“When Ronald Reagan took office, inflation was in the teens, the prime rate was in the 20s, and the economy was going nowhere. We still had the remnants of wage and price controls, particularly in oil and gas. And Jimmy Carter said we were in ‘malaise.’ It was a bad time. I’m convinced the economy can be turned around because I watched Ronald Reagan do it.”
“It took long-term thinking,” Mr. Shultz emphasizes. “I’ll give you an example. [Reagan] knew and we all advised him you can’t have a decent economy with the kind of inflation we’ve got. . . . The political people would come in and say ‘You’ve got to be careful, Mr. President. There’s gonna be a recession [if the Federal Reserve tightens the money supply]. You’re gonna lose seats in the midterm election.’
“And he basically said, ‘If not us who? If not now when?’ And he held a political umbrella over [Fed Chairman] Paul Volcker, and Paul did what needed to be done. And by late ’82 early ’83, inflation was under control, the tax changes that he made were kicking in, and the economy took off. But it took a politician with an ability to take a short-term hit in order to get the long-run results that we needed.”
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