Leave the Economy Alone


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Some people are hoping that President Obama’s plan will get the economy out of the doldrums and start providing jobs for the unemployed. Others are hoping that the Republicans’ plan will do the trick.

Those who are truly optimistic hope that Democrats and Republicans will both put aside their partisanship and do what is best for the country.

Almost nobody seems to be hoping that the government will leave the economy alone to recover on its own. Indeed, almost nobody seems at all interested in looking at the hard facts about what happens when the government leaves the economy alone, compared to what happens when politicians intervene.

The grand myth that has been taught to whole generations is that the government is “forced” to intervene in the economy when there is a downturn that leaves millions of people suffering. The classic example is the Great Depression of the 1930s.

What most people are unaware of is that there was no Great Depression until AFTER politicians started intervening in the economy.

There was a stock market crash in October 1929 and unemployment shot up to 9 percent — for one month. Then unemployment started drifting back down until it was 6.3 percent in June 1930, when the first major federal intervention took place.

That was the Smoot-Hawley tariff bill, which more than a thousand economists across the country pleaded with Congress and President Hoover not to enact. But then, as now, politicians decided that they had to “do something.”

Within 6 months, unemployment hit double digits. Then, as now, when “doing something” made things worse, many felt that the answer was to do something more.

Both President Hoover and President Roosevelt did more — and more, and more. Unemployment remained in double digits for the entire remainder of the decade. Indeed, unemployment topped 20 percent and remained there for 35 months, stretching from the Hoover administration into the Roosevelt administration.

That is how the government was “forced” to intervene during the Great Depression.

Intervention in the economy is like eating potato chips: You can’t stop with just one.

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  • The Infidel

    If that wasn't so true it would make a brilliant comedy sketch. every job created by a govt ie: govt employee = liability, some of those jobs are important like the millitary, but for the most part those jobs are not much more than expenses which are paid for by the tax paying public.

    If govts really are interested in creating long term jobs, they need to sit down and figure out which laws THEY have passed which have reduced a business's ability to operate and employ people. here's a hint, the biggest employers out there are those who employ 10 or less people, doesn't sound very exciting but its the truth. Cut the red tape and regulation and you will see business boom and employment opportunities pop up everywhere. that is if there are still any entrepeneur's left who have not been driven offshore.

  • ebonystone

    "People who say that Barack Obama​ cannot be re-elected with unemployment at its current level should take note that Franklin D. Roosevelt was elected a record four times, despite two consecutive terms in which unemployment was never as low as it is today."

    A sobering rejoinder to those conservatives who claim that Obama is a failure, and that left-liberalism has collapsed. FDR was a failure too, but he kept getting re-elected.

  • Anamah

    Thanks Mr. Sowell. We must be alert right now to stop this madness!!! Even with a president who each time opens his mouth is for the making of an op campaign and leaving his bluff for everyone to enjoy. At the same time all parameters continue going to the red and the country is entering in the darkness and masochist depression by choice.

  • Phil Robb

    Why isn't Thomas Sowell invited more often to appear on TV, especially Fox TV. Bill
    O'Reilly is okay but he is not a free-market economist. He invites goofy economists like
    Ben Stein to appear, as well as many other liberal politicians and commentarors.

    Dr. Sowell or Dr. Walter Williams should be on a least one Fox show, O'Reilly, Cavuto,
    Van Susteren, Hannity etc. at least twice a week.

    I am tired of hearing Carl Rove, Juan Willams, Dennis Miller and other guests who know
    nothing about economics.

    Phil

  • Raymond in DC

    As that famous line goes, "Don't just do something. Stand there!" And rather than talking about working with the administration to pass a bill, their attitude should be, "Haven't they done enough damage?"

    The current package also contains numerous political traps for the Republicans, one of which concerns how it's to be "fully paid for". It's by taxes, of course, and "closing loopholes for the rich". When Republicans reject that, his retort will be "OK, *you* decide how to pay for it!", thus putting *them* on the spot.

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