Rejecting Keynes.

When Ronald Reagan ran for president in 1980 he rejected the prevailing economic theory that had dominated American economic policy since World War II. Reagan affirmed his belief in free markets and rejected the idea that the federal government should influence the business cycles with its fiscal policies. Indeed, one of the favored targets for Reagan's wrath was the deficit spending that Keynesian economists called for, and the ensuing debt. Upon election, Reagan inherited, as he put it, a runaway deficit of nearly $80 billion in 1981, leading Reagan to proclaim that the federal budget was out of control. Reagan promised to balance the budget and to bring a new type of economics to Washington.

Supply-Side Economics.

Reagan desired to change the nation's economic path. During the 1980 presidential primaries Republican presidential hopeful George Bush labeled Reagan's plan as "voodoo economics," although after the election Bush upheld...