Cal Thomas: Reagan’s economic recovery

MYRNA BROWN, HOST: Today is Thursday, March 13th. Good morning! This is The World and Everything in It from listener-supported WORLD Radio. I’m Myrna Brown.

MARY REICHARD, HOST: And I’m Mary Reichard. Up next, economic deja vu.

It’s been a bumpy week for the U.S. stock market, but WORLD commentator Cal Thomas says we’ve been here before.

CAL THOMAS: When I began investing in balanced mutual funds in 1983, the Dow Jones Industrial Average was just under 12-hundred points. Even after a few choppy days this week, the Dow is still hanging out around 41-thousand or better. It’s the difference between looking at short-term vs. long-term investing.

I called my financial adviser who told me not to worry about the latest declines because I am diversified. Besides, she said, “it’s only paper.” That may not sound reassuring until one considers we’ve been here before.

The year was 1981 and the country was struggling with double-digit inflation—thirteen and a half percent at the end of the Carter presidency. Unemployment was high—8 percent. Interest rates were even higher as mortgage rates soared to well over 16 percent. Public confidence was at a historic low.

It took Ronald Reagan nearly two years to turn the economy around, beginning with the 1981 Economic and Recovery Tax Act. It substantially reduced taxes and eventually led to strong economic growth.

Bruce Bartlett, who drafted an earlier version of the bill, defended it in an article for The Washington Post. He writes: “Keynesian economics, which was the dominant theory at the time, said that higher taxes would curb inflation by reducing people’s disposable income and spending, and that any tax cut would exacerbate inflation.” He goes on to say: “Our thinking, by contrast, was that lower taxes would increase the incentive to work, save and invest. If that led to an increase in the supply of goods and services, then the impact would be anti-inflationary.”

So it was, and so it did.

Reagan’s approval rating sank to 35 percent in 1983, but as the economy began to recover, it soared to 61 percent by November 1984. He won re-election in a landslide.

President Trump has expressed a “wait and you’ll see” attitude about his economic policies. He promises a great economic boom and a new “Golden Age.” We’ll see if that replicates the Reagan pattern. Trump didn’t help consumer confidence when he punted after being asked twice whether a recession might be coming.

Writing in The New York Post, Fox Business commentator Charles Gasparino advises investors to ignore the stock market because Wall Street is dealing with “painful detox from (its) government spending addiction.”

Gasparino writes: “Think of the current U.S. economy as a junkie weaning himself off heroin, which is never easy…”

As with President Reagan, Trump is still having to deal with the fallout from his predecessor’s economic policies. Those include Biden’s “Inflation Reduction Act,” which caused inflation and produced the high prices and other negative consequences Democrats are claiming are Trump’s fault. Really? After only six weeks in office and with his last cabinet officer confirmed by the Senate just this week?

Detox is painful, but the result is worth the effort. Our problem is that too many Americans have become over-reliant on government to take care of them, while ignoring the old Puritan ethic of self-reliance. Politicians don’t care because it contributes to their careers and power. That attitude has contributed to our $36 trillion national debt and inflation which the administration, with the help of Elon Musk and his DOGE squad, are trying to reduce.

Economic roller coasters can be scary, but like the rides at the fair, the end produces satisfaction, relief and even a thrill. So, hang on.

I’m Cal Thomas.

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