Wednesday, February 11, 2009

What worked to pull us out of the Recession of the Seventies?

Peter Ferrara recounts:
The first was across-the-board reductions in tax rates to provide incentives for saving, investment, entrepreneurship and work.

The second component was deregulation to remove unnecessary costs on the economy.
Third was the control of government spending. In 1981, Reagan forced through Congress not only his famed, historic tax cuts, but also a package of budget cuts close to 5% of the federal budget -- equivalent to roughly $150 billion today.
The fourth component of the Reagan recovery plan was tight, anti-inflation monetary policy, which was spectacularly successful.
We know such policies work because they turned around in just two years an economy far worse than today's. We were suffering from multiyear, double-digit inflation, double-digit unemployment, double-digit interest rates, declining incomes, and rising poverty. In fact, what we suffer with today is not the worst economy since the Great Depression, but the worst economy since Jimmy Carter -- the last time liberals were dominant politically and intellectually.

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