Pete DuPont: Ronald Reagan's election marked America's economic turning point

Roundup: Talking About History

In 1981 Ronald Reagan became our 40th president, the hostages were released from Iran, Walter Cronkite retired after 19 years as "CBS Evening News" anchorman, and Sandra Day O'Connor became the first female Supreme Court justice.

But a quarter of a century later we should remember 1981 as the year the kaleidoscope turned in America, a dividing point between the previous two decades' big-government beliefs and the individualism and market economy thinking of the next 20 years. We have seen sharply different opportunities--in jobs, incomes, economic growth and inflation--between the governmental years of the 1960s and '70s and the market decades of the '80s and '90s and the new century.

In the 1980 election the American people chose a new course. For the first time in half a century we retreated from the expanding-government philosophy established by Franklin D. Roosevelt and pretty much adhered to by every subsequent president through Jimmy Carter. Ronald Reagan's emphasis on individual opportunity--as opposed to the liberals' on government-created opportunity--was to have a substantial and positive impact on the prosperity of the American people.

As Robert Samuelson recently noted in The Wall Street Journal, in the 13 years before 1981 there were four recessions lasting a total of 48 months. In the next 23 years--nearly twice as long--there were just two recessions, lasting 16 months.
Real annual growth in gross domestic product averaged just over 2.3% a year in the late 1960s and '70s. From 1982 to 2000 GDP grew an average of almost 3% a year.

From the late '60s until 1982, an average of 1.6 million jobs were added to the American economy each year; from 1982 through 2000 the average added was 2.3 million. There was a recession in 2002, but since the full enactment of the Bush tax cuts in the spring of 2003, nearly five million new jobs have been created.

In the '70s unemployment began to rise, growing during the Carter presidency and peaking at 10.8% in 1982 in Reagan's second year. Reagan got it down to 5.3%, Clinton to 3.8%; today it stands at 4.7%, lower than the average for the 1970s, '80s and '90s.

The famous "misery index"--inflation plus unemployment--annually averaged 13% from the late 1960s to 1982; since then it has averaged just 9%. Inflation peaked at more than 13% in the last year of the Carter administration; Federal Reserve Chairman Paul Volcker drove it down to 3.2% by 1983. Under four presidents of two political parties--Reagan, George H.W. Bush, Bill Clinton and George W. Bush--inflation has averaged just 3.1% for the past 23 years.

Two decades of economic growth show up in the stock market too. The Dow Jones Industrial Average declined to 875 in 1981 from 995 in 1965; in the next 18 years it rose to 11497. ...

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