Which statement best describes Reagan's economic policy?

• A. It increased taxes to fund services.
• B. It relied on tax cuts with increased spending, increasing the national debt.
• C. It achieved a balanced federal budget.
• D. It reduced military spending.

Answer: (B)

Reagan’s economic approach focused on cutting taxes to spur growth while letting spending rise, especially on defense. This combination meant government revenue fell from tax cuts while outlays grew, so the budget moved into larger deficits and the national debt climbed. That’s why describing the policy as tax cuts with increased spending leading to a bigger debt fits best.

Think of the big moves: a major tax cut in 1981 reduced marginal rates across the board, aiming to boost investment and growth. At the same time, military buildup and other spending increased, so revenue didn’t keep pace with outlays. The result was bigger deficits, not a balanced budget.

The other statements don’t fit as well because taxes were cut, not raised; the budget was not balanced, deficits grew; and military spending did not go down—it's one of the hallmarks of Reagan’s policy that defense spending rose.