Reagan administration fiscal policy, which was dubbed Reaganomics. The Reaganomics moniker lasted into the first or second year of the second term of the Reagan administration; however, influ ence of supply side economists all but disappeared after the midterm congressional elections in 1982. The tax reduction goal of supply side economists continued to be sought by the Reagan administration; however, attempts to reduce government spending became a propaganda exercise for the administration, wherein the administration sought to reduce spending on social programs, while seeking increased spending on military prog grams, but was quite prepared to trade off cuts in social spending for increases in military spending.
The Reagan administration sought and got a tax reform package in 1981 (the Tax Reform and Economic Recovery Act of 1981), which reduced federal government revenues. With less success, the administration also was able to reduce federal spending. The tax reform in particular, however, was hailed as providing the supply side incentives for producers, which would lead to surging economic growth. In actual practice, however, the producer incentives were implemented during a time when demand was declining rapidly, and, under such conditions, all the production incentives in the world will not persuade produ cers to create goods for which no demand exists. As a conse quence, the economy plummetted into the worst recession since the 1930s, and the federal government budget deficit soared.
The approval rating of President Reagan plummetted along with the economy, and the Republican Party absorbed a worse than usual drubbing in the 1982 congressional midterm elec tions. In early 1983, President Reagan began to look like another one term president. Thus, with no public anouncement, the fiscal gears of the administration were shifted, and an almost pure Keynesian fiscal policy was implemented by the administration, and a fri...