Barack Obama, it is said, will inherit the worst times since the Great Depression. Not to minimize the crisis we are in, but we need a little perspective here.
The Great Depression began with the Great Crash of 1929. By 1931, unemployment had reached 16 percent.
By 1933, 89 percent of stock value had been wiped out, the economy had shrunk by one-third, thousands of banks had closed, a third of the money supply had vanished, and unemployment had reached 25 percent -- among heads of households. And in those days, there was no unemployment insurance, no Medicare, no Medicaid, no Social Security, no welfare.
FDR's answer: vast federal spending, tough new regulations on business and higher taxes -- like Herbert Hoover before him, only more so.
The Depression lasted until war orders from the Allies brought U.S. industry back to life. Before 1940, not once did unemployment fall below 14 percent. In May 1939, Treasury Secretary Henry Morgenthau testified:
"We are spending more money than we have ever spent before, and it does not work. ... I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. ... I say after eight years of this administration we have just as much unemployment as when we started ... and an enormous debt, to boot."
Politically, the New Deal was a smashing success, with FDR's landslides in 1932, 1934 and 1936 virtually wiping out the GOP.
Yet, economically, the New Deal was a bust, failing utterly to restore prosperity. Despite the indoctrination of generations of schoolchildren in New Deal propaganda, that is the hard truth.
Consider, now, how Ronald Reagan responded to the economic crisis of 1980, the worst since the Depression. In the "stagflation" of that Jimmy Carter era, interest rates had reached 21 percent and inflation 13 percent.
Reagan's answer was the tight money policy of Fed Chairman Paul Volcker and across-the-board tax cuts of 25 percent, while slashing the highest rates from 70 percent to 28 percent.
While unemployment hit 10 percent in 1982 and Reagan lost 26 House seats, in 1983 the tax cuts kicked in.
From there on out, it was boom times until Reagan rode off into the sunset, having created 20 million new jobs. "The Seven Fat Years," author Robert Bartley called them.
Reagan had followed the lead of Warren Harding and Cal Coolidge, who had cut Woodrow Wilson's wartime tax rates of near 70 percent to 25 percent, resulting in "The Roaring '20s," a time of unrivaled prosperity.