Ronald Reagan: The Great Inflation Fighter

February 18, 2010

Ronald Reagans 99th birthday would have been on February 6, 2011, had he lived. Thus, it was refreshing to hear an excellent radio interview with one of Americas best economic journalists, Robert Samuelson, discussing Reagans greatest accomplishment defeating the inflation that had crippled the American economy in the 1970s. The interview on John Batchelors radio show (found here, 2/13/2010, 9pm-10pm) is roughly coincidental with the paperback release of Samuelsons The Great Inflation and Its Aftermath.

Reagan allowed the Federal Reserve chief, Paul Volcker, to throw the country into a brutal recession in which unemployment reached 10.8%. Samuelson notes that Volcker could never have achieved the defeat of inflation without the support of the sitting president. Reagans approval ratings went down to 39% in 1982, but he never wavered. Reagan realized that Jimmy Carters inflation had destroyed the faith of the American people in the economic-political system. He also understood economics well enough to know that the country could not flourish with systemic inflation, so he resolved to end it even if it destroyed him politically. This is great statesmanship, and it sets Reagan apart in a manner matched by only a few presidents.

I agree with Samuelson that this was Ronald Reagans signal achievement. Had he not solved the economic crisis there would not have been a second term and no victory in the Cold War. Conservatism would have been completely discredited. All those victories rested on Reagans economic victory and that paved the way for decades of low interest rates and low inflation. Samuelson is absolutely correct that Reagans tremendous political courage and economic insight have been overlooked and trivialized. Thus, Samuelson wrote his book, to refresh our memories lest we forget what Reagan and Volcker accomplished and lest we forget the poisonous effects of Keynesian inflation.