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Literature Review

Niskanen (1988) posts that reagonomics was the most  serious attempts  by the US Political machine to change the  direction of  the country's economic policy since the days of Franklin Roosevelt, and the new deal. President Ronald Reagan, according to Niskanen (1988) wanted to change the course of the US economy by reducing the growth of government. The Reagan administration plunged into reagonomics through the use of four main strategy objectives (Niskanen, 1988). Niskanen posts that the first policy objective was to decrease government spending. Policy objective two was to reduce the secondary tax rates on earnings from capital and labor (Niskanen, 1988). Reagonomics also aimed to reduce regulation. Lastly, reagonomics wanted to check inflation, the control of the money supply in the country (Niskanen, 1988). This paper attempts to examine the political factors that allowed bipartisan legislation that was enacted in the Reagan era and led to strong economic gains in the country.

Stein (1994) observes that passing legislative bills in a bipartisan house is more difficult than winning an election. He observes that the American legislative system is complex (Stein, 1994). Stein (1994), posts that Congress is given to endless intrigues that kill legislations every waking day (Stein, 1994). Through the process of filibuster, a bill can be delayed indefinitely. In spite of these restrictions in Congress, Reagan was able to pass legislation that birthed reagonomics (Stein, 1994).

A confluence of social and economic factors mobilized the political nobility in America to support reagonomics legislation (Stein, 1994). Inflation is a key economic consideration that brought together the democrats and republican in support of reagonomics (Niskanen, 1988). The American congress works as a team in moments of national disaster, and the economy in1980, when Reagan Replaced Jimmy Carter at the White house, was a mess (Stein, 1994). The American economy was in total shambles and a savoir was needed. The trend of inflation that had been set in motion by Lyndon Johnson funding the Vietnam War and financing the Great society programs was in high gear (Evans, 1983). It had continued unabated. The 1973 crude oil crisis had fueled this economic recession (Evans, 1983). The inflation and unemployment that hit high noon in1973 had economists dubbing it stagflation (Evans, 1983). This is because the rate of inflation had hit double digit levels. Wages peaked in 1973 and by 1975; they had declined by 18%. The American society was in hardship. The economy was approaching the depression levels (Evans, 1983).

To add salt to injury, the oil crisis caused by the temporary stoppage of the flow of Iranian oil hit the sick economy remarkably hard. In the selfsame year, the OPEC countries hiked their prices (Lindsey, 1990). This caused a major oil shortage and went down badly with the American society (Evans, 1983). It is at this time in the American history that the American public was seen standing for long hours at gasoline stations queuing for gasoline (Evans, 1983). The inflation pressure has increased (Evans, 1983). The US suffered higher balance of payments and also deficits. The inflation rate and the domestic suffering wrought by the pain of inflation mobilized the American Congress to pass the reagonomics bills without placing undue emphasis on party voting. The American congress voted for these legislations with the American people at heart (Lindsey, 1990).

With the economy in shambles social factors, begun to shape the direction of the country. The economy is inevitably tied to the social well-being of a country. The period that ushered Regan into the white house saw high skill and high wage manufacturing jobs vanishing (Lindsey, 1990). This was in the wake of the economic restructuring. The automobile manufacturing industry lost over 250,000 jobs just between 1979 and 1982(Lee, 1996). These automobile industry jobs were being replaced with low- skill, low wage   service jobs. This was remarkably hurting to the American citizenry because from 1963 to 1973, over 40% of all new jobs were high paying. Only 20 % of the jobs were at the bottom of the scale (Lee, 1996). These are some of the things that the American legislator does not ignore (Lee, 1996). This is because ignoring such issues is committing political suicide.

As unemployment continued to assail the American population, another thing was happening in the social dimension. The American standard of living had dropped to fifth place in the world ranking. This was due to the   economic phenomenon called stagflation that has been previously mentioned. According to standard economic theories, it is impossible to have high unemployment and high inflation at the same time. This was happening right in the USA.

It has been previously stated in this paper that one of the main aims of reagonomics was to reduce government spending (Lee, 1996). This was due to the fact that the federal government was absorbing more and more financial resources of the country (Lee, 1996). For example, in 1980, the country was spending over 35% of the total gross national product (Lee, 1996). This was a huge figure considering that in 1950 the government was only spending 24% of the gross national product and this percentage only increased to 29 in 1960 (Lee, 1996).

In this scenario of economic slumps and the massive loss of jobs, the poverty rate in America hit noon high. The steel plants of the north were closing every waking day (Lowe, 1984). The slums in places like New Orleans begun to expand and the crime rate increased (Lowe, 1984).This cocktail of socioeconomic problems pushed the American Congress to act as a body neglecting bipartisan politics (Lowe, 1984). This was in order to save the American public that does not forgive legislators that let them down in times of crisis (Lowe, 1984).

The period preceding the Reagan era saw the American citizenry plunged into excessive taxation. This was especially so for the poor and the middle class who found themselves burdened with heavy taxes (Lowe, 1984). The oil embargo and the Iranian crisis had made the government increase tax, especially for petroleum products(Lowe, 1984). The top marginal rate of taxes was high for most people in the country. This meant that when President Reagan begun to lower the taxes he received bipartisan support in the house (Lowe, 1984). For example, when he removed the oil windfall tax in 1980, he effectively ended the energy crisis of 1979. This received support from both the democrats and the republicans in the American congress (Lowe, 1984).

The economic and social factors mitigated the nation to pressurize their legislators to move in line with the presidential policies towards the curbing of runaway inflation (Lowe, 1984). For example, the tax reform act of 1986 was a bipartisan act. In fact, democrats initiated the proposal to clean up the tax base (Lowe, 1984). The government was involved in a lot of regulation efforts prior to reagonomics (Lowe, 1984). The problem of regulation is that it stifles business growth and expansion (Lowe, 1984). Regulation is even worse during times of economic recession. This is because it provides no way for those businesses that are struggling to get out of the doldrums.

The reagonomics literature is impressive. It spans the period from the time Reagan introduced the economic idea to the present. In digression, and looking at the impact of reagonomics scholars believe that the policy had a measure of success (Lowe, 1984). The social and economic factors that fueled political cooperation in the legislative houses of Washington produced results that are felt to this day (Lawrence, 1990). The policies of Reagan in adopting reagonomics are dubbed to have brought the highest economic expansion in the American economic history in peace time (Lawrence, 1990). Although the paper might be digressing, it is useful to note that the Reagan period was exceptional in its economic growth (Lawrence, 1990). Traditionally, the Republican Party does not do much to the economy. Reagan, through his reagonomics approach, trampled this negative portrayal of the Republican Party (Lawrence, 1990).

It is worthy noting that the economy in this time period improved significantly during the Reagan era. This economic progress continued until the period of George Bush (Lawrence, 1990). The GDP growth increased from -0.3, this happened from the time Regan took office to about 4.1 in 1988, the time when he left office. The GDP growth reduced unemployment rates by 1.66 per year, which had a downward impact the peoples' income (Lawrence, 1990). This is from 7.1 in 1980 to 5.5 in 1988. The net job increase was about the same as the birth rate. In short, 16 million jobs were created from 1980 to 1988 (Lawrence, 1990). The policy of deregulation that came with reagonomics was also successful.Reagonomis also had one main negative impact. The federal debt rose from 1 trillion in 1890 to 4 trillion in 1988 (Lawrence, 1990). The digression on reagonomics has n been occasioned by the end to connect the factors that preceded this economic model and the results of the said economic models.

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