Jane Galt over at Asymmetrical Information has an intriguing post regarding Ronald Reagan’s economic legacy. First, Ms. Galt dispels the myth that Reagan’s policies were solely responsible for improving America’s economic malaise of the late 1970’s:

I think it was Grover Norquist, saying that Reagan was great because when he took office, unemployment was 10% and interest rates were sky-high, and when he left office everything was boom-a-riffic.
This is every bit as fine a bit of data mining as Democrats who make similar claims for Clinton — the economy sucked when he took office, and was booming when he left. When Clinton took office, the economy was already recovering from a recession; when he left, it was sliding into another one. That’s luck, not talent. (Rubinomics buffs, peace out. I’ll deal with you later.)
Similarly, high unemployment and interest rates under Reagan were not because Democrats Had Been Driving the Economy Into the Ground Until the Grownups Took Over. High inflation was the result of a dozen years of bad fiscal and monetary policy under two Republicans — Nixon and Ford — and two Democrats — Johnson and Carter — that was brought under control only when Paul Volcker, the Carter-appointed head of the Federal Reserve, jammed interest rates up to national-heart-attack levels and left them there until inflationary expectations were well and truly tamed. Reagan had nothing to do with unemployment and interest rates falling; that was the inevitable result of a drastic monetary tightening finally working its way through the economy.

Ms. Galt also debunks the supply-side economics myth that budget deficits have no effect on interest rates:

While we’re here, can we put to bed the oft-quoted supply side factoid that you can tell budget deficits have no effect on interest rates because interest rates fell under Reagan, even though the budget deficit expanded? Interest rates fell because once inflationary expectations were overcome, the natural interest rate for the US was well below the 20% it reached at the start of Reagan’s presidency. But they might have fallen even farther without the budget deficits.
Then again, they might not. As far as I can tell, there’s no evidence that budget deficits have a significant effect on interest rates. One can theorize that it should, and indeed the theories make a great deal of sense. It’s just that you can’t find any actual good data to support them in the Real World. This is one of the major sources of my skepticism about Rubinomics.

Ms. Galt goes on to opine that the single greatest economic achievement of Reagan’s presidency was tax reform, and not so much marginal rate reduction as the simplification of the tax code that was enacted in the Tax Reform Act of 1986. Then, Ms. Galt views Reagan’s overall legacy:

Oh, it was not a perfect legacy. It wasn’t as sweeping as some people, like, say, me, would have liked; there were a lot of silly deductions left in, like the home mortgage interest deduction. And the Clinton administration and their accomplices in congress did their best to undo his good work, by introducing thousands of new loopholes. Though, recognizing that loopholes are damaging to the economy and the cohesion of civil society, they did at least try to mitigate the damage: they stopped calling them “loopholes” and instead referred to them as “targeted tax cuts”.
By forcing a showdown with the air traffic controllers union, Reagan helped forestall the sorts of public employee quiet riots common in Europe whenever the government suggests that maybe eight weeks vacation and retirement at 55 are quite generous enough already.
He advanced the deregulation begun under Carter, which wasn’t always good for the regulated companies, but was great for those of us who remember the rotary telephones and extortionate long distance rates of Ma Bell.
He helped bring down the Soviet Union. Oh, I agree with liberals that he didn’t do it singlehandedly, but hey, Communism and Soviet imperialism really sucked, so isn’t advancing its demise by fifteen years a pretty damn worthy accomplishment? Plus he had the guts to tell Gorbachev to tear down the Berlin wall, which was more than any of his predecessors had done.
And he pulled us out of the doldrums of the 1970’s. He got the country to stop taking Europe’s word for it that we were a bunch of rubes and know-nothings, fit for nothing except Continental security guard.
Plus, he made a bunch of movies. All in all, I think it likely that he’ll be remembered alongside Roosevelt as one of the two greatest president’s in the twentieth century. And they’ll be remembered that way not because of the events they presided over, but because they recognized an evil empire when they saw it, and they led the country into battle against it.
We should all be able to claim so much.

Amen!