It was ERTA that made US economy bleed in 1982
Failure is the pillar of success! Who else can explain it better than Ronald Reagan who, in order to give economic prosperity to his country, threw it deliberately into a recession. In August 1981, he introduced the Economic Recovery Tax Act (ERTA) with a focus on huge personal and corporate tax cuts, reduced government spending and a so-called “balanced budget” (it was projected to have a deficit of $80 billion) to drive away stagflation that had begun to afflict the US economy. His program was based on supply side economics that tax cuts would push consumer spending, thus leading to an increase in investments, which would result in economic growth.
He felt that the revenue, generated due to economic expansion, would be enough to meet the shortfall due to the initial tax cuts. Instead, his program led the US economy into one of its worst depressions. Inflation peaked to a high of 14% and in fact, many critics even characterised the economic policy of Reagan as being “Keynesianism on steroids.” So, to fight with it, the then Fed Chairman Paul Volcker had no option than raising the interest rate. And that was enough to be the death nail. US was suddenly experiencing its worst recession since the Great Depression of 1930s. In fact, by November 1982, unemployment rate in the US had reached 10.8%, the highest since the Great Depression. 17,000 businesses had failed and thousands of Americans had become homeless. US stayed in depression for one year, before Reagan was forced by strong measures from the Federal Reserve Board to pull the nation out of its nightmare.
Failure is the pillar of success! Who else can explain it better than Ronald Reagan who, in order to give economic prosperity to his country, threw it deliberately into a recession. In August 1981, he introduced the Economic Recovery Tax Act (ERTA) with a focus on huge personal and corporate tax cuts, reduced government spending and a so-called “balanced budget” (it was projected to have a deficit of $80 billion) to drive away stagflation that had begun to afflict the US economy. His program was based on supply side economics that tax cuts would push consumer spending, thus leading to an increase in investments, which would result in economic growth.
He felt that the revenue, generated due to economic expansion, would be enough to meet the shortfall due to the initial tax cuts. Instead, his program led the US economy into one of its worst depressions. Inflation peaked to a high of 14% and in fact, many critics even characterised the economic policy of Reagan as being “Keynesianism on steroids.” So, to fight with it, the then Fed Chairman Paul Volcker had no option than raising the interest rate. And that was enough to be the death nail. US was suddenly experiencing its worst recession since the Great Depression of 1930s. In fact, by November 1982, unemployment rate in the US had reached 10.8%, the highest since the Great Depression. 17,000 businesses had failed and thousands of Americans had become homeless. US stayed in depression for one year, before Reagan was forced by strong measures from the Federal Reserve Board to pull the nation out of its nightmare.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)
