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On the eve of Barack Obama's inaugural speech, with a tough economic downturn and the ongoing threat from global terrorism, perhaps it is useful to recall Ronald Reagan's first inaugural address, delivered on Jan. 20, 1981.

Reagan faced a terrible economy, too, and the growing Soviet threat loomed large. Spirits at home were low then, just as they are today. Problems seemed insurmountable then, just as many believe they are today.

Early in his speech, Reagan set it all out: "These United States are confronted with an economic affliction of great proportions." He then defined the central problem: "We suffer from the longest and one of the worst sustained inflations in our national history. It distorts our economic decisions, penalizes thrift, and crushes the struggling young and the fixed-income elderly alike. It threatens to shatter the lives of millions of our people."

Media commentators regularly compare the current downturn with the Great Depression, which seems like a big stretch. And there's a good chance Reagan was dealt a much tougher hand than the one Obama is holding today.

For one thing, inflation today is zero. Back in Reagan's time it was double-digits. Interest rates today are historically low. In Reagan's day, they were 15 percent to 20 percent. We have suffered a tremendous oil shock, as did Reagan. But today's shock has completely reversed. And while today's recession is over a year old, Reagan inherited a recession that began in 1979 and didn't end until late 1982.

Obviously, we now have the housing problem and the bank credit crunch. But some of that was present in Reagan's challenge, too. And a recent study from the Minneapolis Fed shows that several measures of output and employment haven't come close to the severe levels reached during many post-World War II recessions, much less the Great Depression.

Rising to these challenges, Reagan gave his Fed chairman, Paul Volcker, the political ground to stand on to slay inflation with tough monetary restraint and a strong dollar. It was a signature achievement, and it opened the door to more than 25 years of unbelievable prosperity and wealth creation. Reagan also fingered excessive taxes as a chief recessionary factor. His second great achievement was dropping the top marginal tax rate on individuals from 70 percent to 28 percent.

It's interesting how Obama has also cast himself as a tax-cutter, even though he's not slashing marginal tax rates. He instead opts for tax credits. But there's a similarity here to Reagan. So far, we don't know if Obama will repeal the Bush reductions in marginal tax rates on investment, but he seems to be leaning against it (even as House Speaker Nancy Pelosi wants immediate repeal).

One inaugural line of Reagan's in some sense encapsulates his philosophy: "In this present crisis, government is not the solution to our problems; government is the problem." It arguably is the most famous line of the speech. Fifteen years later, in a State of the Union message, President Bill Clinton said, "The era of big government is over." Yet Barack Obama has said that only government can solve our current economic problems. Will he say as much in his inaugural address, and will it represent a complete reversal of the past three decades?

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