Ronald Reagan - The Bonzo Years

Pro Reagan Speech by L. Kudlow

The following is a commencement speech given by Lawrence Kudlow, in which he defends the Reagan administration. While it is long and covers a number of subjects, I ask that those with knowledge of the areas specified read it and write back with comments, which will be posted.

Only intelligent comments will be put up on the site. Raves, insults, or generalities will not be considered. Pro and con statements are welcome, but there must be some reliable source referred to supporting your position. Just saying "Yeah, he's right.  Reagan was great!" or "He's a moron.  Reagan caused a ton of damage" will NOT cut it.

Please send all comments to: Kudlow Comments.

I have the right to sole discretion concerning which comments are posted. I will, however, attempt to be as fair as possible. If a source is quoted in a comment that you feel is inaccurate, please notify me and I will attach your statement directly below the comment in question, in an alternate color.

The link to the comments page is at the end of the speech, bottom of the page. You may also download a zipped text version of the speech by clicking here.


In terms of defending President Reagan and the economic policies he started
15 years ago, and to which I contributed, I knew I was on to something last
autumn during the presidential campaign of '96. A lot of people in this room
probably felt it was a fairly lackluster campaign and I suspect from the
Republican perspective it was. For me, however, probably the most
interesting aspect of it was that candidate Clinton essentially ran on a
platform that emphasized smaller government, lower taxes, and traditional
family values. And just like the politician who made these three issues
winning issues, namely Ronald Reagan, Clinton won easily

A lot of conservatives in Washington and other places are very resentful and
angry and cranky and even pessimistic over the current state of affairs. I
am not, and I am glad that Mr. Clinton continues to run and govern on what
are essentially Reagan principles (admittedly Clinton's own interpretation
of those principles, but imitation is the sincerest form of flattery). It
shows the power and force of Reagan's ideas and vision.

Furthermore, that Reagan's ideas, and the U.S. economy, can survive the
Clinton presidency is one hell of an achievement. In fact, it may be
spawning new Clintons. There's one in Great Britain today, Mr. Tony Blair,
Prime Minister, who sounds a lot like Margaret Thatcher. In some ways he
sounds more like Thatcher than John Major did, which reminds me of the fact
that at most times, Bill Clinton sounds more like Reagan than George Bush
did. Regrettable, but true. I was very happy a week or two after Blair was
elected when he gave a speech to a socialist enclave in Northern Europe. At
the conclusion of the speech he was roundly booed, which I regard as
tremendous progress. If I gave a speech before a bunch of socialists and was
booed it would be one thing, but for that to happen to Tony Blair, Labor
Party PM, is quite a different matter. In that respect, we have come a long
way, and it makes it all the easier to defend Reagan's legacy because it is
a living legacy. Its spirit, principles and ideas are very much alive today
and, I dare say, are the dominant influence on both political parties.

Now, we've come a long way in economic terms from the period of the late
70's and early 80's. When I went down to work on the Reagan transition, the
OMB treasury transition to be precise, in late November 1980, I was a very
young man in my early 30's. The economy and the world situation then were a
lot different than they are today. It is almost hard to imagine what it was
like. I say this not for any dramatic introduction, it is just a matter of
fact. The United States had lost its place in the world. The Soviet Union
was gaining not only in the territorial battleground, but also in the
logical battleground and certainly in the media battleground. We were in a
very precarious international place. In economic terms, we had just
weathered our second oil shock and our inflation was running upwards of
12-15%. Distinguished Wall Street economists like Henry Kaufman were talking
about the end of our financial markets as we knew them, with long term
federal bonds at double digit yield levels. The economy basically stopped
growing in 1978 and didn't begin to grow again until 1983. It was one of the
longest business downturns in history.

Today, as we meet, it is a different ball game. The Cold War is over, the
United States is supreme. American ideas, values, and economics dominate the
world scene. I believe firmly, with respect to the great success President
Clinton has had in this economy, that it was President Reagan that gave him
the ground he is standing on.

First and foremost, I credit Reagan's policies to vanquish inflation - which
was enemy number one, which is the most pervasive influence, good or bad, on
any economy. Reagan appointed Volker. Reagan appointed Greenspan. Reagan
gave both of them the authority to do what it took and, of course, aided
them with his own efforts to de-regulate the economy. We forget that it was
Reagan who turned around the labor situation by standing up to the air
traffic controllers and in the PATCO dispute, settling it firmly in the
favor of the American people and against a sort of materialistic union
movement which, to the detriment of the economy, had gotten far too big for
its britches.

It was Reagan who gave the primary thrust to de-regulating energy. He argued
with the Department of Energy economists in 1981 (in our first budget) that
the price of oil would not go to $80 or $100 a barrel, and that if our
policies of disinflation and currency stability, along with the tax and
de-regulatory efforts, were successful, oil would go to $20 or $25 a barrel.
I remember betting Jim Schlessinger, distinguished Energy Secretary, a fancy
French meal on this subject. Jim lost.

The President was instrumental in de-regulating the transportation industry,
and the banking and financial services industry. He was instrumental in
setting the forces that led to the de-regulation of telecommunications and,
more recently, utilities. All of these policies are still playing out, even
through one or two generations of policy people in the federal departments
and agencies.

It was Reagan who was four square behind the notion of free trade. We had a
hell of a time getting Canadian free trade, but we did. Reagan really did
that with the force of his personality. That was expanded later to Mexican
free trade and what we now call NAFTA. It was Reagan who floated the notion
of hemispheric free trade, the notion that at some point in the future
Canada, the United States, Mexico, and all of Latin America would be linked
into a free trading zone.

Of course, in an area which goes beyond my expertise, it was Reagan who
stood up to the Soviet Union time and time again. But it wasn't possible to
just stand up to them. We had to have behind our moral force and our
military and diplomatic initiatives an economy that would show the Soviet
Union we meant business when we said we would out-spend and out-arm them if
we had to.

This is where the controversial supply-side tax cuts came into place, along
with the other economic innovations I referred to. Income tax rates were up
70%. They had been raised by Republicans and Democrats from the late 60's
through the late 70's, and the combination of double digit inflation and
un-indexed, highly progressive marginal income tax rates created what we
used to call tax bracket creep. That is to say, as you earned more, if you
were able to, you were pushed into the higher tax brackets, and inflation
pushed you into still higher tax brackets. Families earning real incomes of
$30-$35,000 a year were paying at the top end of the tax rate system and it
was one of the reasons the economy had stagnated. We had the worst of all
worlds. We had high inflation and high unemployment at the same time.

So a band of supply-siders, of which I was a part, helped President Reagan
enact the Kemp-Roth tax cut bill in 1981, which later evolved down to the
flat tax reform of 1986. The top rate was reduced, in steps, from 70% to
28%, which spurred economic growth. There was a lot of doom and gloom in the
80's while economic growth was recovering. It is a part of the story that
interested me a lot. People focused on budget deficits and trade deficits
and the early stages of transforming our industrial economy into an
information age economy. They said the dollar was too high, or the dollar
was too low. Hardly anybody in those days (hardly anybody, that is to say,
in certain media circles and some left-of-center intellectual circles) would
focus on the main chance - that the economy was recovering and jobs were
growing. The expansion of the 1980's lasted over seven years and created
roughly 20 million new jobs. The economy grew at a 4% an annual rate and the
inflation rate was just over 3%. The unemployment rate was taken down from a
peak of 11% to about 5? or 5% at its lowest point. Pretty impressive. It
was the longest peacetime expansion in history. My friend, Wall Street
Journal editor Robert Bartley, referred to it in his book The Seven Fat
Years - a biblical reference, and a very appropriate one.

People will continue to criticize the President and the rest of us for the
deficit problem, so I want to comment on it briefly before moving on to
other more interesting topics. Deficits, in my view, are a fiscal policy
tool. By themselves, they have no moral content. Nations that run recurring
deficits over decades and decades are probably nations that are going to
have trouble. But as historian John Steele Gordon has written in his recent
book Hamilton's Blessing, there are times throughout American history when
deficit finance and the accumulation of debt has served very important
national purposes. Certainly Hamilton's consolidation and selling of debt
was one of the cornerstones to setting our fragile new Republic on solid
ground in the 1790's and led to 40 years of prosperity. Certainly debt was
floated in the Civil War and in World War I and World War II. Indeed, the
highest debt to GDP ratio occurred during and after World War II, when it
ran upwards of 115 or 120% of our gross domestic product. We needed that to
win the war and maintain our freedom. Likewise, I believe we needed to
employ deficit financing in the 80's to win the Cold War and bolster our
economic freedom.

Moreover, I believe the single largest cause of the deficit was the sharp
reduction of inflation, from a zone of 12-15% in 1980 and 1981, to a zone of
2-3% in 1986. The government had been living on inflated revenues and
inflated personal income revenues for over a decade, from LBJ through Nixon
and Ford, to Jimmy Carter. The government's appetite for inflated revenues
was virtually insatiable, and it supported, nourished, and ultimately
overfed the rise of the entitlement state. Reagan inherited that.

Rising inflation was a huge effective tax increase on the economy on top of
the already high actual tax rates. So, getting inflation down was a huge tax
cut, though it probably resulted in a loss of nominal GDP income of, I would
say, by 1986, close to a trillion dollars from what might have been the case
if the inflation had continued at a 10-12% annual rate. If the choice is to
finance a deficit in order to lower inflation and improve the economy, or to
oppose a deficit and maintain the inflation that was destroying our economy,
I would take the former any time. I believe Reagan made a brilliant economic
and political decision to give Volker the green light to do what he had to

The supply-side tax cuts are usually blamed for the deficit, but the facts
are really not supportive of that position. That's the interesting part.
We've learned now that even in the first couple of years of the tax rate
cuts, we only lost about $30 or $40 billion in personal income flows from
what might have been the case. A lot of studies have been done on this, and
over the course of the expansion from 1982 to 1989, it turns out that
revenues nearly doubled in nominal terms, and in real terms went up by 35%!
If it were true that tax cuts caused lost revenues and deficits, then why
did the level of revenues go up so much during that period?

My answer is that the Laffer curve worked. Arthur Laffer, a dear friend with
whom I worked last year in California, argued that reducing tax rates from a
punitively high range will not only encourage more entrepreneurship, more
work effort, more risk taking, and more capital formation, but will also pay
off in a relatively short period of time with better economic growth and a
higher revenue volume. That is exactly what happened in the 1980's, so I
really don't accept the criticism that the tax cuts caused the deficit
expansion (although I recognize that mine is a controversial view). I
believe it was the sharp inflation drop that was truly responsible. However,
both were necessary for our economic security, and the re-invigoration of
our economic security was a crucial tactic in the effort to reclaim our
national and international physical security. When President Reagan went to
Reykjavik in 1986, he was able to stand tall with an economy that was in its
third solid year of growth at a time when the rest of Europe, for example,
was still in a recession. Gorbachev knew, in that negotiation and subsequent
ones, that Reagan had his economy behind him. It was clear we could afford
to do and spend whatever it took if that's the game the Sovs wanted to play.
They folded their hand, and part of the reason for that was the recovery of
our domestic economy.

Now, the last issue on the deficit, of course, is the build up of military
spending. The Weinberger Defense Department spent about 1.6 trillion real
dollars. This was part of the game plan actually begun under President
Carter, who in the last year of his administration finally understood that
the Soviets were not our friends. Well, better late than never. But it was
left to the Gipper to really boost defense spending, and that boost was not
only a crucial factor in the end of the Cold War, but the fundamental reason
why we never had a hot war. Instead, we got just a glimpse, a snapshot, of
the awesome military power that we created in the 80's when we triumphed so
quickly and decisively in the Persian Gulf War in early 1991.

People say this is the inheritance we're handing to our children and our
grandchildren - this debt which is really about 50% of gross domestic
product, very much at the low end of our historical range. I say that what
we are really leaving to the next generation is a strong economy with
maximum opportunity - the leader in the global, information age, high
technology transformation which will be the 21st century's economic story.
That is what we have bequeathed to future generations - a world that is not
only prosperous, but peaceful. And I wouldn't underestimate the peaceful
part as something which will contribute in a feedback, flow-back effect to
the prosperous part.

These are Reagan's legacies.

We will pay the debt down in the next 20 or 30 years. Slowly but surely, any
clever treasury secretary with some good debt management policy advisors can
begin to redeem the debt by slowing down its issuance, as Mr. Ruben has been
doing. He's paid down about $65 billion worth of debt so far in FY 1997 by
simply not re-opening a number of Treasury note and bond issues. This is the
right way to do it. There is no obsession here. It doesn't interfere with
any market forces. It's just done as a matter of course.

What interests me most, though, is the long continuum, big picture story.
Except for about eight months (late 1990 and early 1991) during a Bush
administration that neglected Reagan's economic principles, the U.S. economy
has been in continuous growth and prosperity for nearly 15 years. That is an
awesome achievement. We have created more than 36 million new jobs. As I
said earlier, 20 million came in the 1980's alone. We are experiencing the
greatest bull market in stocks in our nation's history. It shows no signs of
fatigue or end and it has, so far, according to Federal Reserve statistics,
created $17 trillion in new household worth. $17 trillion is about two and a
half times the entire European GDP, and we did that in just the last 15
years! According to the published data, real GDP since 1982 has grown 3% at
an annual rate and the inflation rate has been slightly above 3% at an
annual rate, but I believe all of these will be re-measured to better
encapsulate the high technology investment, production, services and
spillovers of the information age.

Some economists like Leonard Nakamura of the Philadelphia Federal Reserve
and Michael Cox of the Dallas Federal Reserve, both friends of mine, argue
that over this period we have underestimated productivity by at least 1% and
maybe 2%. Therefore, we have underestimated real GDP by at least one
percentage point, maybe two, and we have overestimated the inflation rate by
at least one percentage point and maybe two. When some historian, let's say
in the year 2050, looks back on this period using a refined measurement
process which captures all the contributions to the economy of high
technology advances, it may turn out that the 80's and 90's were a period
when the American economy grew at close to 5% a year with about 1% inflation
and 3% productivity growth. You know, for years I resisted this, but I have
now come to believe that Jack Kemp was right. We can grow at 5% per year and
it is just a matter of time before some national politician runs for high
office on that very plank.

Along the way, we have so democratized and de-regulated financial markets,
as well as other sectors, that today, according to surveys, there are
roughly 125 million people invested in the stock market. 125 million people!
That number is almost identical to the entire work force of this country.
So, virtually all working Americans and, by implication, their children, are
invested in the stock market. They've got a piece of the rock. This is the
greatest advance of democratic capitalism in world history. This is not a
market of rich people. This is not a market of elites. This is a market of
ordinary people saving through stockbrokers and mutual funds and IRAs and
401(k)s and you name it. That $17 trillion increase in net worth, a function
of the stock market's wealth creating processes, is real money.

This is one reason why Americans are at their highest level of confidence in
years. Roughly speaking, we are as confident today as we were about ten
years ago at the height of the Reagan boom, and as we were in the early and
mid 60's at the height of the Kennedy/Johnson era.

Let me make a couple of forecasts. By the end of President Clinton's term of
office (which I will agree will occur on the regularly scheduled date of
January 2001), I believe we will have had three more years of uninterrupted
economic growth. There will have been no recession. This will have given us
roughly 18 years of prosperity. I believe at the end of his term we will
have a zero inflation rate. I believe at the end of his term we will have a
4% unemployment rate, and if I am wrong it will be because it's lower than
that. I believe at the end of his term we will have a 5% Treasury bond rate,
a 4% mortgage rate, and a Dow Jones average somewhere near 12,000. That will
merely be a step on the way to the 40,000 Dow I think likely by the year
2020 when I retire at age 73, God willing.

What's more, in furtherance of Reagan's spirit and legacy, I believe we will
be running budget surpluses of $100 to $150 billion a year, the first of
which will appear in FY 1998 (which starts at the end of this calendar
year). I am not even convinced FY 97 won't be a balanced-budget year. We
have two more tax dates to go, and the economy is really throwing off
revenues. We have solved the problem. Supply-siders argued that by some
manner of flexibly freezing federal spending and by maintaining incentives
to grow the economy, we would solve the problem. We are solving the problem.
We have the lowest deficit in the industrial world. In fact, only the United
States meets the G7 Eurodollar deficit requirements.

There is a fad in Washington right now that if there are surpluses we must
spend them immediately. Others think we should use the surpluses to retire
the debt. Well, I don't agree with either position. I think we should turn
the money back to the taxpayers. I think we have a lot of unfinished
business to take care of in that respect.

I am reminded of two of my favorite heads of State who inherited large
deficits and debt and were able to retire them through supply-side means.
One was the famous Victorian British Prime Minister William Ewart Gladstone.
Gladstone was the Chancellor of the Exchecquer when Peel repealed the Corn
Laws. Those were steep tariffs, as were the tax rates of the day. Gladstone
also eliminated most taxes throughout the U.K. when he was Prime Minister
and in so doing grew the British economy to a point that virtually all of
England's Napoleonic War-related debt could be retired. In this country in
the 1920's, Calvin Coolidge, who followed Harding, lowered the
Coolidge-Mellon income tax rates and, at the same time, extinguished
post-WWI debt and put the budget in a surplus. First he cut taxes, then he
waited for economic growth, then he retired the debt. First Gladstone cut
tariffs, then he waited for economic growth, then he paid down the debt.

I emphasize this because the Reagan agenda has a number of unfinished
aspects. I will make this final point in a general sense. I am a reformer. I
regard myself as a conservative, free-market reformer and I think there is
no better time to reform than during periods of prosperity. It is very
difficult to make large scale reforms when economies are turning down and
people are unhappy and social conditions are contentious. But when the
people have more confidence, when the jobs are plentiful, when prosperity
exists, it's a great time to make the reforms that need to be made.

My laundry list of reforms, which I believe follows directly from Reagan's
agenda (and which, incidentally, I think Clinton may have some sympathy
with), includes, first and foremost, tax streamlining. The Reagan 1986 Tax
Reform Bill was a great step in this direction. A lot of loopholes were
closed. A multitude of tax brackets was collapsed into two - the good old 28
and 15% brackets - and the spirit of tax reform was sufficiently and
surprisingly bipartisan. I don't remember the final votes on the bill, but
people like Senator Bradley and Congressman Gephardt were tax reform
Democrats in those days, and it isn't at all clear to me that President
Clinton couldn't become one now. You know, Jack Kemp is actually meeting
with Clinton today to discuss tax reform. That is an interesting odd couple
meeting and some good might conceivably come out of it. (I will say
editorially that the biggest impediment to an administration plan to
streamline the tax code and lower tax rates is Clinton's own Treasury
Department. It is an odd story. As much as I admire Robert Ruben, who I
think has done a wonderful job working with Clinton and with Greenspan to
keep the inflation rate down, as much as I admire Mr. Ruben and Mr. Clinton
for their spectacular free trade policies - they have done a terrific job
following in Reagan's footsteps - Ruben is a class warrior and a revenue
redistributor when it comes to tax policy. He is not a capital formation,
pro-growth reformer. It's very odd, and I don't know why this is.)

I think we should create a tax system - and I believe Reagan strongly
advocated this - where entrepreneurs and ordinary men and women will be
permitted to spend their own money. They will spend it more wisely than
government will. The root of this is not only an economic vision of
incentives, but also a vision of personal responsibility and accountability
- a spiritual vision in addition to an economic incentive vision.

What is more, I heard President Reagan say repeatedly that the ideal tax
code is one in which all income is taxed once and only once. Such a system
would stop taxing saving and investment three and four times as wages, as
salaries, as dividends, as interest, as capital gains, as inheritance taxes.
These are reforms that are currently out there, and all fall very much under
the Reagan rubric.

Now, there is one issue which I believe was President Reagan's Achilles'
heel, and that's Social Security. I believe the biggest mistake the
President made was signing the 1983 Social Security Reform Bill, and I
believe that because number one, it triggered a series of payroll tax
increases, thereby burdening even more the already burdened middle class.
Number two, it offset and diluted his own income tax reform plan. And number
three, it didn't take any small steps in the direction of a privatized
social security system which would link our contributions to the investment
markets. The rate of return offered by these markets, of course, is superior
to that of the Treasury bill market (which has itself diminished). One of
the great tragedies, I think, of the last 15 years is that all of us sitting
in this room have been denied by the federal Social Security system the
opportunity to invest our Social Security contributions in this phenomenal
bull market. States and localities have for years invested retirement money
in the stock market and have seen terrific performance as a result. It is a
pity that the general citizenry is not allowed to do the same. I wish Reagan
had moved toward privatization. I and others recommended it at the time, but
it remains an unfinished agenda item along with tax streamlining.

Additionally, I think we can still make quite a few reductions in the level
of federal spending. A lot of unnecessary departments and agencies could be
cut out entirely. Regrettably, not much of this is in the current budget
bill. Reagan would have preferred a significantly smaller government,
meaning not only fewer dollars spent every year, but also fewer federal
departments and agencies. Unfortunately, there were only two terms, and only
so much time in the day, within which to achieve these goals.

Finally, I think an unintended aspect of Reagan's policies was the
extraordinary explosion of this information age high technology which has
become the backbone of the economy in the 1990's. It started really in the
mid to late 70's, but so much of the new computing devices, both hardware
and software, that were developed in the 70's were not sufficiently
commercialized, brought to market, and distributed until the 80's. I have to
believe it was no coincidence that lower inflation, lower taxation, less
onerous interest rates, and so forth combined to bring these things to
commercial success. It's as if Joseph Schumpeter became an advisor to
Reagan, though he never had a formal place at the table.

Schumpeter, of course, is my favorite dead economist. He was the foremost
proponent of the entrepreneurial theory of growth and, particularly, of the
technological innovation theory of growth which plays such a huge role in
our present economy. At hand is the greatest burst of high tech innovation
and risk taking and commercialization in our nation's history, certainly in
the last 100 years. A lot of experts who know more about this than I do have
argued that the information age technological innovations are more powerful
than the steam engines, railroads, automobiles, and other industrial
breakthroughs of the 19th century because the information age breakthroughs
have more spillovers and more applications for more people and more
businesses. I think that's true. We know they have raised productivity and
our economy's potential to grow. So, in a sense, I believe Schumpeter met
with Reagan.

Schumpeter recently had lunch with Alan Greenspan, too, which is a very
important point. We are headed towards literally zero inflation. Price
indexes are now registering zero inflation. The producer price index has not
grown in 12 months. That is a phenomenal achievement. Schumpeter always
believed that an entrepreneurial economy would create innovations. Those
innovations, when put into business, would do two things: they would raise
output and lower prices. So another spillover from the Reagan revolution may
be the end of the Phillips curve. Unlike many Wall Street bond traders and
many economists at the Federal Reserve, Reagan believed you could have good
economic growth, low unemployment, and price stability all at the same time.
He believed that, and he encouraged Volker and Greenspan to keep their eye
on gold as a reference point for the value of money. We are as close to a
Bretton Woods gold system as we've ever been, and it has helped
entrepreneurs. Schumpeter, in at least some imaginary sense, is telling
Greenspan, "Don't worry about economic growth. It is all coming from the
investment side, from the technological side, from the innovation side. It
won't cause inflation, it'll actually lower it." Last week Compaq announced
strong earnings, a tougher marketing process, and lower prices. It is just
what Intel said two or three months ago. That is Schumpeter's influence. And
with Greenspan having gone back to the hard money philosophy of Reagan, I
think short-term interest rates will likely go down, not up. This is another
spillover from the Reagan years.

Finally, we have the notion that prosperity and price stability improves the
national soul - one of my favorite topics. The data actually show that
malignant social trends have reversed of late, at least a bit. Crime rates
are down. Property crime rates are way down, but violent crime rates are
down as well. Teenage pregnancy is starting to turn down. Family break-up is
starting to turn down, as is divorce. Much drug use is also waning.

I am indebted on this point to historian David Hackett Fischer. Fischer has
written a great new book called The Great Wave in which he talks a lot about
how rising inflation causes social deterioration and how falling inflation
or stable inflation (what he calls price equilibrium) causes an improvement
in the moral fiber and the moral character of nations. In particular,
Fischer discusses the Victorian Age. For 76 years, from 1820 to 1896, prices
were stable and inflation was non-existent. I mentioned Mr. Gladstone, my
favorite Prime Minister from that period, who contributed to that situation
in England. In the United States, except during the Civil War, the case was
the same. Our inflation rate was zero during that period. Fischer points out
that during the Victorian equilibrium we saw a decline of crime, a decline
of murders, a decline of alcohol consumption, a decline of illegitimacy. We
also, during that period, had an increase in real wages. We also had a
decline of income inequality, and Fischer concludes - and I wish to agree
strongly - that we had a decline of social despair and a rise of moral value
during the Victorian equilibrium.

I believe, along with Nobel Prize-winning Chicago historian Robert Fogel,
that we are in the midst of another such great awakening, a great spiritual
awakening, in this country. Much of this has nothing to do with economics,
but much of it does, because it sure is easier to attend to our spiritual
flaws and defects if we have a job and a more secure financial future and
some money in the bank and some retirement investments that are rising in a
bull market.

What I wish to do here is connect some dots from Mr. Reagan to Mr. Clinton.
These are really, primarily, the American people's dots which are connected.
We are in a period of great change and transformation. Our evaporating
inflation rate and our rising economic growth rate are mirrored in the
phenomenal increase in the stock market which is a metaphor for our times.
We can look forward to improving social, family, and spiritual conditions.
We have a marvelous confluence of events: stable prices and free trade,
information age entrepreneurship, the promise of new tax reform and social
security privatization, and the end of the false paradigm of the trade-off
between growth and inflation. We now know we can have low unemployment and
zero inflation at the same time. An era of renewed moral and spiritual
values, an era of global peace and prosperity, is upon us. I think we are
about a third of the way into this long cycle, and I believe strongly that
it was Mr. Reagan who began it.

We are changing. We are reforming. We are transforming. It is all of a
piece. This is a story about the economy, but it is a story that is much
bigger than the economy. This is a story, really, about our unlimited
potential to use our God given talent and creativity. I can't predict how
long this will go on. There is no end in sight in terms of the stock market
and the economy. But I will argue, as I have tried to this afternoon, that
with the help of millions of people around this country and billions of
people around the world, it was Ronald Reagan who led this revolution, who
established this new higher ground, who provided us with the spirit, the
vision, and the road map which is today still being followed by the most
successful politicians on the world scene. So let me say personally, keep
the faith. Faith is the spirit. And in the words of my favorite president
from California, the best is yet to come. Thank you.

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