Business Roundtable Perspectives: No. 479, July 2011

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.

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This article was published by The Wall Street Journal on 8 August 2011.

Articles in the Perspectives series plus a large library of books, studies, speeches, articles and DVDs on a wide range of public policy issues can be found at www.nzbr.org.nz

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