Reaganomics

Abstract

Ronald Reagan came to power with a mandate to purge the economy of the ills of Keynesianism. Since the Federal Reserve had already begun the task a full year ahead of the Republican landslide of 1980, momentum was well under way. Among the architects of the laissez-faire resurgence, or ‘supply-siders’, was Arthur Laffer who argued for a reduction in tax rates. According to the supply-siders, a cut in tax rates would stimulate output and income, and therefore generate a larger federal base from which tax revenues could be drawn. So even though rates might be cut, the end result would be an increase in total tax revenues.