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To: Jacques Chitte who wrote (69846)	1/12/2009 1:27:01 AM
From: JF Quinnelly	1 Recommendation Read Replies (2) of 71178

Reagan had no intention to run deficits, and in his last message as President he said that the failure to contain deficit spending was his biggest disappointment as President. There were at least two factors he had no control over that contributed to the deficits. Reagan had cut a deal with House Speaker Tip O'Neill that called for dollar for dollar reductions in spending to match the 1981 tax cuts. Tip O'Neill agreed to the deal and then reneged on it, so there were no spending cuts. I guess you could blame Reagan for taking the word of a Democratic politician if you wanted blame Reagan, but I'm not sure that argument has legs. The other factor was the collapse of inflation as Volcker's monetary policy took effect. A gradual fall in inflation was one of the assumptions of the Reagan team, but velocity fell off a cliff and caught them by surprise. This had the effect of increasing the real cost of spending.

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