When Ronald Reagan entered office, the American economy was in a state of decline. Economists were doubting the American system of free enterprise, and some thought Russia's command economy was the answer. The Keynesian school of thought figured that the economy had reached its limit and could advance no further.1 Reagan, however, knew otherwise and pursued his domestic policy of supply-side economics. In 1981 the country entered "The Era of Reaganomics" and experienced the longest era of economic expansion in peace-time ever-for any country in the history of the world.2 This paper will show how the Reagan Administration's policies affected the economy of the 1980's. .
Most people that knew him, inside aides and journalists, had great respect for Ronald Reagan. David Broder of the Washington Post said of Reagan, "One of the most remarkable demonstrators of Presidential leadership in modern history."3 George F. Will, syndicated commentator, noted in 1992 that the world was better off than it was 10 years ago, and that Reagan was partly responsible.4 Insiders all spoke of how Reagan was the man in charge of the administration. Reagan was the man calling the shots, not some aide. The policies of the Reagan Administration were the policies of Reagan.5 Another point is that not only was he in charge, but he made things happen. Edwin Meese said of Reagan and the tax cut, "I am certain the tax reduction program would not have been adopted under any other President in recent memory."6 .
The first thing that needs to be addressed about the economic history of the 1980's is the relatively poor economy that Reagan inherited. There is still argument over whether the recession of 1981 to 1982 was Reagan's fault.7 Some politicians and historians have claimed that the Administration caused the recession. However, Reagan's fiscal policy did not go into effect until 1982. Additionally, he stated in public that there would not be an economic turnaround until 1983, when it actually happened.