Back in 1920-21, there was a sharp economic downturn, with unemployment spiking to 11.7 percent. President Warren G. Harding did nothing, except for cutting government spending. Yet the economy quickly recovered and annual unemployment rates ranged from a high of 6.7 percent to a low of 1.8 percent in the rest of the decade.
In the mid-1940s, as World War II neared its end, Keynesian economists were frantically trying to come up with postwar plans to prevent massive unemployment when 12 million people were to be discharged from the military and millions of civilians would lose their jobs when plants producing military supplies shut down.
Two things prevented those wonderful Keynesian plans from being put into operation. First, the atomic bomb brought the war to an end much sooner than anyone expected. Secondly, the Republicans got control of Congress, producing the "do-nothing 80th Congress" that President Harry Truman excoriated during his 1948 election campaign.
In short, plans for vastly expanded government intervention were thwarted -- and the "problem" that such intervention was supposed to solve did not materialize. There was a G.I. Bill of Rights for returning military veterans but this was a fraction of what liberal Keynesians had been contemplating.
Anticipating postwar employment problems, former Vice President Henry A. Wallace wrote a book titled "60 Million Jobs," advocating sweeping government interventions to achieve this otherwise unattainable goal. Wallace's interventions never took place, but the free market created 60 million jobs anyway.
A stock market crash in 1987 broke some records set in 1929. But Ronald Reagan did nothing, despite howls from the media, and the economy recovered -- leading to 20 years of prosperity.
Obama may yet be re-elected, as a result of gridlock.