the libertarian wing of conservatism and vice versa. Libertarian conservatism advocates the greatest possible economic liberty and the least possible government regulation of social life (described as "small government"), mirroring laissez-faire classical liberalism, but harnesses this to a belief in a more socially conservative philosophy emphasizing authority, morality and duty.
Supply-side economics
Supply-side economics is a macroeconomic theory that postulates economic growth can be most effectively fostered by lowering taxes, decreasing regulation, and allowing free trade. According to supply-side economics, consumers will benefit from greater supplies of goods and services at lower prices, and employment will increase. Supply-side fiscal policies are designed to increase aggregate supply, as opposed to aggregate demand, thereby expanding output and employment while lowering prices.