His Visit To The New York Stock Exchange
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In today’s 12 Days of Christmas, managing editor Geoffrey Morris reflects on the presidency of Ronald Reagan, and how he changed the American economy – and sent the stock market on a decades-long bull run. Specifically, he looks at the speech Reagan gave to traders on the floor of the New York Stock Exchange in 1985 – and how it was received.
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Ronald Reagan sparked the longest bull market in U.S. history…
I (Geoffrey Morris) was a kid during his presidency, and in those eight years I grew from knowing nothing about politics to being an outspoken (and lifelong) conservative. Reagan’s optimism, good humor, and faith in people were as infectious as his laissez-faire approach to leading the country and his firm commitment to ending communism. Being just a boy, of course, I changed a great deal over his two terms – and eventually set off on a path of political journalism, because he created a new way of thinking to explore and report on.
But the economy and the market changed even more. When Reagan entered the Oval Office in 1981, the Dow Jones Industrial Average was around 900, almost exactly where it was four years earlier when Jimmy Carter took the oath of office.
When Reagan left the White House in 1989, the Dow had risen 135%, and since then it has increased an average 11.4% per year for a total gain of 4,668%.
The American economy also performed better during the Reagan years. Real median family income grew by $4,000 (about 18%) during the eight Reagan years and experienced a loss of almost $1,500 in the previous eight pre-Reagan years. Interest rates, inflation, and unemployment fell more under Reagan than they did immediately before or after his presidency. The productivity rate was higher in the Reagan years than in the pre- or post-Reagan years.
Reagan’s 1981 tax cuts, combined with a scrupulous attention on federal monetary policy, deregulation, and free trade, created America’s greatest sustained wave of prosperity… ever. The American economy increased by a third during his tenure, producing a $15 trillion bump in American wealth. Consumer and investor confidence soared. Cutting federal income taxes, reducing U.S. government spending, scaling down the government workforce, maintaining low interest rates, and keeping a watchful inflation hedge on the monetary supply was Ronald Reagan’s formula for a successful economic turnaround.
In the midst of this economic boom, on March 28, 1985, two months into Reagan’s second term, the board of the New York Stock Exchange invited him to ring the opening bell – the ceremonial kickoff to the day’s trading activity. As the door to the familiar balcony overlooking the floor of the exchange opened and Reagan’s face appeared, the traders and brokers roared their approval, chanting “Ronnie, Ronnie, Ronnie.”
And then he spoke…
This is a great view from up here. It’s kind of like being at a Saturday-night, tag-team wrestling match at the Garden.
But in a few minutes I’ll ring the bell so trading can begin.
But in this lull before the storm, I’d like to say a few words about where this country’s been and where we’ll be going from here. The last time I visited the New York Stock Exchange was in 1980, and the mood sure was different then.
But in the last five years, we’ve moved from malaise to hope, confidence, and opportunity. We knew that malaise for what it really was: government. With its high taxes, excessive spending and overregulation, it had thrown a wrench in the works of our free markets. In essence, the government was trying to run the economy, but was ruining it instead.
So, we cut tax rates and counterproductive regulations and moved to limit spending growth. Our estimate is that we have eliminated enough regulations to save 300 million man-hours a year that the public and local and state governments used in filling out government forms to meet the regulations.
And I think we’ve seen some healthy results on this trading floor. Those tax cuts helped re-energize the stock market, with the volume of shares traded hitting record highs and more Americans than ever before participating in the market. An enormous rush of new equity issues, venture capital, and new investment became the driving force behind an economic expansion as strong as any we’d seen in more than 20 years.
And for all those who say we can’t repeat the dramatic growth or record of the past two years, I can only paraphrase my chief of staff: We’re bullish on the American economy.
The American economy is like a racehorse that’s begun to gallop out in front of the field. Other nations, hobbled by high tax rates and weighed down by oversized government spending, have been slow to catch up. And this has caused some painful dislocations, especially for America’s exporting industries. But the answer is hardly to hamstring the American economy to make it drop back with the others. The solution is for our trading partners to throw off the dead weight of government – cut their own tax rates, spending, and overregulation and join us in opening up their markets to foreign competition so they can catch up with us in our race to the future.
There’s one sure method to cut the expense and price of American-made goods and increase our export sales. The surest way to make American products more competitive is to spur innovation, enterprise, and productivity by cutting tax rates again. And that’s exactly what we intend to do.
It’s time, too, that government got off its present spending spree before it squanders our future prosperity. Senate Republicans are trying to put together a package of genuine spending reductions, and they’re going to need all of our support and encouragement in the coming weeks. And let me repeat, if the political heat of budget cutting is too much for Congress, then they should give the president what 43 governors have – a line-item veto. And if Congress can’t cut it, I will. And let me tell you… it really would make my day.
With tax reform and budget control, our economy will be free to expand to its full potential, driving the bears back into permanent hibernation. That’s our economic program for the next four years. We’re going to turn the bull loose.
Thank you all very much. What you have done for me is better than a hot stock tip.
The economy was sluggish under Reagan’s successor, George H.W. Bush, but improved remarkably under President Bill Clinton. In fact, Larry Kudlow, a top White House economic advisor to both Reagan and President Donald Trump, refers to Clinton’s time in office as “Reagan’s third term,” because Clinton largely left Reagan’s tax rates untouched, reduced the capital-gains rate, and reformed welfare.
Today, Reagan’s legacy lives on and is the basis of the economic policies – though not the temperament, moral compass, or world view – pursued by President Trump, both in his first term and in what he is aiming to do in his second.
Porter & Co.
Stevenson, MD
P.S. Will Donald Trump do for the economy what Ronald Reagan did?
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