Editor’s note: The following are excerpts from a Nov. 16, 1980 memo to President-elect Ronald Reagan from his Coordinating Committee on Economic Policy. Its title: “Economic Strategy for the Reagan Administration.” The memo describes an era similar to our own in its economic problems and public anxiety, laying out a strategy to address them. The complete memo can be read at OpinionJournal.com. A related editorial appears nearby.

Sharp change in present economic policy is an absolute necessity. The problems of inflation and slow growth, of falling standards of living and declining productivity, of high government spending but an inadequate flow of funds for defense, of an almost endless litany of economic ills, large and small, are severe, they are not intractable. Having been produced by government policy, they can be redressed by a change in policy.

The Task Force reports that you commissioned during the campaign are now available. They contain an impressive array of concrete recommendations for action. More than that, the able people who served on the Task Forces are available to provide further detail and backup information to you or your designees. We all want to help and you can count on enthusiastic and conscientious effort.

Your Coordinating Committee has reviewed the Task Force reports. With due allowance for some differences in view about particulars and relative importance, we have found that they offer a substantial base for action by you and the team you assemble. We focus here on guiding principles, on priorities and linkages among policy areas, and on the problem of getting action.

You have identified in the campaign the key issues and lines of policy necessary to restore hope and confidence in a better economic future:

• Reestablish stability in the purchasing power of the dollar.

• Achieve a widely-shared prosperity through real growth in jobs, investment, and productivity.

• Devote the resources needed for a strong defense, and accomplish the goal of releasing the creative forces of entrepreneurship, management, and labor by:

• Restraining government spending.

• Reducing the burden of taxation and regulation.

• Conducting monetary policy in a steady manner, directed toward eliminating inflation.

This amounts to emphasis on fundamentals for the full four years, as the key to a flourishing economy.

Guiding Principles

The essence of good policy is good strategy. Some strategic principles can guide your new administration as it charts its course.

• Timing and preparation are critical aspects of strategy. The fertile moment may come suddenly and evaporate as quickly. The administration that is well prepared is ready to act when the time is ripe. The transition period and the early months of the new administration are a particularly fertile period. The opportunity to set the tone for your Administration must be seized by putting the fundamental policies into place immediately and decisively.

By CHARLES SCHWAB Mr. Schwab is founder and chairman of the Charles Schwab Corporation

We’re now in the 37th month of central government manipulation of the free-market system through the Federal Reserve’s near-zero interest rate policy. Is it working?

Business and consumer loan demand remains modest in part because there’s no hurry to borrow at today’s super-low rates when the Fed says rates will stay low for years to come. Why take the risk of borrowing today when low-cost money will be there tomorrow?

Federal Reserve Chairman Ben Bernanke told lawmakers last week that fiscal policy should first “do no harm.” The same can be said of monetary policy. The Fed’s prolonged, “emergency” near-zero interest rate policy is now harming our economy.

The Fed policy has resulted in a huge infusion of capital into the system, creating a massive rise in liquidity but negligible movement of that money. It is sitting there, in banks all across America, unused. The multiplier effect that normally comes with a boost in liquidity remains at rock bottom. Sufficient capital is in the system to spur growth—it simply isn’t being put to work fast enough.

Average American savers and investors in or near retirement are being forced by the Fed’s zero-rate policy to take greater investment risks. To get even modest interest or earnings on their savings, they move out of safer assets such as money markets, short-term bonds or CDs and into riskier assets such as stocks. Either that or they tie up their assets in longer-term bonds that will backfire on them if inflation returns. They’re also dramatically scaling back their consumer spending and living more modestly, thus taking money out of the economy that would otherwise support growth. (more…)

By JOHN B. TAYLOR

As this election year begins, a lot of people are wondering what we can do to restore America’s prosperity and create more jobs. Republican presidential candidates are offering their ideas, and at his State of the Union message on Tuesday President Obama presented his. I believe the fundamental answer is simple: Government policies must adhere more closely to the principles of economic freedom upon which the country was founded.

At their most basic level, these principles are that families, individuals and entrepreneurs must be free to decide what to produce, what to consume, what to buy and sell, and how to help others. Their decisions are to be made within a predictable government policy framework based on the rule of law, with strong incentives derived from the market system, and with a clearly limited role for government.

Getty ImagesRonald Reagan: He and advisers such as George Shultz shunned the idea of stimulus and agreed on ?the need for a long-term point of view.? (more…)

Food prices are an important component of the living expenses of ordinary people, especially the elderly or families struggling to make ends meet. Last week the U.S. Department of Agriculture forecast that food prices will rise by 3.5%-4.5% this year, the sharpest year-to-year increase since 1978. (That year, by the way, was prelude to 1979-80 double-digit inflation, when prices at one point in 1980 were soaring at nearly 15% annually.)

Commodity futures prices for animal feed staples like corn and soybeans are riding high. Oil and gold blipped upward again last week after a hiatus that followed the end of the QE2 monetary stimulus. Overall, dollar inflation is approaching an uncomfortable 4% annually.

So what else is happening? The economy picked up a little steam in the third quarter, growing at an annual rate of 2.5% on the strength of higher consumer spending and business investment. But personal disposable income, inflation adjusted, dropped 1.7%, the first decline since the 2009 recession. The personal savings rate fell back to the recession level, a meager 4.1% of personal income. Why should anyone save, when money-market accounts yield only a skimpy half a percentage point?

What we have here looks like the early stages of stagflation. (more…)

When President Obama meets with his counterparts from other G-20 countries in Cannes later this week, American economic leadership will, unfortunately, largely be absent.

At the most recent meeting a year ago in Seoul, the G-20 rejected the president’s pleas for a deficit-increasing Keynesian stimulus and instead urged credible budget-deficit reduction and a return to sound fiscal policy. And on that trip he had to defend the activist monetary policy of the Federal Reserve against widespread criticism that its easy money was damaging to emerging-market countries, causing volatile capital flows and inflationary pressures.

With a weak recovery—retarded by new health-care legislation and financial regulations, an exploding debt, and threats of higher taxes—the U.S. is in no position to lead as it has in the past.

By contrast, in the years after World War II, the U.S. led the world in promoting economic growth through reliance on the market and the incentives it provides, the rule of law, limited government, and more predictable fiscal and monetary policy. It created a rules-based, open trading system by helping to found the General Agreement on Tariffs and Trade, which slashed tariffs multilaterally. The miraculous postwar European and Japanese recoveries came from greater adherence to these principles of economic freedom and direct support from the U.S. (more…)

Let me start this article by saying this: I confess from the start that this is a very, very passionate issue for me.  I am not a fan of Ron Paul, and I respond with passion and sometimes vitriol at times when I am confronted with Paulites (my term for those who are devout Ron Paul supporters).  I freely admit that I have an axe to grind here, but I deny that my agenda is a result of irrational or unhealthy dislike.  In fact, I am going to argue that it is all that I like about Ron Paul that has made me so passionately opposed to him.

I am writing this article for one of two categories of Ron Paul supporters: The well-meaning folks who appreciate Ron Paul’s rhetoric regarding freedom and limited government.  The other category of Ron Paul supporters, those who are consciously self-aware in their belief that America is a bad guy military bully, and needs to sit idly by in an isolationist sense as a matter of foreign policy, are not the target of this article.  I disagree with them with every ounce of of breath in my body, but I have no hope that I might be able to persuade them.  The latter group is aware of the things I am going to say in this article, and they do not care.  I am hopeful that the former group will feel that the facts I present in this piece are new information, and warrant a change in their perspective.

I am an advocate of the freedom movement in this country.  I believe, with Ron Paul, that the United States federal government has morphed into an eggregious behemoth, violating their own Constitutional jurisdiction on a daily basis.  I believe that the federal government was created by the people, for the people, and that if we do not reign in their size and jurisdiction, it will one day represent the end of the Republic (fortunately, I have every confidence that we will be successful in that endeavor, incrementally).  I have spent the last fifteen years studying economics and finance, and believe that Ron Paul has some wise things to say on the subject of a strong U.S. dollar.  I am not a pure Austrian economist, as Paul is, but I was heavily influenced by many of their leaders when I first became obsessed with the subject, and believe there is a lot to be learned from Von Mises and some of the early Austrian economists.

But my love of freedom economics and my desire for a limited, Constitutionally constrained federal government has not caused me to jump on the Ron Paul bandwagon.  In fact, and this is the most important line I will write in this article, it is my deep appreciation for where Ron Paul is right that has caused me to so emphatically reject him where he is wrong. Put differently, Ron Paul is his own worst enemy, and because I care so much for the freedom movement, I believe Ron Paul and his more extremist followers are doing irreparable harm to that very cause in our country.  How could I possibly jump on that bandwagon?

I want to start my indictment of Ron Paul where I will surely end it: With the linking of Ron Paul to the American fanatical lunatic, Lew Rockwell.  It is dangerous ground when one seeks to take down a person by simply associating him with someone else.  As we all know, it is actually a logical fallacy of the first order.  But Ron Paul is not merely “associated” with Lew Rockwell; he is Lew Rockwell.  And he makes no attempt to deny this or cover it up. (more…)