What led to the decline of the Soviet economy during President Reagan's administration?

Gorbachev's reforms led to a decline of the Eastern Bloc and a loss of economic partners for the Soviet Union.

The arms race certainly accelerated the decline of the Soviet Union. Reagan's massive defense build-up encouraged Soviet efforts to keep up with the American defense build-up. Consequently, the Soviet Union was compelled to raise the share of its defense spending which affected the production of civilian goods.