2 - NATIONAL ECONOMIC POLICIES IN THE UNITED STATES: A REVIEW OF THE 1980s AND THE OUTLOOK FOR THE 1990s

Abstract

This chapter reviews national economic policies in the United States of the 1980s. The main policy thrust of the 1980s was to increase reliance on the private sector, competition, and market solutions. A centerpiece of this approach has been changes in tax policy. The dramatic reductions in top marginal tax rates and the broadening of the tax base may have increased economic efficiency. Economic analysis suggests that these benefits could be substantial. There is not much indication in the data that the restructuring of the tax system has produced large additions to saving or to the supply of labor. To a large extent, the main policy issues of the 1990s concerned the unfinished business of the 1980s. Reducing the budget deficit was promising as a means of reducing the large U.S. current account deficit. In the area of tax policy, the US continues to grapple with the problem of achieving a more rational tax system. The future thrust of policy in the environmental area is likely be to develop improved tools of government regulation, which control environmental degradation but preserve a high degree of market flexibility.