Ronald Reagan Was A Fiscally Liberal President - 1962 Words

Neither Republicans nor Democrats will admit it today, but Ronald Reagan was a very fiscally liberal president. His eagerness to please citizens with tax cuts and a boost in defense spending, all while balancing the budget, seemed well placed, but with the largest deficit run in peacetime up to that time, Reagan proved he did not have the heart to make cuts to control the budget. Additionally, the change from reactionary monetary policy to monetarism by Federal Reserve chairman Paul Volcker dealt with the increasing inflation and unemployment problem of the late 1970’s, but at the cost of deep recession. Reagan, who as a candidate had promised economic prosperity, found himself in a difficult situation, as his plans for growth were†¦show more content†¦The lackluster effort of the Fed to control the money supply shows their true hand. In the mid to late 70s, the increasing inflation had gone out of control, and Volcker made it his mission to stop that inflation. To th e members of the Federal Reserve Board, this policy was clearly to reduce inflation, but market outsiders were confused by the Fed’s switch in policy, and scared by the volatility of the money supply. In 1981, the uncertainty of Federal Reserve policy could be seen in the bond markets, which rely heavily on stable interest rates. According to Greider, the bond market had a â€Å"traumatic seizure† that could best be described as an â€Å"anxiety attack† in April of 1981, as a result of the monetary policy pursued by the Fed, which fundamentally abandoned the control of interest rates (Greider 374). With the new policy, the Fed caused interest rates to fluctuate with the money supply, which relies heavily on the velocity of money, or the amount of times money changes hands over an interval of time. Monetarists believed that the velocity of money was constant, and criticized the Fed for not simply increasing the money supply slowly over time, but tit became clear in the early 80s that the velocity was not constant at all. Even thoughShow MoreRelatedNational Debt : The Biggest Issue Of The Global Politics1270 Words   |  6 Pagesbe a major concern to all American citizens and tax payers, because they contribute to government spending a great deal. In 1790, Alexander Hamilton stated in the first report on the public credit that: The United States debt, foreign and domestic, was the price of liberty. The faith of America has been repeatedly pledged for it... Among ourselves, the most enlightened friends of good government are those whose expectations of prompt payment are the highest. To justify and preserve their confidence;