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January 29, 2009 - The endless media narrative that this is the "worst
economy since the Great Depression", and the fear-mongering political
assertions that this time it could be even worse unless we do something
urgently such as passing the "economic stimulus" plan, is just factually
absurd. |
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This is the worst economy since Jimmy Carter. He took over a
bad economy, and made it worse. Does anybody
remember how depressing those years were? Here we go again, making
it worse. |
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Thankfully, it still hasn't come anywhere close to the disaster which he
left to Ronald Reagan, and which was then turned around within just a
few years. Almost all of the so-called "experts" in the media at
that time asserted endlessly that "Reaganomics" was sheer lunacy and
would never work. |
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get real for a moment. Today, buried in an AP story about how
terrible the fourth quarter GDP statistics were (even though they were
actually better than expected) was this little bit of real news.
"The National Retail Federation, the world's largest
retail trade group, predicts that sales will fall 0.5 percent this
year, well below last year's meager 1.4 percent gain."
Wow. A 0.5% decline in sales this year.
Last year, despite the recession which economists now officially declare
started in December 2007, actually achieved a 1.4% gain.
That means retailers are still expecting to be
doing better this year than in 2006 or prior years. Just not
as well as last year. They are having to cut back on growth plans.
Some got overextended, or have actually gone bankrupt now. It
happens every recession. During the boom years, people assume it
will just go on forever. Oops. Reality sets in, people and
businesses adjust their expectations, and they get over their mistakes.
That's how free markets work - cycle after cycle. Smart people
sometimes make bad choices. They have to find a way to get over
it. They do. It's not a national catastrophe.
Maybe I'm missing something, but that 0.5% retail
sales decline doesn't resemble what I know of the Great Depression.
It sounds like a pretty normal recession on the retail side so far.
Some had a bad Christmas season. They're worried that 2009 may be
worse. They are dealing with that risk, as usual.
There's more trouble in housing and the banking
industry and financial markets, to be sure. Their excesses this
time were really costly. Overall, however, this is not the end of
the world as we know it.
At least, not unless we panic ourselves into a larger
mess, as Hoover did. We have gone through many recessions since
his time. Some were really painful. We didn't repeat the
Great Depression - yet. Carter took us as close to it as anyone
since Roosevelt. Obama could finally trump them both. |
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What about that scary 4th quarter GDP data? OK, it went down 3.8%.
All the experts expected worse, and still expect it to be revised
downward, which may happen. That's certainly not good news, but on
the other hand, it certainly isn't anything like the Great Depression -
yet. They're saying it may even go down more than 5% this quarter.
Not good - but it did worse in 1982, and then soon turned around under
Reagan after getting pretty steadily worse with Carter's approach to the
problem. As with the Great Depression, however,
government is certainly capable of making a bad situation worse, and
seems to be striving mightily to do so as quickly as possible, with as
little scrutiny of the details as possible. |
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It's not even close to the worst year of the Carter recession, in 1982,
before the Reagan stimulus plan of major tax cuts started to have an
impact. Reagan's tax changes meant that businesses and individuals
could finally anticipate a predictable future of rising incomes and
profits rather than rapidly rising taxes and government spending in a
declining economy which couldn't afford either. |
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Here's another tidbit buried at the end of that same AP story:
"For the whole year, employment costs, including wages
and benefits, showed an increase of 2.6 percent, an all-time low for
records that go back to 1982."
This was asserted as though it was terrible news.
Wages and benefits costs didn't go up as much as in prior years.
If 2008 was the worst year, then they have been rising
pretty steadily ever since 1982, right? Perhaps that tells us
something about what worked to create growth in our economy? Maybe
we should take a closer look at what Reagan did to stop the raging
double-digit inflation of the Carter years. Maybe the recession
already started to trigger some restraint in the steady inflation of
wages and benefits. |
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Does anybody remember all the talk about the "Pickens Plan" during the
2008 election? Remember all the fear about
the "largest transfer of wealth in American history" through $140+ oil?
Guess what? The price went down to closer to $40, so that $700
billion hypothetical cost didn't happen.
It was really bad for a few months last summer, but by
the fourth quarter, this burden on the American economy was getting back
to a lower level than in recent years. Yes, oil prices will
probably go up again at some point, and that won't help our recovery
from the recession, or our long-term national security.
On the other hand, spending $819 billion now
through government, after $700 billion on TARP, should scare you far
more than all of the consumers in America making a free choice about
whether they want to spend that much for oil or not.
Consumers obviously started to make free choices to
conserve as best they could when faced with high oil prices. That
had an impact on the speculative bubble in oil prices. Few
"experts" could have been found last summer who would predict that oil
would be closer to $40 rather than $150 - $200 today.
Be careful about believing the fear-mongering
experts who now claim that spending $819 billion more, on top of the
$700 billion TARP program, is urgently needed to avert another Great
Depression. |
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about the little-noticed "Buy American" provisions in the
stimulus bill, which the Europeans and others have now noticed, and to
which they have already objected as violations of our World Trade
Organization commitments and other agreements? They are
threatening retaliatory measures. By the way,
does anybody remember when the old "Buy America" provisions from the
Great Depression era were finally eliminated? You guessed it -
under Ronald Reagan, in 1982. What a coincidence.
Does anybody remember how the Hawley-Smoot tariffs
helped to set the stage for the Great Depression? That was another
great job creation and protection idea out of Congress in response to
the great stock market crash of September and October 1929, which
Herbert Hoover signed into law in June 1930. Along with other
monetary policy mistakes, this soon helped to turn a very bad recession
into the Great Depression. The efforts to turn the economy around
through increased federal government intervention, despite good
intentions, soon helped to make matters worse. That brought in
Roosevelt and the "New Deal", which extended the Great Depression until
World War II finally ended it.
The world economy is far more interconnected today.
This type of populist policy may sound good to the steelworker unions
and other lobbying groups, but it could be a world trade disaster for
America. After all, many American jobs now rely heavily upon our
ability to sell goods and services in other countries. |
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is not the time when the federal government should be adding trillions
of dollars to the federal deficit far into the future in the hope that
it will somehow stimulate the economy enough to pay for it someday.
We already know from past experience what doesn't work, and what does
work. Going deeper and deeper into debt as a country is a large
part of what created this mess. It is not the way out of it.
Hopefully there will be some Democrats in the Senate who
won't buy this "stimulus plan" hook, line and sinker. We can't
afford to sink a weak economy. We need to focus again on what
actually works.
We should not trust the fear-mongers who are using
this weak economy as an excuse to concentrate more power and resources
in the hands of the federal government. We have to fight this
"stimulus". |
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