President Obama started with a much weaker economy than I did. No President – not me or any of my predecessors could have repaired all the damage in just four years.
Between 1918-1920, inflation touched 20% and the post-war economy looked grim. In response, by June, 1920, the New York Federal Reserve Bank had increased the discount rate to a record 7%. When Warren Harding became president in March 1921, unemployment had tripled to 12%. Gross National Product (GNP) had plummeted 17% and Harding found himself under tremendous pressure to initiate massive government intervention to stave off a financial collapse. Some of that pressure was coming from his Secretary of Commerce (and future president), Herbert Hoover.
...Defying conventional wisdom, Harding slashed taxes and cut federal spending in half. Rather than propping up failing businesses and policies, he forced credit and financial markets to restructure to current conditions, encouraged businesses to reduce production costs and relied on the free markets to reset asset values and investment allocations. Without government intervention, the economy responded quickly and began to rally during the summer of 1921. A year later the unemployment rate had retraced to 6.7% and dropped to 2.4% by 1923.What did he do? He fixed the economy in two years, by letting the free markets correct without government intervention. TWO YEARS. He got out of the way, and let people run their own businesses.
Huh. That sounds like the cold hard calculations of a raaaaaacist Republican who hates people, hates the poor, and only wants to make the rich richer, doesn't it?
All Barack Obama has done is to prolong the recession. That's all Keynesian economics does! Witness what Franklin Roosevelt did, with his "New Deal" policies, via The Wall Street Journal:
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.They were trying to be more like Europe, giving more power to the unions:
By the late 1930s, New Deal policies did begin to reverse, which coincided with the beginning of the recovery. In a 1938 speech, FDR acknowledged that the American economy had become a "concealed cartel system like Europe," which led the Justice Department to reinitiate antitrust prosecution. And union bargaining power was significantly reduced, first by the Supreme Court's ruling that the sit-down strike was illegal, and further reduced during World War II by the National War Labor Board (NWLB), in which large union wage settlements were limited by the NWLB to cost-of-living increases. The wartime economic boom reflected not only the enormous resource drain of military spending, but also the erosion of New Deal labor and industrial policies.Keynes doesn't work. Neither did FDR's policies. Neither have Obama's. Instead of turning the economy around, he has delayed economic recovery with policies that seem to be right out of the Roosevelt text book.
Listen to John Maynard Keynes, (who seems to be the central inspiration for the current American government's economic policies) at the end of his life:
"I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago."The invisible hand that he's talking about is the free market's ability to correct itself. The more the government intervenes, the longer the recovery. Even Keynes seems to realize that the free market is a powerful force.
Let people decide how to reckon with their business. Let them make the adjustments needed to make a profit and thereby hire more and more people. They know better than a group of men hundreds of miles away.
Warren G. Harding knew this.