Reawakening The Giant

Then, companies would seek more private investment, which can have greater benefits than bank loans. For one thing, companies never need to pay private investors back (forgetting dividends). Additionally, investors who contribute large amounts of capital take have influence in the decision-making process. They want the company to do as well as it can, because as the company prospers, so does the stock price. .
             Secondly, Reagan urged Congress, composed of a Republican-run House and a Democratic Senate, to enact a 25% across-the-board tax cut. Milton Friedman, a well-known economist, said that, "Taxes have a depressing and inhibiting effect on the economy." The tax cut would reduce that effect, and introduce the benefits of supply-side economics. Also, with the economy expanding, companies would charge less for their products and services then they would have without an expansion. This is true because when people buy more things from a company, it can reduce its prices but still maintain or exceed the recent profit margin. Companies are driven to lower prices to keep competitive with other companies. Although, there is a concern that with the influx of capital into the economy, the rate of inflation will rise because the dollar will seem to be worth less. However, this is checked by the restrictive monetary policy mentioned before. .
             Third, Congress would need to restrain domestic spending. If the government was going to earn less revenue, it would have to cut back spending to match it. One problem was that the Reagan Administration was fighting the Cold War, trying to outspend the Soviets in the military, making ours far superior to theirs and giving them no hope for victory. The tactic worked, because at one point Russia was spending 60% of its budget on the military and still not spending as much as the United States.12 The weakened Soviet Empire lost its power and morale, and then collapsed in 1991.