Dan Mitchell wrote the following on January 11, 2009. Great insight as always Dan.
Which U.S. president ranks as America’s greatest depression fighter? Not the fabled Franklin Delano Roosevelt, since unemployment averaged 17 percent through the New Deal period (1933–1940). What banished high unemployment was the conscription of 12 million men into the armed forces during World War II. FDR actually prolonged high unemployment: he tripled taxes; he signed laws that made it more expensive for employers to hire people, made discounting illegal, and authorized the destruction of food; and he launched costly infrastructure projects like the Tennessee Valley Authority that became a drag on states receiving TVA-subsidized electricity.
America’s greatest depression fighter was Warren Gamaliel Harding. …Harding inherited Wilson’s mess — in particular, a post–World War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit. The estimated gross national product plunged 24 percent from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million to 4.9 million. Harding had a much better understanding of how an economy works than FDR.
As historian Robert K. Murray wrote in The Harding Era, the man who would become our 29th president “always decried high taxes, government waste, and excessive governmental interference in the private sector of the economy. In February 1920, shortly after announcing his candidacy, he advocated a cut in government expenditures and stated that government ought to ‘strike the shackles from industry. . . . We need vastly more freedom than we do regulation.’ ” One of Harding’s campaign slogans was “less government in business,” and it served him well. Harding embraced the advice of Treasury Secretary Andrew Mellon and called for tax cuts in his first message to Congress on April 12, 1921. The highest taxes, on corporate revenues and “excess” profits, were to be cut.
…Harding’s Secretary of Commerce Herbert Hoover wanted government intervention in the economy — which as president he was to pursue when he faced the Great Depression a decade later — but Harding would have none of it. He insisted that relief measures were a local responsibility. Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes fell from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924; for federal spending, in1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930.
Conspicuously absent was the business-bashing that became a hallmark of FDR’s speeches. Absent, too, were New Deal-type big government programs to make it more expensive for employers to hire people, to force prices above market levels, or to promote cartels and monopolies. …With Harding’s tax and spending cuts and relatively non-interventionist economic policy, GNP rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million — a reported 6.7 percent of the labor force — in 1922. So, just a year and a half after Harding became president, the Roaring 20s were underway. The unemployment rate continued to decline, reaching an extraordinary low of 1.8 percent in 1926. …While Harding can hardly be considered a champion of laissez-faire economics (he supported tariffs, after all), the pro-growth policies he implemented are directly responsible for the astonishingly rapid growth in prosperity — and widely shared prosperity — America enjoyed throughout the Roaring 20s. …Rather than follow the model of FDR — whose policies raised only Americans’ spirits — President-elect Obama ought to consider the model of Warren G. Harding, whose policies raised Americans’ standard of living, and lifted the nation itself out of a depression — before it had a chance to become Great.
My comments,
Dan is a very nice man. A lot nicer man than I am. He assumes or pretends to assume that Obama and democrats want what is best for America. I would suggest nothing is further from the truth. Democrats know FDR’s policies kept them in power for decades and it was not until 1994 that their stranglehold on power was wrenched from them. Democrats, as Barney Frank and Nancy Pelosi noted on several occasions, worship power and Keynesian economics. It’s what they are all about. Power and control over you. Obama and the democrats with the assistance of a lot of republicans, notably George Bush, are turning the United States into a socialist economy as fast as they can.
They bailed out the banks, automotive and next will be the press. Yes a state run media. This is far deeper than socialism it’s totalitarianism. The run up of debt will eventually collapse the dollar and wipe out the middle class. 401K confiscation like what was done in Argentina will wipe out personal savings.
I must give my employer credit for stopping her 401K contributions if for no other reason than her employees will rethink the investment and move the money into a less government plundering vulnerable vehicle.
Millions will be without property or rights. 1984 is about to become reality. There are few educated individuals with the power or education to combat this. All we can hope for is a Battle of Britain scenario where a few brave talented airmen successfully fought off the Third Reich. I don’t really relish doing all this research beyond my regular job. I have four kids in college and an average suburban lifestyle. But I owe it to my children and anyone else out there to report what is happening as long as I am able to.
I think Dan and most economically educated people understand what is going on. It is evident everyday in the stock market results that continue to drop after trillions in bail outs. On the positive side I will include a video comparing the flat tax verses the fair tax from the Center for Prosperity. Well done as always.
December 8th, 2009 at 1:25 am
Our country was also hit hard by the Economic Recession. At least we are seeing some signs of economic recovery now. I hope that we could recover soon from this recession.
l..*.
December 8th, 2009 at 11:58 am
Obama has a credit card for the 2010 election and will spend money to make it look like growth.
But then the bill will come due in the third and fourth quarters.
Keynesian economics never worked and it will not work today. That is just a fact of life no more than F = ma.
January 5th, 2010 at 8:13 am
I think we are also seeing some signs of recovery from the Economic Recession. Of course, we have no idea of how long it will take to completely recover, but some say it’s going to be longer than for the other recessions in decades. I also scanned an article yesterday that said business owners need a new set of tactics to do well during recovery.
January 5th, 2010 at 9:51 am
If the Democrats force growth with spending and unemployment drops look for a good old 70′s inflation kick in the pants.
April 28th, 2010 at 6:23 am
Our home business was really affected by the Economic recession, we have to cut jobs just to cover up our losses. fortunately, we have already recovered. ‘