An Economic Legend

The New York Times > Opinion > Op-Ed Columnist: "According to a recent article in The Washington Times, Ronald Reagan 'crushed inflation along with left-wing Keynesian economics and launched the longest economic expansion in U.S. history.' Actually, the 1982-90 economic expansion ranks third, after 1991-2001 and 1961-69 � but even that comparison overstates the degree of real economic success.

Inflation did come down sharply on Mr. Reagan's watch: it was running at 12 percent when he took office, but was only 4.5 percent when he left. But this victory came at a heavy price. For much of the Reagan era, the economy suffered from very high unemployment. Despite the rapid growth of 1983 and 1984, over the whole of the Reagan administration the unemployment rate averaged a very uncomfortable 7.5 percent.

Mr. Reagan passed his big tax cut right at the beginning of his presidency, and mainly raised taxes thereafter. So we're supposed to believe that a tax cut passed in 1981 was somehow responsible for an economic miracle that didn't materialize until around 1997. The architect of America's great disinflation was Paul Volcker, the Fed chairman. In fact, Mr. Volcker began the process in 1979, when he adopted the tight monetary policy that caused that record unemployment rate. He was also mainly responsible for the recovery that followed: it was his decision to loosen up on the money supply in the summer of 1982 that set the stage for the rebound a few months later."