Debunking Clinton on Economic Recovery
September 12, 2012 2 Comments
Bill Clinton notably defended Barack Obama at the Democratic National Convention by saying that no president could have gotten the United States out of the recession in just one term. Yet he also claims Barack Obama might have been able to sort this mess out faster if it wasn’t for those darn Republicans and their obstructionist ways. Is this true?
The history of economic downturns and government reactions to them tells us otherwise. Thomas Sowell writes about this over at Townhall today. He notes that “for the first 150 years of this country’s existence, the federal government felt no great need to “do something” when the economy turned down”. Laissez-faire was the traditional rough guide in regards to economic crises before 1929. Lets compare recessions, then and now.
The first major financial crisis in America was the Panic of 1819. In his definitive work on the subject, Murray N. Rothbard writes that the federal government’s only action was to ease the terms of payment for its own land debtors. The Panic was history by 1923. That’s less than one full Presidential term, Mr. Clinton. Martin Van Buren, a highly underrated President, stayed the laissez-faire course during the Panic of 1837. That took five years to finally get over, but we wont quibble over a year or so, as Van Buren was a good fellow. Subsequent federal governments followed a similar approach, the occasional nasty exception being state governments which sometimes permitted insolvent banks to continue operating without paying their obligations.
The last of the real laissez-faire Presidents was Warren G. Harding. In the 1920–21 depression, unemployment hit 11.7 at its height. This is higher than its reached so far under Obama. Harding – the unsung hero of the day – did nothing, possibly because he was too busy boozing and fornicating. Wage rates were permitted to fall. Government spending and taxes were actually reduced significantly. This largely forgotten depression was over in one year. The Austrian School economist Dr. Benjamin M. Anderson called it “our last natural recovery to full employment.” Unemployment came to 2.4 percent in 1923.
Unfortunately, the laissez-faire tradition was abandoned after 1929 when progressive, Keynesian policies took hold of governments. This was true for both the Hoover and Roosevelt administrations. Some still perceive Hoover as a laissez-faire man, but let him tell the story in his acceptance speech for the Republican nomination in 1933:
[W]e might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system anew breath of life; nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitter end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction.
Modern studies continue to prove that the interventionist policies of Hoover and Roosevelt only prolonged the Great Depression by several years. Well into Roosevelt’s second term unemployment stood at the terrible rate of 15 percent, indicating that the much-vaunted New Deal was an utter failure. Obama is making the same mistakes, prolonging a crisis that could have been over already if men like Van Buren and Harding were in Washington today. This was proven by Reagan. According to Sowell again:
Something similar [to 1920-21] happened under Ronald Reagan. Unemployment peaked at 9.7 percent early in the Reagan administration. Like Harding and earlier presidents, Reagan did nothing, despite outraged outcries in the media.
The economy once again revived on its own. Three years later, unemployment was down to 7.2 percent — and it kept on falling, as the country experienced twenty years of economic growth with low inflation and low unemployment…
Despite demands that Mitt Romney spell out his plan for reviving the economy, we can only hope that Governor Romney plans to stop the government from intervening in the economy and gumming up the works, so that the economy can recover on its own.
Amen to that.