Donald Regan on Budget & Economy
Amortize government purchases like homebuyers do
How could we have a rational spending policy if we did not yet know what our policy for raising revenue was going to be? Why should the federal government not have a capital budget, like every business & every family in America, in which its possessions
are calculated as a part of its wealth and its debts are amortized over a period of time? Few people pay cash for a house in which they intend to live for thirty years. Why should the government pay cash for an aircraft that would be operational for the
same period of time?
My basic position was simple. Ronald Reagan had been elected to carry out the ideas he had discussed in his campaign. My job was to identify these promises and do my best to translate them into policy and programs. I saw that there
was a remarkable consistency in the President's public utterances: erratic monetary policy by the Federal Reserve is perhaps the greatest threat to economic stability and growth; and markets [should be] free of government regulation and interference.
Source: For the Record, by Donald Regan, p. 155-158
, May 2, 1988
Economy needs steady, predictable monetary policy
As for monetary policy, nobody argued with Paul Volcker's desire to drive inflation out of the economy. Certainly the Administration could not control it, because the Federal Reserve is and ought to be, independent of the
Executive; still, we did try to influence monetary policy. I argued with Volcker for a steady, predictable monetary policy that would assure an adequate and dependable supply of money for the private sector.
Volcker is a brilliant and dedicated man, and there is no doubt that his actions did, indeed, cauterize inflation, but the burn cost the patient the use of his right arm for nearly two years. The combined public effect of
Volcker's two outstanding qualities as a manager created an atmosphere of fitful government activity and uncertainty in the market that, in my opinion, prolonged the slump well past the point of necessity.
Source: For the Record, by Donald Regan, p.172-173
, May 2, 1988
Deficits don't matter, s long as economy is growing
I did and do believe that deficits did not matter in the short run if in the long run the economy generates sufficient revenues to pay off the deficits, and the rate of growth of
government spending is controlled in such a way that it is consistently less than the real growth of the economy.
The question concerning the budget was never how to reduce it, but how to keep it in rational proportion to income by regulating its growth.
But if spending were not controlled, nothing could control the deficits--certainly not new taxes, and net even, as we have seen, the longest sustained period of economic growth in American history.
Source: For the Record, by Donald Regan, p.173-174
, May 2, 1988
Page last updated: Jan 13, 2017