Poverty and the Distribution of income during the Reagan years Research Paper

Poverty and the Distribution of income during the Reagan years - Research Paper Example Name of the Student Name of the Professor Course No. Date Poverty and the Distribution of Income during the Reagan Years I. Introduction United States had a Republican form of administration from 1981 to 1989. The administration was under the 40th president of United States named Ronald Reagan. This essay tries to focus on the level of poverty and income distribution in the Reagan years in United States. The pattern of governance under Reagan in U.S. was in favor of reducing the state owned programs. Ronald Reagan has announced the highest across board tax redemptions in American history. The different economic policies that were introduced by the president were mainly examples of supply side economics; they were often termed as ‘Reaganomics’. 1 The concept of what is now known as Privatization was first introduced by Reagan; he always encouraged the private spending by limiting the growth of state expenditures. Reagan successfully won re-election in U.S. by taking activ e measures to reduce inflation and extra regulations imposed by the government. However it was a noticeable fact that the fiscal debt was successfully incrementing during this period of economic history. II. Poverty and Income Distribution in the Reagan Period The epoch of Reagan governance in U.S. was often termed as the ‘Reagan Revolution’ as the economy both in and beyond U.S. was significantly influenced by the faith that the ruling president had in laissez-faire economy. 2 It has always been a subject of study for economists and analysts concerning the extent of inequality and income distribution in U.S. It is analyzed that after a long period of equitable income distribution, income equality started to fall in most of the English speaking nations from 1970 onwards mainly in the U.S. It was found that in the Reagan era the gap between rich and low income classes started to increase.3 This is because Reagan paved a way for almost a ‘U’ turn in U.S. econ omy. The nation started to invest primarily in speculation purposes by increasing its offshore stash.4 The country also started to outsource its factor services like labor required for productive purposes. The following was done in order to get sources at lower cost. U.S. governance during this period supported growth of business and industry at the cost of abating the organized labor power of the economy.5 Reaganomics made the country to spend less in welfare purposes, led to reduced corporate taxes and reduced spending on military services.6 It was believed by Krugman that the tax cuts made by the government during this period increased the costs of the lower 60% population and gave profit to the upper 40% income group.7 It was found during this period that the mean wage of the common households in U.S during this period was approximately $2000 while the average wage of the steelworkers was almost close to $4000.8 Rather the Pension Benefit Guarantee Corporation has abolished the allowances of unilateral transfer payments to the old section of the society. The labor unions were made almost powerless under the extreme rules and regulations of the government. Thus the U.S. economy was subjected to high income inequality during this era. The table given below depicts the level of income inequality in U.S. from the years 1967 to