WI: Reagan Followed Monetarism Instead of Supply-Side?

What if Ronald Reagan had followed an economic policy of Milton Friedman rather than Robert Mundell and Arthur Laffer upon assuming the Presidency in 1980?
 
We'd have a LOT less Federal Debt. One way this could happen is if he doesn't listen to Team B and begin his massive Defense buildup.
 
I don't think it would have made much difference, either in policy or in effect. Monetarism recommends:
  • Adjusting monetary policy to provide price stablity without regard to the short-term effects on unemployment or economic growth. Volker did precisely this (although he was criticized by Friedman for being too arbitrary and unpredictable in his tactical moves), and Reagan gave him the political cover he needed to stay the course.
  • Cutting nondefense government spending. Reagan tried to do this, but only got Congressional approval for a portion of his proposed cuts.
  • Cutting taxes regardless of the effect of the deficit. Reagan did this.
  • Restructuring the tax code towards a flat-rate tax with few or no deductions. Reagan tried to push for a true flat tax and did in fact get a substantial tax reform package passed (the 1986 two-tier tax package) although it fell well short of his goals.
  • Deregulation of the economy. Again, Reagan did this to the extent it was politically possible.
The one major Reagan economic/bugetary policy not supported by Monetarism is the defense buildup, but that's not really a Supply Side policy either. Both Monetarism and Supply Side consider national defense to be a legitimate part of the role of government, and both are agnostic about the proper level of defense spending.
 
Top