ABSTRACT
This chapter explores the period 1980–2000. Ronald Reagan won the 1980 election on the promise of deep tax cuts and reductions in spending. The first of these promises was kept: between 1980 and 1988, the top marginal income tax rates were slashed, bringing deep reductions in revenues. When combined with record peacetime defense spending and the ongoing growth of mandatory spending, the debt-to-GDP ratio almost doubled. Subsequently, new budget controls and tax increases during the 1990s brought surpluses and reductions in the debt by the end of the decade. There was some hope that debt reduction would continue. But progress would depend on success in controlling the growth of mandatory spending—a challenge, given the underlying demographic trends—and maintaining the tax rates introduced in 1993.
