You provided an excellent overview of the economic policies

You provided an excellent overview of the economic policies enacted during the Reagan years and some of the consequences. One of the consequences of the Reagan budgets were increasing deficits; which in our more recent time have exploded to astronomical numbers. The enormous deficits had many causes, some of them stretching back over decades of American public policy decisions. In particular, the budget suffered from enormous increases in the costs of “entitlement” programs (especially Social Security and Medicare), a product of the aging of the population and the dramatic increase in the cost of health care. But some of the causes of the deficit lay in the polities of the Reagan Administration. The 1981 tax cuts, the largest in American history, eroded the revenue base of the federal government and accounted for a significant percentage of the deficit. The massive increase in military spending on which the Reagan administration insisted added more to the federal budget than its cuts in domestic spending removed. How would you assess the legacy of these budget deficits? Also, how would you suppose we move to address this continual fiscal problem?

Reference:

In American Journey, Vol. 2, 7th ed.,

Solution

First of all it is very detail and wonderful question

The question describes almost most of the problems that have bought the economic ruin.

First of all there are very few tools that federal reserve can use right now, All the fiscal policies that could be used were already used

Intrest rates cannot go below Zero. The real intrest rates for borrowing were below zero for almost a decade, so you cannot drag intrest rates below zero for a long time

Increasing intrest rates right now can cause a cycle of savings and investment, but it also has many unitended consequenses including huge slowdown in the economy and incresed borrowing costs for companies and individuals

There is not much fed can do right now rather than increase intrest rates, It is the only way ahead.