Reagan's Economic Legacy

August 12, 1988
Entire Report

Introduction

Are you better off today than you were when Ronald Reagan took office in 1981? The outcome of the November presidential election may depend on how voters answer this question. Reagan's successor will inherit a growing economy, but one weakened by huge budget and trade deficits. There are more jobs than ever before, but employment growth has been highest in lower-paying service jobs. How will voters judge Reagan's economic legacy?

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Overview

“Are you better off today than you were four years ago?” The answer to Ronald Reagan's rhetorical question to American voters during the 1980 presidential campaign was a resouding “no,” Reagan beat Jimmy Carter by a landslide margin.

Eight years later, the same question evokes a more ambiguous response. On the surface, the economy appears to be much healthier than it was when Reagan took office: employment is up, unemployment is down, the economy is expanding and, perhaps most significantly, inflation is far below the double-digit levels of the 1970s. “The reduction in inflation stands as the most important accomplishment of the Reagan administration,” says Marvin H. Kosters, director of economic policy studies at the American Enterprise Institute for Public Policy Research in Washington, D.C. “In contrast to 1980, when inflation was rising and we were heading for some kind of slump, now inflation is more stable and at a much lower level.”

But underlying the surface prosperity are weaknesses that cloud the country's economic future. The combination of tax cuts and defense-spending increases introduced early in the Reagan administration produced record budget to unprecedented lows. The United States was transformed from the world's biggest creditor to its biggest debtor.

While steps have been taken to reduce the budget and trade deficits, it will be many years before Americans have paid off the debt accumulated during the Reagan era. “On balance, I think we are better off today than at the beginning of the decade, at least in the near term,” says Alexander B. Trowbridge, president of the National Association of Manufacturers. “When you look at the federal deficit and our trade position, you have to wonder whether that is true in the long term. Hopefully, those problems ar

ISSUE TRACKER for Related Reports
Reaganomics
Aug. 12, 1988  Reagan's Economic Legacy
Aug. 21, 1987  Economics After Reaganomics
Jan. 08, 1982  Reaganomics on Trial
BROWSE RELATED TOPICS:
Deficit, Federal Debt, and Balanced Budget
Inflation
Unemployment and Employment Programs