What is Reaganomics, 

and why did President Reagan chose this strategy? 

    With the advice from former president Richard Nixon, Reagan concentrated on economic issues his first six months in office. Reaganomics was the name given to the supply-side economic theory on which Reagan based his economic plans. It operated on the belief that the economy was struggling in large part because of excessive taxation. With more money going to taxes, individuals and corporations were unable to invest capital to stimulate growth. The plan called for massive tax cuts in order to stimulate investments. The economic growth would then `trickle down` to the workers. Supply-side economics also called for budget cuts to counteract the loss of revenue from the tax cuts. 

    Reagan followed this model in creating his budget plan in 1981. Reagan put together legislation that cut government expenditures by $40 billion and created a three year tax cut plan for individual and corporate income taxes. The tax cut was the largest in history and was expected to jump start the economy. However, after the bills passed in the summer of 1981, the country fell into the worst recession since the Great Depression.