Changes in Poverty,Income Inequality,and the Standard of Living in the United States during the Reagan Years

Abstract

The record of economic well-being in the 1980s belied Reagan's claim that Americans would be better off if they scaled back the welfare state and cut tax rates. Though the standard of living rose, its growth was no faster than during 1950–1980. Income inequality increased. The rate of poverty at the end of Reagan's term was the same as in 1980. Cutbacks in income transfers during the Reagan years helped increase both poverty and inequality. Changes in tax policy helped increase inequality but reduced poverty. These policy shifts are not the only reasons for the lack of progress against poverty and the rise in inequality. Broad social and economic factors have been widening income differences and making it harder for families to stay out of poverty. Policy choices during the Reagan Administration reinforced those factors.