Debunking the Gipper

I receive no special pleasure in analyzing the Reagan presidency while the former occupant of the White House is suffering from Alzheimer's Disease. This is not an effort to strike a man when he is down, but rather, it is an object lesson in the veracity of the fable "The Emperor's New Clothes." If there is any blame to distribute, it squarely belongs on the short political memories of the American People.

During the Republican Primary debates it appears that the candidates are attempting to create a conventional wisdom that Ronald Reagan was the greatest American President. In particular, they credit him with the current economic boom

Whoa !!! Is my memory so bad or was the "Emperor in the Altogether?"

When Ronald Reagan defeated Jimmy Carter high inflation rates and a recession were allies of the challenger.[ Inflation- http://www.ecabot.com/ppt/cabot1/tsld028... ] When did this inflation begin? Most economists would first look at the period 1964-9 when Lyndon Johnson fought the war in Vietnam, the War on Poverty and all without raising taxes. The inflation was being primed by heavy government borrowing. Richard Nixon (1969-74) had two inflation breeding problems during his presidency. The most significant economic event of this era was the "Oil Supply Price Shock of 1973." [Gas Research Institute-http://www.gri.org/cgi-bin/re?url=http%3... ] As the result of the Yom Kippur war OPEC decided to dramatically cut oil production. When the price of a basic commodity goes up it drives up the price of all derivative and dependant commodities and it also cuts production, so that you have inflation and recession-stagflation-resulting from a supply price shock.

Until that time we had developed the fiscal tools necessary to combat demand induced inflation. If a period of prosperity increased demand and subsequently prices, we cooled the economy down. After all it was a period of prosperity and a tax increase and more unemployment would cool prices down. Inducing a slight recession is always preferably to inflation. Recession may hit 8% of the work force, but inflation effects everyone. Conversely, when a recession struck the government would heat up the economy. Inflation was not feared because traditionally recession meant lower prices.

Mr. Nixon contributed to the inflationary pressures when he devalued the dollar in the commodity markets to make American cars more price competitive with Volkswagens and Toyotas.[1971 Man of the Year: Richard M. Nixon-- http://www.pathfinder.com/time/special/m... ] Poor Gerald Ford comes into the White House 1974-7) and doesn't know whether to "whip inflation now (win) and risk a serious recession or fight the recession and plant the seeds of Jimmy Carter's inflation. (1977-81)

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