79-04-B2
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Inflation[edit]
Transcript[edit]Despite the umpteen million words that have been written and spoken about inflation, I'm going to add a few more. With all the rosy predictions about the right against inflation and the possibility of "victory", we now know that the inflation rate in 1978 was nine per cent and there are hints it might actually have been 10 percent. Have you ever wondered what things would be like if that rate continued for the next 20 years? I'll use the 10 percent rate, not just to look on the dark side, but because it's easier to figure. In 1998 -- 20 years down the road with a 10 percent inflation rate -- when your grandchild asks for a candy bar, you'll give him $1.35. Maybe you'll make it an even $1.50 and tell him to keep the change and maybe that will buy him a stick of gum. Today's $50,000 home will cost $336,000 and if you can still afford to eat, the food you can buy now for $100 will set you back $673. That modest $4,000 car sitting in the driveway will have a $26,910 price tag. College tuition, which averages $5,000 a year now, will be a hefty $33,638. Heaven only knows what kind of money Junior will be writing home for. Well, that's 10 percent inflation 20 years down the road. We're being encouraged to think the inflation rate might be brought under control at, say, a reasonable six percent. And sometimes it sounds as if those in government, plus their economic advisors, are willing to settle for that as a kind of status quo. That's a little like rolling over and going back to sleep because the fire in the house is only on the first floor. Would you like to hear that same set of figures I just gave, readjusted down to a six percent inflation rate? That $50,000 house will be a bargain at $160,370. The candy bar for little Johnny or Alice will only cost 64 cents and that $100 basket of food will run you $321. Your modest compact car will only cost $12,830 and college tuition will be $16,036 a year. All we have to do to prevent these ridiculous figures from becoming a fact of life is to end deficit spending by government. How did we get into this situation anyway? Well, back in the '60's, there was a decision to fund a great many social programs under the name "The Great Society" and to fund the war in Vietnam without raising taxes. It takes political courage to raise a tax. Inflation is a tax, but not easily recognizable as such and no one in office has to cast a vote for it. As a matter of fact, inflation may even seem like fun for awhile. The government -- without saying anything to anyone -- turns on the printing presses and runs off several billions of dollars, all green and crisp. Business seems to pick up, money is easy to come by and everyone feels good. You get a raise and find yourself in a higher surtax bracket. At first you're inclined to be proud of that. It seems like you're getting ahead in the world. But then the warm glow turns out to be a fever. You discover you're earning twice as much, but suddenly you don't seem able to afford the same things you could back when you earned less. Maybe we can't go back, but we can head off that $1.35 candy bar right now at 20 cents by simply telling government the party's over. This is Ronald Reagan. Thanks for listening. |
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