Tag Archives: Ronald Reagan

by Mike

One of my favorite economic writers is author, Amity Shlaes, an admitted classical liberal, Bloomberg columnist, and senior fellow at the Council on Foreign Relations. Recently she penned “The Forgotten Man,” a chronological narrative of the Great Depression.

Her latest on Bloomberg.com is titled “Reagan Recipe on Fed, Taxes Spells Path From Funk.” Here is a little taste.

July 9 (Bloomberg) — Double-digit unemployment looms. The country is in a funk. The federal budget deficit is widening to an extent not seen in decades.

This scenario isn’t new. It also describes the U.S. in 1982. Somehow, the 1980s and the 1990s turned out to be pretty good years. So it’s worthwhile to compare current policy to the one followed then.

Today, it’s hard to say where the U.S. stands when it comes to the strength of the dollar. The country is divided on the question of whether we are confronting inflation or deflation.

In the early 1980s, things were different. For a while our officials wanted a strong dollar and managed to drive the currency up so that it bought more French francs and German marks than it had in a decade. On the home front, voters in both parties had already come to see inflation as an enemy. The Federal Reserve advocated a tight-money policy and pushed interest rates up to prove it meant what it said.

Though the position on the exchange rate didn’t hold up — our own Treasury Department came to undermine it — the Fed kept up its vigilance on inflation.

Today, taxes are on their way up. Whether it will be abolishing some of the tax deductibility of health care or increasing taxes on soda, President Barack Obama and Congress are clearly signaling the direction in which they want to move. Most tax increases under discussion would make the rich, or companies, the first to pay. The justification offered for this is that the federal government needs the money and may know how to spend it better than the private sector, anyhow. read more…

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