Economic Progression and Trends

Of the 1980's

Leading Up to the '80's

Prior to the 80's the United States suffered a period known as "stagflation," basically meaning that the rate of inflation was high, the growth of the economy was stagnant, and unemployment levels were consistently high. The stagflation of the recent decade plunged the 1980's into a decade of financial ambiguity as they tried to solve and protect against the problems suffered in the economic realm.


Supply-side Economics

Supply-side economics, often called "trickle-down" economics, was Reagan's economic plan to fix the economy by empowering the wealthy in order to allow them to hire more people and to pay them more, thereby bolstering the economy. He committed to policies in order to cut taxes to people of wealthier incomes, such as the Tax Reform Act of 1986, believing heavily in top-down economics and that the ones with the money would invest if given more money. This proved to be almost entirely false as the United States continued to struggle during this time, at the same time as the income gap widening to unprecedented statistics since the industrial revolution.

Cutting of Social Plans

Reagan (being a conservative), believed heavily in a low government interaction so in accordance, cut many major social programs from the budget, also in an attempt to decrease spending and decrease the budget deficit. In reality, funding from social programs was simply moved to fund the military. He cut funding primarily from Social Security, with the Social Security Amendments of 1983, and Medicare.


Following the tax-cuts enacted in both 1981 and 1986, there were also a series of eleven tax increases for the sake of increasing the amounts of infrastructure (roads), and military funding. Regardless of the tax-increase, the budget deficit quadrupled, and the national debt tripled. The tax increases were mainly in an attempt to slow down or stop the growing public debt, which was largely unsuccessful due to the heavy increase in military spending. This was the second largest growth of military spending in "peacetime" in the United States, and no tax increase could help it. The tax increase was also unevenly dispersed amongst the wealthy and the middle class and poor, reinforcing "trickle-down" economics.
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Controlling the Money Supply

Reagan also attempted to combat stagflation by having less government involvement. Control of oil prices, and Nixon's price and income controls were seen as primarily responsible for the lack of growth seen in the 1970's so in accordance with his policy of lack of government involvement, he allowed those acts to term-out without reinstatement. This along with his tax-breaks in 1981 contributed to a recession in 1981 and 1982 as a result of soaring inflation, and a decrease of exports, but this too leveled out in the coming years.



Oil is considered a primary concern economically during this time period. Oil prices during the 1970's were seen largely as contributors to stagflation and the recessions during that decade. Oil helps to allow things to be produced faster, be shipped farther, and therefore is a large affecter of the economy and economic trends/progressions. Oil got cheaper in this decade, bolstering the economy and assisting with the economic increase during this decade.

1980's Oil Glut

Prices for oil peaked around 1980 only to fall for the next 6 years as a result of surplus due to a decrease in the consumption of oil. OPEC was primarily responsible for the Middle Eastern countries control of oil prices, and had to lower their prices due to outsourcing to Canada, Norway, Nigeria, and Mexico in addition with the decrease in consumption.

Jimmy Carter and Ronald Reagan

In 1979, Carter signed an executive order to reduce price controls on petroleum so that they would only be controlled by price and demand. This is considered in large a cause of the decrease in oil consumption in coming years. Reagan actually put this order into effect in 1981.

Domestic Production

US Oil Windfall Tax was lowered in 1981 and removed in 1988, decreasing the disincentives for domestic oil production. This paved way for the increase of oil production in Alaska, which allowed outsourcing and helping to cause the Oil Glut. The increase also allowed an increase in oil export, allowing the US once again, to export oil more than it imported.