Alan Reynolds

 The relentlessly partisan New York Times could not resist using Ronald Reagan's death as a tawdry opportunity to denigrate his enduring, internationally emulated accomplishments in economic policy. The editors concluded Reagan merely "profited from good timing and good luck" by taking office just after the Fed raised interest rates from 9 to 19 percent. A New York Times reporter, Todd Purdum, added gratuitous insults about "Mr. Reagan's ... seeming indifference to civil rights, the environment and the plight of the poor."

 Even the obituary by Marilyn Berger recycled random nonsense, such as blaming the ephemeral stock crash of October 1987 on "the administration's failure to deal with the budget." October 1987 marked the end of a fiscal year in which the deficit fell 32 percent.

 Like many others, Berger dug up former budget director Dave Stockman's tiresome canard that the supply-side team in early 1981 spun a "Rosy Scenario" to make future budget deficits look small. I was the first recruit on Stockman's transition team, so I know this was a self-serving scam.

 The controversy among Stockman's advisers in early 1981 was not about economic growth, but about an unduly gloomy forecast for inflation. We projected a one-year recession and five years of 3.9 percent real growth. Far from being wildly optimistic, this was the only official forecast that ever predicted a recession not yet begun. That recession turned out to be more persistent than anyone expected, starting in July 1981 and lasting through November 1982. But that was followed by seven years of 4.3 percent growth of real GDP, making our forecast look modest.
 
We never imagined the Fed would keep the funds rate above 14 percent through June 1982, even as inflation fell sharply. That Fed squeeze guaranteed big budget deficits by inflating the government's interest bill and deflating the economy. Supply-side economists (Larry Kudlow, John Rutledge, Paul Craig Roberts and I) also did not anticipate that nearly all of the 25 percent reduction in tax rates would be foolishly postponed until 1983-84.


Alan Reynolds

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