Reagan Revolution
The political transformation initiated by President Ronald Reagan (1981–1989): cutting top marginal income tax rates from 70% to 28%, deregulating industries, dramatically increasing defense spending to confront the Soviet Union, breaking the air traffic controllers' union, and asserting supply-side economics ('Reaganomics') as the governing theory, inaugurating 40 years of neoliberal dominance in US politics.
Reagan's election in 1980 represented a decisive break with the New Deal/Great Society consensus that had governed US politics since the 1930s. The Reagan Revolution had several interlocking components.
Economic policy (Reaganomics/supply-side): the top marginal income tax rate was cut from 70% (1981) to 50% (1982) and ultimately 28% (1986). The theory: lower taxes on high earners would stimulate investment, which would 'trickle down' as jobs and growth to lower-income Americans. Corporate regulation was cut. Deficit spending increased dramatically (despite Reagan's rhetoric about balanced budgets) as defense spending rose while social programs were cut.
Labor: in 1981, Reagan fired 11,000 striking Professional Air Traffic Controllers Organization (PATCO) workers and banned them from federal employment. This was a defining signal to corporations: union-busting was acceptable, even at the federal level. Union membership began its long decline from ~20% in 1983 to under 10% today.
Anti-Soviet strategy: Reagan's defense buildup (the 'Reagan buildup' of the early 1980s) was designed to outspend the Soviet Union into collapse, funding SDI (Strategic Defense Initiative/'Star Wars'), deploying Pershing II missiles in Europe, and supporting anti-communist insurgencies worldwide (the Reagan Doctrine). Soviet attempts to match US defense spending accelerated their fiscal crisis.
Political legacy: the Reagan Revolution set the terms of US political debate for 40 years. Bill Clinton's 'Third Way' accepted deregulation and free trade (NAFTA). George W. Bush extended tax cuts. Obama's stimulus was constrained by deficit politics. Only after 2016 did Reaganomics face serious political challenge from both populist right (Trump's industrial protectionism) and progressive left (Medicare for All, Green New Deal).
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Frequently asked questions
What were the main policies of the Reagan Revolution? ＋
Four pillars: (1) Supply-side tax cuts, top marginal rate from 70% to 28%, theory being lower taxes on high earners stimulate investment that trickles down. (2) Deregulation of industries and financial markets. (3) Union-busting, firing PATCO air traffic controllers set the template. (4) Massive defense buildup designed to outspend the Soviet Union into collapse.
Did Reaganomics work? ＋
Depends what you measure. GDP growth was strong in the mid-1980s, inflation fell (largely due to Fed Chairman Volcker's monetary policy begun under Carter), and the Soviet Union did collapse. However, income inequality rose sharply, union membership collapsed, wages for non-college workers stagnated, and the deficit exploded despite Reagan's balanced-budget rhetoric. The 'trickle-down' mechanism of investment creating broad prosperity has been widely challenged by economic data.