How to Wreck an Economy

THE CURRENT economic stagnation, now three years old, has its origin in the charge that the Reagan tax cut of 1981 would fuel inflation. Liberal economists, such as Walter Heller, made this charge, but so did conservative economists. Expecting a worsening of the inflation of the 1970s, many investors sought refuge in real estate, a time-proven inflation hedge.

By 1986 it was apparent that inflation had collapsed, and many real-estate investments that had relied on inflation to make them good were turning sour. Just at the moment when a major pillar of U.S. wealth and the collateral behind hundreds of billions of dollars in loans was in line for a shake-out, the Federal Government enacted the 1986 Tax Reform Act.

PC

About the Author

Paul Craig Roberts

Featured Tags

THE CURRENT economic stagnation, now three years old, has its origin in the charge that the Reagan tax cut of 1981 would fuel inflation. Liberal economists, such as Walter Heller, made this charge, but so did conservative economists. Expecting a worsening of the inflation of the 1970s, many investors sought refuge in real estate, a time-proven inflation hedge.

By 1986 it was apparent that inflation had collapsed, and many real-estate investments that had relied on inflation to make them good were turning sour. Just at the moment when a major pillar of U.S. wealth and the collateral behind hundreds of billions of dollars in loans was in line for a shake-out, the Federal Government enacted the 1986 Tax Reform Act.