The political economy of Reaganomics:

Strayer University

Domestic Policy: A Position Paper

Position in Favor of the Policy

Domestic policy at the time of President Johnson and Reagan were so monumental in the sense it revolutionized the American economy. For instance, the first years of the Reagan Administration generated a collection of changes in political and economic relationships. Such changes were so novel in that they entailed re-orientation of the tax systems, which constituted the centerpiece of Reaganomics (Rousseas, 2015).  The economic packages that formed part of Reagan’s domestic policy included minimization of domestic programs, bureaucracies and support. Another major component of the policy included the radical reallocation of state vales, which took the form of non-incremental increase in defense spending. Reaganomics dramatically reduced threats to inflation while creating lower taxes for many American citizens (Rousseas, 2015).  Further, the policy promoted budget cuts by encouraging the government to be financially conservative.

Like Reagan, Johnson’s domestic policy’s impacts continued to be felt for more than one decade. In what Johnson terms as The Great Society, Johnson spearheaded radical transformation of the American economy. This resulted in significant reduction of income inequality across different classes. For instance, the number of Americans living below poverty lines sharply dropped from 22 percent to 12 percent. It represented one of the most historical declines within such periods of time (Dewhirst & Rausch, 2014). Johnson’s war on poverty program was premised on the idea that income inequality discourses often generate divisive outcomes and that talks on handouts could potentially pull oneself up by their bootstraps. In 1964, Johnson talked at length on how he would stamp out poverty in order to improve the standards of living of the American populace. However, Johnson had a dream of ensuring that Americans of all race and classes gained equal access to decent housing, schools, and affordable high quality healthcare. He wanted all families to have equal chances to increase their socioeconomic ladder.

Cons of the Policy

Although the benefits of domestic policy during the Reagan and Johnson administrations cannot be overlooked, they attracted various criticisms. For instance, though the macroeconomic success of Reagan’s policies can be acknowledged, Reaganomics needed full compliance from the beneficiaries for it to bear the desired fruits. Additionally, it resulted in increase in higher levels of national debt. This is because for the tax reductions to be enforced, Reaganomics embraced the ideology that it takes money to make money (Rousseas, 2015).  Consequently, tax levels increased at unprecedented scales. Furthermore, Reagan’s domestic policy resulted in widespread cases of high budget deficits. The expenditure deficits were high in Reaganomics. This posed major threats in terms of grinding the country to another phase of economic recession similar to the Great Depression (Rousseas, 2015).  As a result, pundits argue that it created and conceptualized an unrealistic economy. This is because internal spending was a foundational element of Reaganomics, particularly within the defense sector.

Like Reagan, Johnson’s domestic policies were marred by numerous flaws. Conservatives sharply criticized Johnson’s domestic policy not only as wasteful, but also one that increases people’s dependency on the government’s handouts (Califano, 2015). Defending the achievements of the Great Society changes and the advancements of social welfare initiatives became more and tougher in environments in which a lot of criticisms existed regarding the unprecedented impacts and costs of the great Society reforms. The war on poverty reflected the crowning triumph of the liberal vision of society. According to this liberal policy framework, slums bred high rates of crime. However, the brand-new government housing initiatives nearly turned into new centers of crime (Califano, 2015). This rapidly degenerated into new slums. Therefore, one weakness of this policy is that it failed to understand the real genesis of crime and its respective solution. Instead of increasing employment rates among slum dwellers to reduce crime, Johnson erred in focusing on slum upgrading.

Response to the Argument in Favor of the Policy

The domestic policies at the time of Reagan and Johnson were beneficial for various reasons. For instance, Reaganomics created lower taxes for most Americans. Taxation has always formed part of major economic subjects for Americans. This can be traced back to revolts on the tea tax that resulted in the Boston Tea Party. Thus, Americans yearn to be represented for the taxes they pay and may argue that the value of what they give to the government is not commensurate with what they receive (Rousseas, 2015).  Like taxation, the domestic policy during this period reduced threats of inflation. Most of the economic problems that faced the United States in 1970s stemmed from inflation that was getting out of control. Inflation rates not only affected the prices of essential commodities, but it also resulted in the dramatic increase in interest rates. By reducing inflation rates, the policy curbed the rate of increase in costs of goods and services, which were soaring in relation to the real values of wages.

Domestic policies at the time of Johnson were aimed at significantly reducing poverty levels. Moreover, over 16 million preschoolers were served by the Head Start program in almost all cities across the country. This impact continues to be felt currently, where almost eight hundred thousand children are served annually. Johnson reduced inequality in the access to high-quality schooling programs. In the past, such services were only accessed by wealthy families. However, the policy made it possible for poor people to also benefit. As soon as Johnson rolled out his domestic policy, Americans witnessed one of the most historical enrollments into the Medicare program. This reduced health disparities across different American populations. For instance, in just a year of his presidency, approximately 19m million people were enrolled into the Medicare initiative. Thereafter, Medicaid served over 200 million needy Americans, including disadvantaged and underserved populations.

Response to the Arguments against the Policy

Although domestic policy at the time of Johnson and Reagan are highly praised, there are certain areas that need careful reconsiderations. For instance, Reaganomics policies needed 100 percent compliance from the beneficiaries for them to work. This is because both Reagan and Congress were driven by the presumption that people who receive tax cuts are most likely to voluntarily adhere to the issue of channeling their investments into the future of the nation. This misconceived assumption exposed millions of Americans, who received economic benefits but continued to hold on to their surplus cash, thereby taking them out of the economy. As a consequence, the average working households that benefited were very few. At the national levels, the domestic policy implied increase in national debt. In order for the tax reductions to be implemented, the Reagan domestic policy embraced the philosophy that it takes money to make money. Therefore, spending levels reduced as tax incomes increased. However, these cuts were never sufficient. The national debt increased astronomically at a higher proportion than any other serving US president of the time.

While Johnson believed that upgrading slums was the answer to ending crime, he was shocked to observe an upsurge in crime rates. Further, his domestic policy was marred by oppositions that took the form of protests in urban centers and rising crime rates, coupled by mounting oppositions to his costs of Great Society programs (Chaves, 2016). Consequently, Johnson lost control over the national agenda, coupled with his influence over Congress. The genesis of Johnson’s failure can be traced back to his response strategies to the economic depression and mass unemployment. Critics view such problems as ones those which never prevailed during Johnson’s presidency, since FDR had already addressed them shortly after the world war (Chaves, 2016). Therefore, it was a waste of time for Johnson to focus on the same problems, challenges that had already been overtaken by time.


Califano, J. A. (2015). The triumph & tragedy of Lyndon Johnson: the White House years. New

York: Simon and Schuster.

Chaves, E. K. (2016). Reviewing Political Criticism: Journals, Intellectuals, and the State.

London: Routledge.

Dewhirst, R. E., & Rausch, J. D. (2014). Encyclopedia of the united states congress. New York:

Infobase Publishing.

Rousseas, S. (2015). The political economy of Reaganomics: a critique. London: Routledge.

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