How did Reagan's policies affect the economy? | US Government and Civics | Khan Academy

How did Ronald Reagan's policies affect the government and economy?

What Ronald Reagan believed is that good programs—he had been a New Deal Democrat—he believed that what had happened was good programs that had tried to help people who needed the help: the poor, the infirm, the elderly. Those programs had ballooned, and what had happened was they were no longer prioritizing help to those who needed it.

But they had become a kind of system where those who made the loudest noise got the most government, got the most money, and got the attention from the government. That, in fact, stopped helping people in need and ended up hurting people—ended up sort of entrapping them in government dependence.

So, what he said was he was going to do two big things—actually three big things. He was going to cut taxes, and what that was going to do was shrink the amount of available money towards government, which he was then going to also do by cutting spending. He was going to cut regulations.

So, it was essentially paring down government, which he thought was inefficient towards the giving of resources to those who need it. He wanted a lot of that power to go back to the states. He also believed in an economic program that both cut money from domestic spending but also cut taxes, which he believed would actually generate more revenue because of something called supply-side economics.

So, his both economic theory and his theory about shrinking government were kind of matched up in his first budget and in his first major tax cut.