76-06-A5
- Main Page \ Reagan Radio Commentaries \ 1976
| << Previous Broadcast | Next Broadcast >> |
Unemployment and Inflation V[edit]
Transcript[edit]Given the propensity of the federal government to spend our money in ways that restrict our productivity, it is almost inevitable that inflation and unemployment will continue to rise. Federal job programs and tax cuts may temporarily mask the worsening problem, much as an aspirin may alleviate the first pain of a rotting tooth. But when aspirin no longer works, the prudent person goes to the dentist for a permanent cure. Not so government. Its judgment is impaired by the politics of doing what is popular, so it simply seeks a stronger patent medicine to relieve the symptoms. The liberals' idea of strong economic medicine is government wage and price controls. Nobody, except a socialist, likes wage and price controls. Business, labor, and the man in the street all view them with extreme distaste, which perhaps is why liberals think they will work. Strong medicine should taste bad. But this is one situation in which public perception and economic logic match perfectly. As long as the money supply continues to increase faster than the nation's productivity, wage and price controls can only make the economic situation worse while robbing all of us of some more of our freedom. Most people pay no attention to the nation's money supply, but it is a key to inflation. The federal government controls the money supply, and when it increases the supply faster than the rest of us can increase productivity, we have inflation. In October, the money supply grew at an annual rate of 16.6%, while the gross national product, the most widely accepted measure of productivity, was growing at an annual rate of only 4%. This is a scenario for higher inflation, and we now have so much inflation in our economy that people who have never worked before are searching for jobs to help their families meet the rising cost of living, thereby raising the unemployment rate. What will happen if government tries to apply wage and price controls in this situation? The same thing that happens when a sealed bottle full of water freezes: an explosion. The economy could blow up in one or several directions: nationwide strikes, massive layoffs, empty store shelves, bankruptcies, a black market in essential goods. In other words, wage and price controls in an inflationary economy can only make things worse. The only way wage and price controls will work is if there is no inflation, and since inflation is what is supposed to be cured by wage and price controls, there is no rational reason for ever applying them. Unless you prefer socialism. This is Ronald Reagan. Thanks for listening. |
Details[edit]
| |||||||||||
Added Notes[edit] |
