In today’s radio address, Obama said economic recovery “is going to take time.” With the tax and spend policies liberals continue to push, this is actually an understatement. More accurately worded would be, “won’t happen at all.”
We are all familiar with The Great Depression, mostly because of how long it went. What’s not discussed frequently is the drastic, yet quite brief, depression of 1920.
Quick history lesson:
In 1920 the country elected Warren G. Harding as president (yes, this is right where season one of Boardwalk Empire ended). Like Obama, Harding was inheriting a TERRIBLE economy. Unemployment had sky-rocketed from 4% to 12%. GNP declined 17 percent. The stock market had lost roughly half of its value. Top tax rates were at 77%. The nation was accumulating debt at unprecedented levels.
Any of this sound familiar?
What did President Harding do? He did not implement a government stimulus package or increase the taxes on the rich to make them “pay their fair share.” Instead, Harding slashed federal spending by 50%. He reduced tax rates across the board.
The result was that in roughly 18 months, the country was out of this economic nightmare. Unemployment fell to 6% in 1922 and to 2.3% by 1923. The country was able to trim their debt by 1/3rd. In short, it kicked off the roaring twenties where many average Americans enjoyed unprecedented quality living highlighted by buying their first car, radio, and telephones.
Of course, things didn’t stay this way. As president Hoover came into office towards the end of the 20’s, he began to increase spending and taxing again, and again the US faced economic peril. The difference between 1929 and 1920, is that the government tried to tax and spend its way out of trouble the second time which resulted in the all too well known Great Depression spanning around a decade.
While slashing government spending by a full 50% in one year may not be appropriate now, one can’t deny that a more fiscally conservative approach with less spending and taxes has been EXTREMELY effective in the past, and doesn’t require the time the current president is asking of the American People.
To learn more on this 1920 Depression, this article sums up well with lots of references:
http://www.firstprinciplesjournal.com/articles.aspx?article=1322&loc=r
or here:
http://www.thefreemanonline.org/featured/the-depression-youve-never-heard-of-1920-1921/
Comments 9
I had to read this a few times over to realize that a Rostrafarian was extolling the virtues of Warren Harding.
Warren frickin’ Harding.
It’s no secret that Republicans want to take America back to pre-recession levels. It’s just that the Gilded Age is their target.
Dave,
If you can find evidence to refute the analysis, please give it, instead of a thoughtless ad hominem sneer. I expect that from democrab; it’s all s/he ever does; but you’re capable of better.
Apparently the City Beat Guy is not aware that Warren Harding is the only professional Journalist ever elected US President.
Harding was editor of his college newspaper at Ohio Central College. After graduation he worked as a printer, pressman, typesetter and reporter. With 3 friends he bought a struggling 4-page local newspaper, and together they built it into the successful “Marion Star”, one of Ohio’s most influential newspapers of that time. Harding was Publisher of the Star as he became state senator, Lt. Governor, US Senator and finally President of the USA.
Reasonable to compare the two, but this analysis gets it backwards.
The bottom dropped out of the post-war economy in 1920, similar to the dot-com bubble bursting in 2000. The crashes ran from Jan 1920-July 1921 and March 2000-October 2002. Both Warren Harding and George W. Bush passed a series of tax cuts for the rich (21, 23, 25 and 01, 03) that stimulated short term recovery. Both moves were followed by much deeper, systemic collapses rooted in bank failure, over-speculation in the stock market, and major housing problems.
Where things diverge is what later presidents did. Hoover came in and took a traditional conservative approach.
He refused to make direct payments to people because during 25% unemployment because he thought it would de-motivate them from working, and most popular discontent was rooted in the perception that Hoover was trying to filter recovery through banks and corporations.
He forced half a million Mexican immigrants out of the country by painting them as usurpers of “American” jobs and pushed volunteerism as an answer to economic problems. He refused to run a deficit, instead insisting on a balanced budget, and so didn’t invest in a significant stimulus program. If that sounds familiar, it’s because it’s the current economic plan from Washington conservatives.
Barack Obama by contrast has done explicitly the opposite. A large stimulus program was designed out of the gate centered on tax breaks, incentives, and direct assistance to individuals. Six months ago he extended tax cuts and added new reductions and exemptions, directly at odds with Hoover’s Revenue Act of 1932.
So if your point is that Obama should be like Harding and not like Hoover, congratulations and welcome to year three of your goal achieved.
Brad –
Are you accusing me of an ad hominen on Warren G Harding? This is the same Harding who reportedly said, “I am not fit for this office and should never have been here.”
http://www.usnews.com/news/history/articles/2007/02/16/worst-presidents-warren-harding
Rider turns to multiple Austrian economists who selectively draw from history for explicitly conservative publications. None address the underlying causes of the economic depression or analyze how they compare to the current recession. None seem to go beyond the next several years or address the economic contraction that occurred later on in his term.
This reminds me of anarchocapitalists who use the semi-stability Somalia’s statelessness to support an argument for anarchy, while omitting any reference to Sharia law. Or who argue that anarchy works among pirates, without addressing the whole kidnapping thing.
Sills –
I am aware that Harding was a journalist and I’m not sure of the relevance. You can be a damned good basketball reporter, but that doesn’t mean you can dunk.
Oh come now Lucas (and I guess Richard).
It is a financial crisis. What we know from the past ones is that they are painfully difficult to emerge from. NEITHER party (either the proto-Kenysians who don’t understand that current government program are really ill equiped to stimulate demand) nor the deficit hawks (someone please show me how balancing the budget matters a hill of beans to restoring “confidence” in the short term) really is offering good ideas….but that is mostly because modern economics DOESN”T have good ideas when it comes to this.
The brutal reality is that for perhaps as long as 2 decades, from the actions of BOTH national parties, the United States “enjoyed” growth fueled by an unprecendented rise in leverage. Now, with the party over and the fat Federal Reserve Chair having sung, there will be a long, painful, frustrating, and difficulty period of unwinding that leverage. Policies like the bi partisan idiocy on housing which delay that unwinding likely delay the end game. Deficit hawking is largely a side show. Proto-Kensyianism ignores the reality that most infratructure is done with mechanized machinary and raw materials IMPORTED.
The “good” news is that in the long run the unwinding and incumbent rise in savings will actually strengthen the economy. Less leverage will be a good thing. But the restructing is going to be hard.
Dave,
Ad hominem was precisely your argument against Harding. You simply repeated his name, without any attempt at refuting the post. Zero thought involved.
And Dave, you need to do more rigorous research than citing US. News for that quote attributed to Harding. Linking to a U.S. News article for that historical quote is inadequate. When did Harding say it? Where was the writer’s source? Is there a historian who endorsed the quote’s authenticity?
I think this quote is spurious, so let’s see you prove its authenticity.
Dave,
Here’s a little help with your research on that alleged Harding quote about him not being fit for the presidency. This is from a Wikipedia talk page about the lack of proper sourcing for that quote:
“This quote was mentioned prominently in the article, in the summary at the start, but with a bad source. I have looked a little bit (standard google search) but have been unable to locate an authoritative source for this quote, just several trivia lists and quote lists. Since this is a rather extreme statement for a president in office to make, I think we need a really good source here, ideally a newspaper from the time.
“As a bare minimum, we should be able to establish exactly *when* he said this and to whom, and perhaps also in what circumstances. None of the sources I found provide any background, they simply repeat the quote verbatim. As long as we cannot even pin a date on this quote, I do not believe it should be in this encyclopedia.”
–KarlFrei (talk) 11:30, 13 March 2008 (UTC)
Hope this helps.