In the 1980 presidential election, the American public found a candidate that realized the problems they were facing. Besieged by high inflation and factors of a stagnate economy, the public elected Ronald Reagan to be their president. His economic platform, later dubbed “Reaganomics,” largely involved lower income taxes (especially for the top tax brackets) to combat inflation. This plan also involved shoring up the military, which supposedly had fallen behind other world powers during the 1970s. This plan would fall flat on its face because to enact these lofty goals there would need to be a reduction in the budgets for entitlement programs, which could be considered political suicide.
Lester Thurow compares Reagan’s plan to the administration of Lyndon Johnson. Johnson’s Great Society plan, involving a great deal of new social programs, needed a large amount of funding that would only come from higher taxes. Another factor in this was the conflict in Vietnam, which was very costly for the Americans. Johnson’s refusal to budge on the taxation issue caused his social programs largely to fail and his choice to prioritize Vietnam was very detrimental for his approval ratings. Reagan faced a similar situation; his plan to increase defense and lower taxes would require cutting funds from entitlement programs that were staples to different groups in the American public. Reagan’s refusal to back down from his plans, similar to Johnson, would cause him to draw the ire of a great many economists after his administration.
Reagan himself seemed confident about his programs. In his interview with the Los Angeles Times, Reagan stated that his first year in office produced very good results, answering his question from the 1980 campaign, “Are you better off now?” He said that inflation was significant down and that the per capita spending on defense was less than that used during the Carter administration. It seems that Reagan only knew part of his plan would accomplish and his misuse of statistics is apparent. For a country with a stagnate economy, a few million dollars used for the military could be used elsewhere and Reagan was not cognizant of this.
A major critic of Reaganomics was David Stockman, a former Reagan budget analyst and a proponent of “supply side” economics. In his critique, he said that there was never any “revolution” and that if all of Reagan’s plans had gone through, it would have hurt a great many people who depended subsidies and entitlement programs. Stockman stated that Reagan relied largely on his aides to explain the ideas of the Laffer curve and “supply side” economics and implement them. The idea that Reagan only knew that the half of the plan that the public would favor becomes very apparent. This is also apparent in history as we still recover from “Reaganomics” today, trying to balance an astronomical budget deficit in the face of increasing expenditures.
