Sowell gives us another good reminder that in the case of government intervention, “less is more.” He also reminds us of the perfidy of people like Clinton and Obama who excise out of the conversation any reference to how the world worked back in the recession following the First World War, or the rebound under Reagan. It if doesn’t fit, it doesn’t exist, is their mantra. Sowell gives President Harding his due:
One of the last of the “do nothing” presidents was Warren G. Harding. In 1921, under President Harding, unemployment hit 11.7 percent — higher than it has been under President Obama. Harding did nothing to get the economy stimulated. Far from spending more money to try to “jump start” the economy, President Harding actually reduced government spending, as the tax revenues declined during the economic downturn. This was not a matter of absent-mindedly neglecting the economy. President Harding deliberately rejected the urging of his own Secretary of Commerce, Herbert Hoover, to intervene.
When you think about the recession of 1921-22 and compare it to the Great Recession exacerbated by government intervention, the contrast is quite remarkable: unemployment jumped but then abated just as quickly. The market “cleared” of the excesses brought on by the war, and then moved smartly higher. Here are the numbers:
The 11.7 percent unemployment rate in 1921 fell to 6.7 percent in 1922, and then to 2.4 percent in 1923. It is hard to think of any government intervention in the economy that produced such a sharp and swift reduction in unemployment as was produced by just staying out of the way and letting the economy rebound on its own.
“Staying out of the way.” What a concept.