Thomas Sowell: ". . .if the economy has been rebounding on its own for more than 150 years, the question is why it has been so slow to recover under Obama?"
An Economic 'Plan'?
By Thomas Sowell
Former president Bill Clinton told the Democratic
National Convention that Barack Obama has a plan to rescue the economy,
and only the fact that the Republicans stood in his way has stopped him
from getting the economy out of the doldrums.
From all this, and much else that is said in the media and on the
campaign trail, you might think that the economy requires government
intervention to revive and create jobs. It is Beltway dogma that the
government has to "do something."
History tells a different story. 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. Over that long span of time,
the economic downturns were neither as deep nor as long lasting as they
have been since the federal government decided that it had to "do
something" in the wake of the stock market crash of 1929, which set a
One of the last of the "do nothing" presidents was Warren G. Harding.
In 1921, under President Harding, unemployment hit 11.7 percent --
higher than it has been under President Obama. Harding did nothing to
get the economy stimulated.
Far from spending more money to try to "jump start" the economy,
President Harding actually reduced government spending, as the tax
revenues declined during the economic downturn.
This was not a matter of absent-mindedly neglecting the economy.
President Harding deliberately rejected the urging of his own Secretary
of Commerce, Herbert Hoover, to intervene.
The 11.7 percent unemployment rate in 1921 fell to 6.7 percent in
1922, and then to 2.4 percent in 1923. It is hard to think of any
government intervention in the economy that produced such a sharp and
swift reduction in unemployment as was produced by just staying out of
the way and letting the economy rebound on its own.
Bill Clinton loudly proclaimed to the delegates to the Democratic
National Convention that no president could have gotten us out of the
recession in just one term.
But history shows that the economy rebounded out of a worse
unemployment situation in just two years under Harding, who simply let
the market revive on its own, as it had done before, time and time again
for more than a century.
Something similar 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
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.
The Obama party line is that all the bad things are due to what he
inherited from Bush, and the few signs of recovery are due to Obama's
policies beginning to pay off. But, if the economy has been rebounding
on its own for more than 150 years, the question is why it has been so
slow to recover under the Obama administration.
The endless proliferation of anti-business interventions by
government, and the sight of more of the same coming over the horizon
from Barack Obama's appointees in the federal bureaucracies, creates the
one thing that has long stifled economic activity in countries around
the world -- uncertainty about what the rules of the game are, and the
unpredictability of how specifically those rules will continue to change
in a hostile political environment.
Both history and contemporary data show that countries prosper more
when there are stable and dependable rules, under which people can make
investments without having to fear unpredictable new government
interventions before these investments can pay off.
A great myth has grown up that President Franklin D. Roosevelt saved
the American economy with his interventions during the Great Depression
of the 1930s. But a 2004 economic study concluded that government
interventions had prolonged the Great Depression by several years. Obama
is repeating policies that failed under FDR.
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.
Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.
FDR's own Secretary of the Treasury, Henry Morgenthau Jr., architect of
the New Deal, admitted its failure in a statement to Democrats on the
Ways and Means Committee on May 9, 1939:
“We have tried spending money. We are spending more
than we have ever spent before and it does not work. I want to see this
country prosperous. I want to see people get a
job. I want to see people get enough to eat. We have never made good on
our promises. I say after eight years of this Administration we have
just as much
unemployment as when we started. … And an enormous debt to boot!”
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