From: jpietro@calais.austin.ibm.com (Jeffrey A. Pietro)
Newsgroups: alt.rush-limbaugh,alt.fan.rush-limbaugh
Subject: Re: misinformation from the right
Date: 1 Sep 92 19:12:40 GMT
Reply-To: jpietro@perelandra.austin.ibm.com
Distribution: usa
Organization: IBM Austin, TX

I'm not en economist (thank God), but there's one thing that I have always
remembered from my one and only Econmics class in College.  It explained
Reaganomics and the relationship to the following graph [see below]

In article <1992Aug27.182510.12769@umbc3.umbc.edu>, alex@engr3.umbc.edu
(alex) writes:
> In article <guido.714937170@sparc-3>, guido@blink.att.com (Guido
Bertocci) writes:
> 
> 	 (% increase)  (% of workforce)
> year	 CPI	energy	Unemployment
> 70	 5.7	 2.8	4.8	Nixon
> 71	 4.4	 3.9	Not available
> 72	 3.2	 2.6	Not available
> 73	 6.2	 8.1	Not available
> 74	11.0	29.6	Not available
> 75	 9.1	10.5	8.3	Ford
> 76	 5.8  	 7.1	7.6
> 77	 6.5	 9.5	6.9	Carter
> 78	 7.6	 6.3	6.0
> 79	11.3	25.1	5.8
> 80	13.5	30.9	7.0
> 81	10.3	13.6	7.5	Reagan
> 82	 6.2	 1.5	9.5
> 83	 3.2	  .7	9.5
> 84	 4.3	 1.0	7.4
> 85	 3.6	  .7	7.1
> 86	 1.9   -13.2	6.9
> 87	 3.6	  .5	6.1
> 88	 4.1	  .8	5.4
> 
> The data clearly shows that unemployment was higher under Ford
> and Reagan than under Carter.  (One is certainly free to argue 
> how long a particular administrations responsibilities carry over into the
> next).

I agree with the graph the unemployment was higher under Ford and Reagan
than under Carter.  From what I understand (and will explain here) is that
this was intentional in Reagan's case.

Does anyone remember the "Phillips Curve"?  It was a curve developed by
a man (economist?) named Phillips that showed Inflation (CPI) on the
vertical access and Unemployment on the horizontal access.  The curve
was basically y = 1/x [asymptotic].  Another premise of his theory
was that there will always be unemployment at a "natural rate".  Change
unemployment and it will gradually go back to that "natural rate" (some
people just won't work???).  He also stated that if you change unemployment
that inflation will change according to the curve.  However (!!!!!), when
unemployment went back to it's "natural rate", inflation did not change.
Therefore, if you reduce unemployment from its "natural rate", inflation will
increase, but unemployment will eventually go back up.  On the other hand,
if you increase unemployment, inflation will decrease, and unemployment will
eventually go back down.  As unemployment moved back to its "natural rate"
the curve would move with it laterally (right or left) leaving a higher
or lower (respectively) inflation rate at the "natural rate" of unemployment.

This was the rationale (as far as I remember) of why the Reagan administration
allowed such high unemployment--to control the rampant inflation created by
the Carter administration and eventually reduce it.  The numbers on the graph
would tend to agree.

> My own interpretation of the data is that inflation was drastically 
> reduced in the 80s due to falling oil prices and was on its way down
> before Carter left office.  If you think that Carter or Reagan were
> primarily responsible for driving oil prices up or down feel free to
> argue that as well, but try to be specific on why or how they did it.
> Don't forget to consider the big jump in energy prices in 74 and 75.

You might be able to argue that oil prices dropped due to Inflation being
controlled (or unemployment being high).  I don't think you can blatantly
state the CPI fell because oil prices did without a week to week graph
showing how one influenced the other (including unemployment).

P.S. From my .sig you can tell I'm a fan of Rush Limbaugh--this doesn't
automatically make me wrong, though... ;-)

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