Navy sailors wave American flags as the USS Ronald Reagan aircraft carrier docks at Naval Air Station North Island in Coronado, Calif.  The nuclear-powered aircraft carrier and its crew of nearly 5,000 sailors returned to San Diego from a six-month deployment to the Persian Gulf and Western Pacific Ocean.  It was the first mission for the ship since being commissioned in 2003.

Nancy Reagan posing with Douglas Fairbanks, Jr. and Grace Kelly (Peter McCoy at far left) during a dinner at Winfield House during trip to London for the Royal Wedding. 7/26/81.

President Reagan’s Address at the Ceremony Commemorating the 40th Anniversary of the Normandy Invasion, D-day at Point-du-Hoc – 6/6/84.

You will notice that Grace Kelly is pictured above. I got to visit Monaco back in July of 1981 and I saw the outside of her beautiful home. My wife and I love the film “To Catch a Thief,” that stars Cary Grant with Grace Kelly and we watch it several times a year. There are some car race scenes in that movie.

I remember thinking back in 1981 that there were winding roads back up in those hills and I was glad the bus driver knew what he was doing since the views out the window looked pretty scary from those heights. Unfortunately, about a year later on September 14, 1982, Grace Kelly died on one of those same roads.

Have you heard the lie that Presidential policy does not matter, but economic cycles come and go and we can not hold our politicians to blame. Many have said that about the success that Reagan had with the economy in the 1980’s. William A. Niskanen and Stephen Moore have sent the record straight in their October 22, 1996 paper “Supply-Side Tax Cuts and the Truth about the Reagan Economic Record.” I will be sharing portions of that article with you over the next few days.

Reagan’s economic program actually amounted to the longest and most successful Keynesian recovery the world has yet seen. 

If the 1980s expansion had been a classic, demand-driven Keynesian recovery, nominal demand should have grown rapidly in the 1980s. However, as Figure 9 shows, over the course of the 1980s the rate of nominal demand growth fell.
The Keynesian explanation of the economic recovery in the 1980s is also fundamentally inconsistent with the sharpfall in inflation throughout that decade. If the recovery had been driven by a hike in the demand for goods and servicesrather than by a supply-side effect of greater output, inflation would have risen rather than fallen. But it did fall. Thisis why the near-universal predictions by Reagan’s opponents from 1979 to 1981 of higher inflation from tax cutsproved to be entirely misguided.
Finally, if budget deficits are highly stimulative, the post-Reagan period of 1990-95 should have produced strongeconomic growth. The budget deficits of that period were very nearly of the same magnitude as the deficits of 1982-89(4.2 percent of GDP versus 3.9 percent of GDP); in the 1980s, however, we had rapid growth and in the 1990s wehave had anemic growth. The answer seems to be the supply-side effects of tax and regulatory reductions in the 1980s versus the tax hikes and reregulation in the 1990s.