I’ve been teling you since… well, forever, that FDR made things worse not better… So along comes Harold Cole and Lee Ohanian at The Wall Street Journal this morning:
The New Deal is widely perceived to have ended the Great Depression, and this has led many to support a “new” New Deal to address the current crisis. But the facts do not support the perception that FDR’s policies shortened the Depression, or that similar policies will pull our nation out of its current economic downturn.
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Why wasn’t the Depression followed by a vigorous recovery, like every other cycle? It should have been. The economic fundamentals that drive all expansions were very favorable during the New Deal. Productivity grew very rapidly after 1933, the price level was stable, real interest rates were low, and liquidity was plentiful. We have calculated on the basis of just productivity growth that employment and investment should have been back to normal levels by 1936. Similarly, Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935.
So what stopped a blockbuster recovery from ever starting? The New Deal. Some New Deal policies certainly benefited the economy by establishing a basic social safety net through Social Security and unemployment benefits, and by stabilizing the financial system through deposit insurance and the Securities Exchange Commission. But others violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels. All told, these antimarket policies choked off powerful recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.
This is, of course, merely one more repetition of the facts surrounding FDR and his anti free market meddling. The real facts, of course. Not the ones fed us by the government school teachers who worship on the altar of FDR. The fact is (And I say this yet again) the governmental, anti-free market ‘solutions’ that he forced down America’s throat in a time of crisis, were exactly the wrong direction to go. They ended up doing more harm than good.
And the sad fact is, we are still suffering from depression era governmental interference in the form of laws… Anti- free market laws, which still hold back our economic growth capabilities today. The saddest part of all is, we have somebody in the White House who doesn’t understand any of that. The policies he’s pushing, are pointing us toward a new depression.
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