President Reagan Case

Questions:

1. Compare the nature and severity of the problems facing President Reagan when he takes office in January 1981 with those faced by Kennedy. What factors contributed to these problems?

Answer 1

President Reagan took the reigns of a country following 10 years of "stagflation." Heading into 1981, the U.S. was plagued by high interest rates approaching 20%, inflation rates of double-digits for the first time in 60 years, lagging productivity, declining GDP, a growing deficit, and an unemployment rate of 7.5%.

When Reagan took office in January of 1981 he faced what he considered the, "worst economic mess since the Great Depression." The credit and capital markets where in disorder, The national debt was approaching $1 trillion, interest rates reached absurd levels of more than 20% and 15% for homes, and inflation was rising out of control, maintaining double digit increases for two consecutive years. Additionally, nearly eight million workers were unemployed, and those with jobs were struggling to keep up with inflation.

Whereas, Kennedy assumed the office following two terms of President Eisenhower's administration, during which the country experienced two major recessions, and facing yet another potential recession.

Questions:

1. Compare the nature and severity of the problems facing President Reagan when he takes office in January 1981 with those faced by Kennedy. What factors contributed to these problems?

Answer 1

President Reagan took the reigns of a country following 10 years of "stagflation." Heading into 1981, the U.S. was plagued by high interest rates approaching 20%, inflation rates of double-digits for the first time in 60 years, lagging productivity, declining GDP, a growing deficit, and an unemployment rate of 7.5%.

When Reagan took office in January of 1981 he faced what he considered the, "worst economic mess since the Great Depression." The credit and capital markets where in disorder, The national debt was approaching $1 trillion, interest rates reached absurd levels of more than 20% and 15% for homes, and inflation was rising out of control, maintaining double digit increases for two consecutive years. Additionally, nearly eight million workers were unemployed, and those with jobs were struggling to keep up with inflation.

Whereas, Kennedy assumed the office following two terms of President Eisenhower's administration, during which the country experienced two major recessions, and facing yet another potential recession.

2. What were the key elements of the Reagan economic strategy? What is the role of monetary policy in the Reagan Plan?

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