Reagan rates a 'C,' Volcker an 'A' for US upturn
The American stock market boom celebrates its one-year birthday. It has been a lusty baby, one of the lustiest on record. Those of us who hold common stocks are, on the average, 60 percent richer than we were last year at this time.Skip to next paragraph
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The United States recovery from the 1981-82 Reagan recession is more than half a year old. Although many doubted its reality and most experts predicted a springback far weaker than the average of postwar first-year expansions, I have to judge this to be a normal, buoyant recovery.
This is a good thing. It is good for American workers and property owners. It provides a worthwhile stimulus to foreign economies, many of which are at long last ending their recessions. Of course politicians striving to ensure reelection in 1984 for President Reagan must regard the zippiness of business indicators as a very good thing.
How long will the recovery last? I think the odds are strong that the US gross national product will continue to advance from now through the November 1984 election. So, with the warning that we must not overemphasize the significance of the economic factor in the whole political picture, let me say that the President ought to be gaining in acceptance and popularity as economic optimism spreads.
Will Mr. Reagan run for reelection in 1984? No certain answer is yet possible. All the signs and the White House statements point toward Reagan's being a candidate next year. But we must remember that, even if Ronald Reagan had already made up his mind not to run, those same signs and statements would still constitute an optimal strategy for the Republican camp.
The fact that the world economic situation looks better in mid-1983 than in mid-1982 is not proof that Reaganomics works. Whatever the popularity polls report, economic historians will judge that the recovery came in November 1982 not because of Reaganomics but despite Reaganomics. The hero is not the President himself. Nor is it Arthur Laffer or Jack Kemp, the radical right supply-side zealots to whom Ronald Reagan listened on first taking office in 1981. Nor is the hero to be found anywhere on the Reagan team, in the list of names that includes Treasury Secretary Donald Regan, Undersecretaries Beryl Sprinkel and Allen Wallis, Budget Director David Stockman, or economic adviser Martin Feldstein.
Economists generally give credit to chairman Paul Volcker of the Federal Reserve for ensuring the recession's end. Last summer the Federal Reserve decided to abandon the monetarism that was perpetuating the recession by keeping a tight rein on the money supply. Mr. Volcker and his board contrived a growth in the money supply big enough to bring interest rates down from the high level that had been killing off housing starts. When Henry Kaufman, the fallible wizard of Wall Street, recognized the Fed's shift in strategy, his announcement of this fact initiated the great bull market of last August. Bonds soared upward in price. Common stocks chased up after them.