Unsung Triumph (Reagan set stage for long economic expansion)

The Washington Post ^ | Wednesday, June 9, 2004 | Robert J. Samuelson

[Dick Holmes]

It's a magnificent irony. Amid all the affection and adulation for Ronald Reagan, one of his greatest achievements stands all but overlooked. He helped subdue double-digit inflation, setting the stage for the prolonged economic expansions of the 1980s and 1990s. High inflation largely brought Reagan to power; low inflation made his presidency popular and successful.

We forget now how much inflation once frightened Americans. In 1979 Daniel Yankelovich -- a leading student of post-World War II public opinion -- wrote this: "For the public today, inflation has the kind of dominance that no other issue has had since World War II. The closest contenders are the Cold War fears of the early 1950's and perhaps the last years of the Vietnam War. But inflation exceeds those issues in the breadth of concerns it has aroused among Americans. It would be necessary to go back to the 1930's and the Great Depression to find a peacetime issue that has had the country so concerned and so distraught."

What unnerved people was not merely that inflation was high (13.3 percent in 1979) but that it was rising (in 1976, it was 4.9 percent) at an unpredictable pace and that no one could stop it. President Jimmy Carter had fumbled with a host of confusing policies -- including wage-price guidelines -- to little avail. The steady upward march of prices fed the sense that Carter had lost control of events, an impression reinforced by his handling of the Iranian hostage crisis.

Of the two issues, inflation counted for more politically. In the last monthly report before the election, the consumer price index rose 1 percent; prices were 12.7 percent higher than a year earlier. In a September 1979 survey, 67 percent of the public said that "holding down inflation" was a bigger problem than "finding jobs" (21 percent). On Election Day 59 percent of Reagan's supporters said that inflation was a "determining issue for them," according to the New York Times/CBS exit poll.

When Reagan asked, "Are you better off than you were four years ago?" he was referring mainly to inflation. Since 1976 the economy had created 10.6 million jobs. In 1980 the unemployment rate (7.1 percent) was lower than in 1976 (7.7 percent), though it had jumped sharply from 1979 (5.8 percent). But people detested inflation's stress and uncertainty. They couldn't know whether their salaries and savings would keep pace with rampaging prices. Interest rates seemed astronomical. In 1980, 30-year fixed mortgages averaged 12.7 percent. All this sapped Americans' confidence in their leaders and the future....

None of this has merited much attention. In its 10,820-word obituary, the New York Times mentioned inflation four times. The Wall Street Journal's retrospective of "Reaganomics" virtually ignored inflation. It got a paragraph in Time's cover story, which was more than in Newsweek's....

No other major leader -- Republican or Democrat -- would have then done what Reagan did. "The President stands almost alone among Washington's current politicians in his instinctive comprehension that inflation is a profoundly destructive phenomenon," wrote David Stockman, Reagan's first budget director, in an otherwise critical 1986 book. Giving "Volcker the political latitude to do what had to be done . . . was a genuine achievement." More than genuine, it was magnificent.

[Dick Holmes]

Interesting take on what the author, who writes about economics, considers really important in Reagan's handling of the economy.

[fella]

I would like to see the speech RWR made when he signed the tax reduction bill.

[Dick Holmes]

I would like to see the speech RWR made when he signed the tax reduction bill.

State of the Union, January 25, 1984has some reference to inflation:

Together, we passed the first across-the-board tax reduction for everyone since the Kennedy tax cuts. Next year, tax rates will be indexed so inflation can't push people into higher brackets when they get cost-of-living pay raises. Government must never again use inflation to profit at the people's expense.

Today a working family earning $25,000 has $1,100 more in purchasing power than if tax and inflation rates were still at the 1980 levels. Real after-tax income increased 5 percent last year. And economic deregulation of key industries like transportation has offered more chances -- or choices, I should say, to consumers and new changes -- or chances for entrepreneurs and protecting safety. Tonight, we can report and be proud of one of the best recoveries in decades. Send away the handwringers and the doubting Thomases. Hope is reborn for couples dreaming of owning homes and for risktakers with vision to create tomorrow's opportunities.

Reagan knew what he was doing!

[jla]

^

[Timocrat]

Yes but I think he is right. It was touch and go in the mid to late seventies whether we would end up like Argetina with hyper inflation.