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Some people are hoping that President Obama's plan will get the economy out of the doldrums and start providing jobs for the unemployed. Others are hoping that the Republicans' plan will do the trick.
Those who are truly optimistic hope that Democrats and Republicans will both put aside their partisanship and do what is best for the country.
Almost nobody seems to hope the government will leave the economy alone to recover on its own. Indeed, almost nobody seems at all interested in looking at the hard facts about what happens when the government leaves the economy alone, compared to what happens when politicians intervene.
The grand myth that's been taught to whole generations is that the government is "forced" to intervene when there is a downturn that leaves millions of people suffering. The classic example is the Great Depression of the 1930s. What most people are unaware of is there was no Great Depression until after politicians started meddling in the economy.
There was a stock market crash in October 1929 and unemployment shot up to 9% — for one month. Then unemployment started drifting back down until it was 6.3% in June 1930, when the first major federal intervention took place. That was the Smoot-Hawley tariff bill, which more than a thousand economists across the country pleaded with Congress and President Hoover not to enact.
But then, as now, politicians decided they had to "do something." Within 6 months, unemployment hit double digits. Then, as now, when "doing something" made things worse, many felt the answer was to do something more.
Both President Hoover and President Roosevelt did more—and more, and more. Unemployment remained in double digits for the entire remainder of the decade. Indeed, unemployment topped 20% and remained there for 35 months, stretching from the Hoover administration into the Roosevelt administration.
That is how the government was "forced" to intervene during the Great Depression. Intervention in the economy is like eating potato chips: You can't stop with just one.
What about the track record of doing nothing? For more than the first century and a half of this nation, that was essentially what the federal government did — nothing. None of the downturns in all that time ever lasted as long as the Great Depression. An economic downturn in 1920-21 sent unemployment up to 12%. President Warren Harding did nothing, except for cutting government spending. The economy quickly rebounded on its own.
On Aug. 31, with job creation grinding to a complete halt, U.S. Labor Secretary Hilda Solis was asked this question: "Why do you think there have been so many jobs created in the last decade in Texas?" She laughed and said, "Come again." The questioner rephrased his query, adding a citation: "The ...
Those who are impressed by words seem to think that President Barack Obama made a great speech to Congress last week. But, when you look beyond the rhetoric, what did he say that was fundamentally different from what he has been saying and doing all along? Are we to continue doing the same kinds of ...
The new conventional wisdom on 9/11: We have created a decade of fear. We overreacted to 9/11 — al-Qaida turned out to be a paper tiger; there never was a second attack — thereby bankrupting the country, destroying our morale and sending us into national decline. The secretary of ...
From now until the election in November 2012, Gov. Rick Perry may come to be known as "Governor Provocative-Language or Gov. PL" for short by Americans desperate for some actual leadership for a change. Certain Republican candidates continue to put their fingers in the air to gauge the political ...
Liberal certitudes continue to dissolve, the most recent solvent being a robust new defense of a 1905 Supreme Court decision that liberals have long reviled — and misrepresented. To understand why the court correctly decided Lochner v. New York and why this is relevant to current arguments, ...
Posted By: Ellman(1645) on 9/15/2011 | 12:52 AM ET
For decades the Left has been praising socialism and commumism and denouncing capitalism, praising Keynesianism and rejecting free market systems. Where history and facts do not support their ideologies and positions they revise, distort, or fabricate. Stop the malignant growth of government and restore the country to greatness again.
Posted By: Robert Dell(20) on 9/14/2011 | 10:12 PM ET
I wish there was more public knowledge of the SEVERE deflationary recession that began in January 1920 and lasted until July 1921. The Harding administration, under the influence of Mellon, steadily cut spending from over $6.4 billion in fiscal 1920 to under $3.3 billion in fiscal 1923--a 45 percent cut! A recovery began in August 1921 and was so robust that by the spring of 1923 unemployment had given way to a pronounced labor shortage, while industrial production reached a new peak.
Posted By: GMLOGMD(25) on 9/14/2011 | 9:02 PM ET
Why can't we get Dr Sowell into the white house? At least as economic advisor or inteligent thinking advisor. Free market works when not tampered with. The only thing the Gov can do is mess things up. Why does anyone think that an organization that produces nothing, builds nothing, creates nothing, could possibly understand how to effect business (yes i mean effect not affect) is beyond understanding. The Gov has no business in business!
Posted By: proconstitution(440) on 9/14/2011 | 8:43 PM ET
Obama is a criminal.. Every knows it. All democrats belong in jail for what they have done to america. *** all.
Posted By: czarrboro(8120) on 9/14/2011 | 6:37 PM ET
I think the Dr. missed a point here: it's too late now. Obamacare and new legislation must be dismantled. If we could go back and erase the damage done by the EPA, Dept of Ed, etc. WOW! We would HAVE to import low cost labor from Mexico and outsource low value manufacturing. I ask two things: no more regulations and let us go wild on energy. You would see GDP growth rates above 8% again. It will happen, but we must never forget what the "Progressives" have done to US.
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