NCPA - National Center for Policy Analysis

The Reagan Factor In Dow 10,000

March 16, 1999

With the exception of a short and shallow recession in 1990-91, the U.S. economy has created ever-higher levels of prosperity since late 1982. Many economists credit former President Ronald Reagan and his policies of lower taxes, deregulation and freer markets for this 17-year-long achievement.

Here are some of the benefits which have accrued since August of 1982:

  • The Dow Jones average has appreciated 1,095 percent -- or 615 percent in inflation-adjusted terms.
  • The economy has posted a 3.2 percent yearly real rate of increase -- while real corporate profits have expanded an average of 6 percent annually.
  • Thirty-nine million net new jobs have been created -- largely from nearly 11 million new business start-ups.
  • Roughly $25.7 trillion of new household wealth has been created.

Meanwhile, long-term Treasury bond yields have dropped to 5.5 percent from roughly 15 percent, as inflation fell from nearly 11 percent to almost zero today. Unemployment -- which stood at 11 percent then -- is only 4.4 percent today.

Economists point out that Reagan's policies are still largely in place today. The Republican congress elected in 1994 put an end to the high-tax and re-regulation policies of President Clinton's first two years -- steering him toward approval of a capital gains tax-rate cut, welfare reform, a balanced budget plan, the North American Free Trade Agreement and other measures to encourage trade.

Source: Lawrence Kudlow (American Scandia Life Assurance Corp.), "The Road to Dow 10000," Wall Street Journal, March 16, 1999.


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