Business Roundtable Perspectives: No. 479, July 2011
How to Get That AAA Rating Back
By Robert J Barro
8 August 2011
Ronald Reagan and Barack Obama have at least one similarity. They both were confronted by great economic challenges when they became president.
Mr Reagan's immediate challenge was that inflation and interest rates were out of control. He met this great test by allying with the Federal Reserve chairman, Paul Volcker, in accomplishing a return to price stability, even through the 1982 recession when the unemployment rate hit 10.8%.
Reagan's success is not in doubt. Inflation and interest rates were reduced dramatically, and the recovery from the end of 1982 to the end of 1988 was strong and long with an average growth rate of real GDP of 4.6% per year. Moreover, Reagan focused on implementing good economic policies, not on blaming his incompetent predecessor for the terrible economy he had inherited.
This article was published by The Wall Street Journal on 8 August 2011.
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