Editing 76-06-A2 (section)

=== Transcript ===
In the recent presidential campaign one candidate emphasized the fight against inflation, the other the fight against unemployment. One claimed that cutting inflation would put people back to work. The other claimed that putting people back to work would cut inflation. Both were wrong. Our economy is now so full of inflation that, whether it goes up or down, it will only contribute to greater unemployment.

Here's why. Inflation is an increase in available money without a commensurate increase in goods and services on which to spend the money. But people spend it anyway, thereby bidding up the prices on existing goods and services. Producers of these goods and services meet the rising demand by hiring more people to produce more goods and services. Thus inflation artificially expands the labor force
and when inflation levels off or drops, workers are laid off and the unemployment rate rises.

However, when there is as much inflation in an economy as there now is in ours, families find that one breadwinner and one job can't keep up with the rising cost of living. The labor force swells as wives and children seek jobs to help their families make ends meet. Again, inflation artificially expands the labor force, but this time as inflation continues to rise, so does the unemployment rate. The dilemma of the current situation is that inflation, whether it goes up or down, will continue to cause increased unemployment. It is a dilemma we need not have gotten into. We could have stayed out of it if the government which time after time has taken the more popular course of deficit spending and rapid expansion of the money supply, when it could have chosen the more prudent course of matching revenues to the federal budget, and available money supply to the national production of goods and services.

It is a dilemma brought on by the centralization of economic power in government, and the centralization of government power in Washington, D.C., because the federal government has sole control over the money supply and, thus, over the fact and degree of inflation. What's government doing with the dilemma? Making it worse. Next time I'll tell you how.

This is Ronald Reagan.

Thanks for Listening.

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