It could be argued that Reagan left the USA with substantial economic weaknesses: enormous sums were owed to foreign investors and America had a massive budget and trade deficit. From this perspective, it would be wrong to describe him as one of the greatest presidents of the 20th century. However, there is some merit in the claim. Indeed, Reagan is often credited with halting and reversing Americans’ dependency on the welfare state and returning the US to prosperity. Also, despite serious flaws in ‘Reaganomics’, his administration brought about the longest period of economic growth to the USA since the Second World War. Therefore, from this vantage point, Reagan was arguably one of the greatest presidents of the 20th Century. This argument will be analysed and developed further below.
Reagan left the USA with substantial economic weaknesses: enormous sums were owed to foreign investors and America had a massive budget and trade deficit. When Reagan took office the economy was one of the double-digit inflation and high interest rates. During the campaign Reagan promised to restore the free market from excessive government regulation and encourage private initiative and enterprise. Reagan's economic policies came to be known as "Reaganomics.” The President vowed to protect entitlement programs (such as Medicare and Social Security) while cutting for social programs by targeting "waste, fraud and abuse." During his first year in office, Reagan engineered the passage of $39 billion in budget cuts into law, as well as a 25 percent tax cut spread over three years. At the same time, he insisted on, and for the most part, was successful in gaining increased funding for defense. Although inflation dropped from 13.5% in 1980 to 5.1% in 1982, a severe recession set in, with unemployment exceeding 10% in October, 1982 for the first time in forty years. The administration modified its economic policy after two years by proposing selected tax increases and budget cuts to control rising deficits and higher interest rates. After the 1982 downturn, the reduced inflation rate (under 5% for the remainder of the administration) started record economic growth, and produced one of the lowest unemployment rates in modern U.S. history). As Reagan left office, the nation was experiencing a continuing period of economic prosperity. The economic gains, however, came at a cost of a record annual deficit and a vastly increased national debt.
At the center of Reagan's foreign policy was the prevention of communist expansion, which revolved around his “Reaganomics” program that focused greatly on increased defense spending. This was demonstrated by the strong financial and military support of the Contras against the communist Nicaraguan government, the aid given to the government of El Salvador in their fight against the communist guerrillas. Reagan believed that the nation should negotiate with the Soviet Union from a position of strength. To such an end, the administration embarked on a strategic modernization program which included the production of intercontinental missiles. The increase in military spending, and the rise of Mikhail Gorbachev as General Secretary of the Soviet Union at the beginning of Reagan's second term, opened a new chain of relations between the two countries. After a number of meetings between Reagan and Gorbachev, the two men signed an Intermediate Nuclear Force (INF) Treaty at the Washington Summit in December, 1987. The agreement promised to eliminate an entire class of intermediate-range nuclear missiles and was the first arms control agreement in history to reduce the nuclear arsenal. Many believed this as the “victory” of the U.S in the cold war. The largest fault of Reagan’s terms became known as the Iran-Contra affair. After nationally televised hearings, a special congressional hearings review board reported that