1 President Reagan, in his final report on the state of the economy, took credit today for 'an unparalleled period of peacetime prosperity' and said a tax increase could undermine his legacy.
2 Reagan's eighth and final economic report says that the stagflation -- high inflation coupled with slow growth -- of the 1970s has given way during his tenure to the longest economic expansion since the 1960s and the lowest unemployment rate in 14 years.
3 'Today, it is as if the world were born anew,' the president said in a nine-page introduction to this year's report, prepared by his Council of Economic Advisers.
4 'By reducing taxes and regulatory bureaucracy, we have unleashed the creative genius of ordinary Americans and ushered in an unparalleled period of peacetime prosperity,' he said.
5 Although the report credited the administration with favorable economic developments, it sought to minimize the importance of the U.S. budget and trade deficits and it placed the blame for the worst year for bank and savings institution failures elsewhere.
6 Also, Democrats point out that Reagan's military buildup had the effect of running the economy on a wartime footing.
7 His deficit spending, they say, had the effect of creating prosperity now at the expense of future generations, who will have to pay the bill.
8 Beryl W. Sprinkel, the president's chief economic adviser, said the new report was aimed at placing the Reagan record in the context of post-World War II economic history.
9 He said Reagan was the first president since Harry Truman to leave office with both lower unemployment and inflation rates than when he took office.
10 Unemployment dropped from 7.6 percent in 1981 to 5.5 percent in 1988 and consumer price inflation from 10.3 percent to 4.4 percent.
11 After suffering a sharp recession in the beginning of Reagan's term, the country in October finished its sixth year of economic expansion, a record for peacetime, but short of the nearly nine-year expansion during the Vietnam War.
12 'The length, strength and resilience of this expansion are ample testimony to the wisdom of the policies that we have pursued,' Reagan said.
13 The president's report said the budget deficit, as a percentage of the economy as measured by the gross national product, has shrunk from 5.2 percent in 1985 to 3.2 percent in 1988.
14 And, Reagan said that attempting to shrink the deficit with tax increases would sap economic growth.
15 'The large budget deficit that this nation faces is not a result of too few taxes, but too much spending.
16 All that is required to reduce the deficit is to halt, or moderate, the increase in expenditures,' Reagan said.
17 Sprinkel, in projections in the report, predicted continued GNP growth of 3.2 percent this year and at least that each year through 1994.
18 But, he said that was predicated on the assumption that taxes would not rise and that the Federal Reserve Board, which has sought growth of 2 percent to 2.5 percent as a means of holding inflation in check, would keep interest rates low enough to foster growth.
19 The report said monetary policy so far has produced solid results, but it criticized the central bank for apparently basing its policy on short-term economic developments rather on long-term goals for the growth of the money supply.
20 The report also said, in effect, that the U.S. trade deficit, which hit a record $170 billion in 1987, was caused by the strength of the American economy.
21 Low inflation and high growth encouraged foreign investors to drive up the value of the dollar.
22 That in turn made foreign goods cheaper in the United States and American goods more expensive overseas.
23 It said the U.S. status as a net debtor has been greatly exaggerated in new accounts, partly because most measures underestimate the value of U.S. holdings abroad.
24 Foreigners hold only about 3.1 percent of U.S. assets, it said.
25 Banks and S & L failures, which in 1988 reached post-Depression records of 221 and 217, respectively, stem from improper incentives in the regulatory system, the report said.
26 It recommended reducing federal deposit insurance from its current level of $100,000 per account to encourage depositors and thus bank and S & L owners to be more cautious.
27 It said if reforms recommended in 1984 by a panel chaired by Vice President George Bush had been adopted, current bank and S & L problems 'would probably be much more manageable.'
28 Congress, ignoring one the recommendations, lowered the amount of investment money, or capital, S & L owners have to place behind public deposits, it said.

Reagan ' s eighth and final economic report says that the stagflation - - high inflation coupled with slow growth - - of the 1970s has given way during his tenure to the longest economic expansion since the 1960s and the lowest unemployment rate in 14 years .
given way
What measures did Reagan's administration take in order to cause this change?