Deficit reduction and tax reform in the Reagan–Thatcher era

Neoliberal tax reform and deficit reduction reforms initiated under Reagan and Thatcher are compared in this chapter. An examination of the period from 1979 to 1991 has led us to three main conclusions. First, distinct fiscal strategies pursued by the Reagan and Thatcher administrations reflect differences in their core and secondary policy beliefs. Second, although Thatcher demonstrated a stronger commitment to deficit reduction than did Reagan, both leaders suffered major defeats in realizing their original fiscal goals. In the final analysis, both Reagan and Thatcher could not muster sufficient political support to institute the spending cuts that were required to eliminate the fiscal deficit within their respective countries. In this chapter, we analyze the deficit reduction and tax reform initiatives under the Reagan and Thatcher governments by focusing on ideas and coalitions in explaining patterns of policy success and failure. Third, despite the policy setbacks that Reagan and Thatcher experienced in the 1980s, their pioneering experiments with neoliberalism-oriented spending and tax reforms in that era laid the critical foundation for the fiscal policy course that was later pursued and consolidated by successive governments of the left in the 1990s.