Boskin Gives the Reagan Administration Too Much Credit for Gains of the 1980s

Regarding Michael J. Boskin’s Oct. 16 Times Board of Economists column, “Faring Better Under Reagan-Bush”:

Is the Reagan-Bush administration’s economic plan responsible for the “outstanding” performance of the economy? No! The pillars of Reaganomics were an increased savings rate, expanding employment through investment in new plants and equipment and a balanced budget due to a better-than-average rate of expansion producing more tax revenue.

In fact, however, savings rates and plant and equipment investment have been low and we all know the bottom fell out of the balanced budget.

Do you want to credit Reaganomics for creating 18 million new jobs during the past eight years? Why should we? There were 18 million new jobs created in the eight years (1973-1981) before Reaganomics.

What about inflation and interest rates? Reagan claimed inflation was due to increasing deficits. Well, his administration proved that theory wrong. Clearly, huge oil price increases were the main cause. Inflation was stopped by the Federal Reserve’s tight money policy, which is not part of supply-side economics.

As for interest rates, they respond to the law of supply and demand for money. A tight money supply, which was needed to fight inflation, generated high interest rates. The loose money supply policy of the Federal Reserve today keeps rates low.

The irony of all this debate is Reagan’s policy failed, but the economy is expanding due to deficit financing--the very liberal economic issue he and other conservatives have campaigned against.

VINCENT DE VITA

Northridge