Assessing the Assessments

Americans either

loved Ronald Reagan or they

hated him.  No one was indifferent.  These strong
feelings can be seen in the assessments of Reagan
following his death.

Emotion-driven assessments have
little to do with fact.  Paul Krugman`s New York
Times (June 11) screed against Reagan`s economic
policy [An
Economic Legend] is a perfect example of bile
overpowering truth.

According to Krugman, President
Reagan`s supply-side policy had no effect on anything
and amounted to nothing more than Reagan talking a good
talk.  The long expansion, Krugman claims, was the
result of the deep recession caused by Fed chairman Paul
Volcker when he decided to inflict sufficient pain to
cure inflation.  Krugman says, “it all played out
just as `left-wing Keynesian economics` predicted.”

Krugman`s claim is totally
incorrect.  Keynesians said two things: (1) there was no
solution to worsening tradeoffs of inflation and
employment except

wage and price controls, and (2) Reagan`s tax cuts
would cause inflation to explode.

Reagan`s supply-side claim was very
specific–I know because
I wrote it.  The claim was that a reversal of the
Keynesian policy mix would cure stagflation.

Keynesians used easy monetary
policy to stimulate employment and high tax rates to
restrain inflation.  Reagan said easy money drove up
prices while high tax rates restrained output.  Reagan`s
policy was to control inflation with monetary policy and
spur real output with lower marginal tax rates.

Reagan`s policy did exactly what he
said: the economy expanded for 7 years–a record at the
time–while inflation fell.

Supply-side economists did not
control economic policy during the Bush and Clinton
administrations.  However, under both presidents tax
rates remained substantially below the pre-Reagan rates,
and monetary policy was used to control inflation.  No
one has seen a “Phillips
curve“ tradeoff of inflation and employment
since the

Carter administration. This is why it is correct for
supply-side economics to claim credit for the long era
of disinflationary economic growth.

Krugman claims there was no Reagan
“miracle.” However, when Reagan announced that
his policy would permit the economy to grow while
inflation fell, Keynesians said it would take a miracle
for such a thing to happen.

Because Reagan is popular among
conservatives, President Bush`s neoconservatives are
claiming Reagan as one of their own.  During Reagan`s
presidency, however, neocons opposed Reagan`s approach
to the Soviet Union.

Neoconservatives wanted to win the
cold war with a military buildup.  Reagan went along
with a buildup, but sought rapprochement with Gorbachev
and ended the cold war by winning Gorbachev`s
confidence.  As Professor John Patrick Diggins wrote in
the New York Times (June 11), “The cold war
ended in an act of faith and trust, not fear and
trembling.” [How
Reagan Beat the Neocons ]

The real competition was economic,
not military.  Reagan ended the malaise of the American
economy, but Gorbachev could not repair the failed
Soviet economy.

The most disappointing assessments
of Reagan have come from libertarians, who seem even
more bitter than Krugman.  They blame Reagan for
speaking their language while allowing government to
grow bigger, making us less free. I find this bitterness
inexplicable in light of Reagan`s

ending the Cold War, curing stagflation that
threatened the economy with wage and price controls, and
making Americans the majority shareholders in their own
incomes.

Perhaps the best response to
libertarians is Peter Brimelow`s

reply to immigration critics, who blame Reagan for
leaving open the floodgates at our border: “Reagan
concentrated on two or three issues that were vital in
his day and ignored much else in the sprawling,
hydra-headed federal government.  . . .  A new
generation of issues has come to the fore.  It is
entirely natural that a new generation of political
leaders will be required to deal with them. And when
they do, they will have to pick their battles, as Reagan
did.”

Reagan picked the two biggest
battles of his day and won both.

COPYRIGHT CREATORS
SYNDICATE, INC.

Paul
Craig Roberts was Associate Editor of the WSJ editorial
page, 1978-80, and columnist for “Political Economy.”
During 1981-82 he was Assistant Secretary of the
Treasury for Economic Policy. He is the author of



Supply-Side Revolution: An Insider`s Account of
Policymaking in Washington.