The Depression of 1920(!)
Friday, October 23, 2009
By John Eidsmoe
Firm Foundation
President Warren G Harding
|
My friend Thomas E. Woods, Jr., with his usual excellent insight, recently posted a column on LewRockwell.com titled “Warren Harding and the Forgotten Depression of 1920.”
You’re probably thinking, “That must be a typo; the Depression was in 1929.” Yes, there was a depression in 1929; but Tom and I are talking about the depression of 1920-21. It had the makings of a great depression; by year’s end unemployment had jumped from 4% to 12%. But by 1922 unemployment had fallen to 6.7%, and it fell further to 2.4% in 1923.
You may be wondering, “Depression of 1920? Why haven’t I ever heard of this?” Perhaps because it ended quickly—and with government taking exactly the opposite approach of President Roosevelt in the 1930s and President Obama today.
President Warren Harding didn’t propose stimulus funds, TARPs, or multi-trillion-dollar debts and deficits. He did the opposite: he slashed federal spending almost in half. Accepting the Republican presidential nomination in 1920, Harding promised:
“We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend Republican capacity. We promise that relief which will attend the halting of waste and extravagance, and the renewal of the practice of public economy, not alone because it will relieve tax burdens but because it will be an example to stimulate thrift and economy in private life.
Let us call to all the people for thrift and economy, for denial and sacrifice if need be, for a nationwide drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic. There hasn’t been a recovery from the waste and abnormalities of war since the story of mankind was first written, except through work and saving, through industry and denial, while needless spending and heedless extravagance have marked every decay in the history of nations.”
Harding saw the 1920 depression as a necessary corrective in the economic process. He let it take its course, and soon it was over.
By contrast, President Franklin D. Roosevelt instituted massive government spending, government regulation of the economy, public works, etc. And while many today credit FDR with ending the depression, the facts are that the depression continued throughout the 1930s and came to an end only with America’s entry into World War II.
In response to today’s recession, President Obama’s spending, credit expansion, deficit, debt, and government regulation dwarf anything FDR attempted. And if history is an accurate predictor, it will fail.
That doesn’t mean the recession will last forever. A recession is a corrective to economic imbalances, and it will end of its own accord. Obama’s policies will only exacerbate and prolong the recession. But when we do come out of the recession, you can be sure Obama will claim the credit.
But in fact, when the recession ends, it will be in spite of, not because of, Obama’s policies. And the precedent for irresponsible spending and heavy-handed regulation will have been set, to be followed and exceeded in the future. As Roger Garrison says, “Savings gets us genuine growth; credit expansion gets us boom and bust.”
Meanwhile, your grandchildren may well ask: “Who’s going to pay off all this debt?”
John Eidsmoe serve as legal counsel for the Foundation for Moral Law, a religious-liberties organization in Montgomery, Ala.
He is senior staff attorney on the Alabama Supreme Court, a professor at Oak Brook College of Law, and a retired lieutenant colonel in the U.S. Air Force Reserve.
NOTE: In accordance with Title 17 U.S.C. section 107, any copyrighted material herein is distributed without profit or payment to those who have expressed prior interest in receiving this information for non-profit research and educational purposes only. For further information please refer to: http://www.law.cornell.edu/uscode/17/107.shtml
|
