Reagan second term — TRA 1986, Cold War endgame, S&L, Black Monday

Doctrine — stated goals and content

Second-term consolidation of the Reagan programme with four doctrinal pillars: (a) tax-base broadening orthodoxy — the Tax Reform Act of 1986 (signed 22 October 1986) cut the top individual rate 50%→28%, cut the corporate rate 46%→34%, and eliminated dozens of shelters including passive-loss rules; bipartisan product of Bradley-Gephardt and Kemp-Kasten drafts negotiated by Baker-Darman with Rostenkowski and Packwood. (b) Cold War endgame and supply-side defence — Strategic Defence Initiative continued; Reykjavik (October 1986) and INF Treaty (December 1987) with Gorbachev; defence spending peaked ~6.2% GDP in FY1986. (c) Financial deregulation inheritance metastasised — Garn-St. Germain era thrifts (1982 framework) generated the Savings and Loan crisis; FSLIC insolvent by 1986-87; FIRREA cleanup pushed to Bush 41. (d) Crisis shocks — Black Monday 19 October 1987 Dow -22.6% one day; Iran-Contra revelations (November 1986) eroded executive authority. Stated economic school: supply-side Lafferism + Chicago-monetarist Fed backstop (Volcker disinflation already achieved). Left-right: centre-right economic, hawkish foreign policy, socially conservative. Popularity: November 1984 won 49 states, 58.8% popular vote vs Mondale; Gallup approval peaked 68% (May 1986) then fell to 43% post-Iran-Contra (February 1987) before rebounding to 63% at exit (December 1988); 1986 midterms lost Senate (Democrats 55-45). Coherence: trade near-term revenue loss and deficit drift (FY1986 deficit 5.0% GDP) for rate cuts, base-broadening, supply-side capital-formation, and a negotiated Cold War windup.