Economists are still debating former President Ronald Reagan's economic legacy, known as "Reaganomics." Supporters say his tax cuts spurred the U.S. economy, creating wealth and jobs. Critics say Reaganomics hurt the poor and ran up huge deficits.
At a White House ceremony to approve a tax cut, President Reagan, a Republican, said lower taxes would keep more money in the hands of individual Americans and businesses so they could invest for the future and the nation would prosper.
"[It] encourages risk taking, innovation and that old American spirit of enterprise," president Reagan said.
Reagan economic advisor William Niskanen says the tax cuts were a huge change in political direction for the United States, a move intended to increase economic growth by limiting the growth of government.
"Those are the most enduring current dimensions of the Reagan program that stayed with us," he said.
It sparked some squabbling with Congress, but the Reagan Administration was also able to slash government regulations that businesses said hampered expansion. The President also sought to restrain spending on social programs. Critics said the Reagan formula helped the wealthy but left few benefits to "trickle down" to the poor.
Economist Peter Orszag, an advisor to the Democratic Clinton Administration, says Mr. Reagan's policies hurt the economy when major increases in military spending came along with the tax cuts.
"The budget deficit really exploded during the Reagan years, reaching all-time highs as share of the economy, at least in the post-war era," he said.
But Reagan Administration economic advisor William Niskanen says in this case, the deficit spending was justified because it paid for a military buildup that helped hurry the collapse of the Soviet Union and the end of the Cold War.