January 21, 2009 at 09:35:14

An Economy On Life Support Is Not Recovering

SAVE AS FAVORITE

VIEW FAVORITES

By Darren Wolfe (about the author) Page 1 of 1 page(s)

opednews.com Permalink

For OpEdNews: Darren Wolfe - Writer

With the government going into overdrive with all manner of so-called stimulus to revive the sick economy many statists are trying desperately to salvage the claim that President Franklin Roosevelt's (FDR) New Deal saved the economy from the Great Depression to justify similar policies today. Despite the obvious fact that the Depression was the longest in US history, people such as David Sirota persist with articles like "Fox News: "Historians Pretty Much Agree" That FDR Prolonged the Great Depression". Well, Mr. Sirota, it was pretty long.

The claim that FDR engineered a recovery is based on the fact that Gross Domestic Product (GDP) grew and unemployment dropped from 1933 to 1936. While these statements are correct they hide the fact that during that time GDP never reached 1929 levels and that unemployment stayed in the double digit range. The key question, though, is why did unemployment go up and GDP go down in 1937 and 1938?

The answer is that the economy never really recovered. The government's massive spending was not recovery, but as John Flynn put it "a palliative". By 1938,

The country had now really reached a greater crisis than in 1933. The public debt, which was 22 billion when Roosevelt took office almost all a heritage of World War IIwas now 37 billion. Taxes were more than doubled. The President had a war on against the conservatives in his party and his own cabinet was split and angry. Unemployment was several thousand more than it was in October, 1932. Roosevelt knew now he was in a crisis. And he had at his disposal nothing to fight it with save a weapon government spending which had failed and which he felt now was a palliative and not a cure.*

All of FDR's spending had failed to revive savings and business investment, without which there can be no economic growth. (See here.) To use an analogy, a patient in a coma is on life support. Machines are forcing the pumping of the heart, the inhaling and exhaling of the lungs. While this may even result in better vital signs than the patient previously had, it is far from being a recovery. Under these circumstances it should come as no surprise that the patient dies if life support is removed.

So it was for the economy during the Great Depression. When government spending slowed and taxes rose the still comatose economy took a turn for the worse. The obvious lesson for us today is that we don't want to repeat the mistakes of that era and try to spend our way to prosperity.

A better model to emulate is the recovery from the recession of 1921. President Harding cut government spending and taxes. The economy recovered quickly. Much nicer scenario, let's stick to that proven method of reviving the sick economy. We can't afford to have politicians playing pass the pork under the guise of stimulating the economy while we languish in a recession. Cut taxes and government spending now.

* "The Roosevelt Myth", pg. 122

http://theinternationallibertarian.blogspot.com/

Darren Wolfe, otherwise known as The International Libertarian, is the former Eastern Vice Chair of the Libertarian Party of Pennsylvania. He grew up in Puerto Rico and lived in Venezuela for seven years, including the first year of Chavez' rule. (more...)

The views expressed in this article are the sole responsibility of the author
and do not necessarily reflect those of this website or its editors.

Contact Author

Contact Editor

View Authors' Articles

Book Recommendations for "Depression Economic Recession "

Bernanke's money maneuvers: Federal Reserve Chairman Ben Bernanke's radical policies have prompted alarm that they might worsen our economic recession/depression.(ECONOMY): ... An article from: The New American
by Charles Scaliger

$9.95

Number of pages: 10
Publisher: American Opinion Publishing, Inc.

Recessions, depressions, and economic panics in American history: Collection of sources

Number of pages:
Publisher: University Publications of America

The Return of Depression Economics and the Crisis of 2008
by Paul Krugman

$24.95
Lowest New Price $8.50
Number of pages: 224
Publisher: W. W. Norton