| BUSINESSWEEK ONLINE : MARCH 15, 1999 ISSUE | ||||||||
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| READERS REPORT
The Reagan Years Were No Picnic, Economically ''Reagan vs. Clinton: Who's the Economic Champ?'' (Economic Viewpoint, Feb. 22) is somewhat misleading. Professor Robert Barro ranks the first term of Reagan (1981-84) as the ''best'' since World War II, based on the Barro misery index. His table shows that the ranking is influenced by the change in the rate of inflation, -6.3% in the '81-84 period, which is the best improvement. However, this period followed the two oil crises of the 1970s. Consequently, this drop in the inflation rate was due mainly to the drop in oil prices. Moreover, it is surprising that Barro does not mention the buildup of the twin deficits during Reagan's two terms. The trade deficit tripled from 1980 to 1986, to more than $150 billion, and the annual budget deficit went up five times, to $200 billion (or 4% of gross domestic product) in 1986. The Reagan Administration exacerbated the budget deficit by cutting taxes and increasing government purchases, and initially tried to deflect the blame for the worsening trade deficit. While it is true that U.S. consumers initially benefit from a high trade deficit, which increases current consumption, this gain comes at the expense of reduced future consumption. We do not know who is better for the U.S. economy--Reagan or Clinton. But we are sure that Reagan is not as good as described. Yiuman Tse and Paul Grier Professors, School of Management State University of New York Binghamton, N.Y. I take issue with Robert Barro's revised misery index, as I do with Arthur Okun's original. What Okun and Barro are measuring is economic strength; it is definitely not misery. To assign an equal weight to inflation and unemployment (in Okun's index), or worse, to equally weight the change in inflation, long-term interest rate, and GDP shortfall with the change in unemployment (in Barro's revised index) is to mask the fact that without employment and a livable wage, one is guaranteed to be miserable, economically speaking. In fact, assuming some validity to the Phillips curve trade-off between inflation and unemployment, a high rate of inflation is actually something to be celebrated by the jobless. The choice between no job and relative low prices or a steady paycheck and slightly higher prices is an easy one for someone unemployed to make. In economic terms, unemployment alone equals misery. These other factors merely represent inconvenience to the economy at large. John Sergio Wantagh, N.Y. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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