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As the 1970s showed us, inflation can cripple an economy. 4% growth in GDP is nothing when inflation is running at 13.5%. One of the great things President Reagan accomplished was the removal of inflation, especially in an expanding economy—an impossibility to Keynesians. Federal Reserve Chairman Paul Volcker, with the support of President Reagan, pursued "tight money" policies that made borrowing harder as inflation went up, and easier as inflation eased, thus breaking the borrow and spend cycle of the 1970s aka "stagflation".

The below table charts inflation from 1978-91, and breaks out the components of the CPI. The second table shows the annual change in CPI and PPI.

Reagan's dogged pursuit of inflation was achieved through work at home as well as abroad. On the home front his tax policies encouraged domestic production of oil and gas to help lower prices. Deregulation in the transportation and communication industries brought lower prices there as well. Through adroit foreign policy he convinced the Saudi's to increase oil production, thus undercutting OPEC's power to influence oil prices (as well as weakening the Soviet Union, which relied on oil exports for hard currency).

The tight money policies of the Federal Reserve choked off the inflationary debt spirals and the cleanup of the banking industry helped restore stability to home financing.

As the CPI table shows, the results of Reagan's policies were dramatically lower commodity prices.

Source: Table 739, American Almanac, p 469 (1993 ed)

Consumer Price Indexes--Percent Change in Major Groups: 1978-91
Year	All items	Energy	Food	Shelter	Apparel and Upkeep	Transpor- tation	Medical Care	Fuel Oil	Elec- tricity	Utility gas	Tele- phone	All Commod- ities
1978	7.6	6.3	9.9	10.2	3.6	4.6	8.4	5.9	7.6	10.0	1.1	7.2
1979	11.3	25.1	11.0	13.9	4.3	14.3	9.2	40.5	7.7	16.0	-0.3	11.3
1980	13.5	30.9	8.6	17.6	7.1	17.9	11.0	39.0	15.5	19.2	2.5	12.3
1981	10.3	13.6	7.8	11.7	4.8	12.2	10.7	22.3	15.0	14.0	8.9	8.4
Mean	10.5	16.1	9.2	13.1	4.8	10.9	9.8	21.4	10.8	14.4	2.3	9.6
1982	6.2	1.5	4.1	7.1	2.6	4.1	11.6	-2.1	9.9	19.9	10.2	4.1
1983	3.2	0.7	2.1	2.3	2.5	2.4	8.8	-8.1	3.2	16.6	6.4	2.9
1984	4.3	1.0	3.8	4.9	1.9	4.4	6.2	2.1	6.5	0.8	8.4	3.4
1985	3.6	0.7	2.3	5.6	2.8	2.6	6.3	-4.0	3.4	-0.7	3.9	2.1
Mean	4.2	0.9	2.9	4.6	2.4	3.3	7.9	-3.1	5.1	8.8	6.8	3.0
1986	1.9	-13.2	3.2	5.5	0.9	-3.9	7.5	-21.7	1.4	-4.9	4.9	-0.9
1987	3.6	0.5	4.1	4.7	4.4	3.0	6.6	2.3	-0.4	-4.6	-0.6	3.2
1988	4.1	0.8	4.1	4.8	4.3	3.1	6.5	0.0	1.4	-0.6	-0.4	3.5
1989	4.8	5.6	5.8	4.5	2.8	5.0	7.7	5.9	2.9	2.8	1.0	4.7
Mean	3.4	1.8	4.2	4.9	2.6	1.7	7.1	-4.0	1.3	-1.9	1.2	2.6
1990	5.4	8.3	5.8	5.4	4.6	5.6	9.0	22.8	2.4	0.2	0.4	5.2
1991	4.2	0.4	2.9	4.5	3.7	2.7	8.7	-6.3	3.7	1.2	1.7	3.1
Mean	4.8	1.8	4.1	4.9	4.1	3.9	8.8	7.3	3.0	0.5	0.8	4.0
Year	All items	Energy	Food	Shelter	Apparel and Upkeep	Transpor- tation	Medical Care	Fuel Oil	Elec- tricity	Utility gas	Tele- phone	All Commod- ities

As you can see with the table to the right, the change during the four Carter years is 0.4, while the change over the eight Reagan years is three times less than that.

Purchasing Power of the Dollar: 1978-1991 Year PPI CPI 1978 1.433 1.532 1979 1.289 1.380 1980 1.136 1.215 1981 1.041 1.098 1982 1.000 1.035 1983 0.984 1.003 1984 0.964 0.961 1985 0.955 0.928 1986 0.969 0.913 1987 0.949 0.880 1988 0.926 0.846 1989 0.880 0.807 1990 0.839 0.766 1991 0.822 0.734 Notes: Excludes Alaska and Hawaii. PPI, 1982=$1.00; CPI, 1982-4=$1.00 Source: Table 737, American Almanac, page 468 (1993 ed)