This quote from a Fast Company column speaks volumes: “Optimism is over. … The layoffs, buyouts, and bankruptcies of the past year are starting to look like the good old days. Business sucks to such a degree that unbridled optimism—the kind of wild, harebrained zest to rule the world—is now just a sign that your meds aren’t working.”
No, this wasn’t written about our current recession; the columnist was responding in November 2001 to America’s post 9/11 economic challenge. While becoming a shining beacon of liberty, freedom and free-enterprise prosperity, America has had its share of difficult economic times. Some were long-lasting; some have been short-lived.
Have you heard about the great depression of 1920? How about the depression of 1946? Of course not! These difficult economic periods were short-lived and were followed by impressive periods of economic growth. There’s another reason you don’t hear about them today—the lessons learned fly in the face of President Obama’s plan for transforming America and stimulating economic growth!
In the severe economic downturn of 1920-21, there were no stimulus packages or bailing out of businesses “too big to fail.” President Warren Harding did what President Obama said can’t work. He actually cut government spending 23% and lowered income taxes for all groups. The economy righted itself and fueled the Roaring 20’s.
Instead of learning from President Harding and letting the economy right itself after the Crash of 1929, both President Herbert Hoover and FDR raised taxes, launched public works, extended emergency loans to failing businesses and lent money to states for relief programs. FDR further expanded government and initiated expensive entitlement programs. Sound familiar? Their policies didn’t save America; they extended the Great Depression.
Was Harding’s approach a fluke? President Harry Truman planned to continue many of FDR’s “New Deal” policies. Writing this year in the Journal of the American Enterprise Institute, Michael Barone noted that less than a month after the surrender of Japan, Truman “called for continued price controls, a full-employment bill, a higher minimum wage, a public- and private-housing bill, and only limited cuts in the high wartime tax rates. In December 1945 he called for national health insurance.”
As a result, Republicans road into control of both houses of Congress in the 1946 mid-term elections by riding the theme—“Had enough? Vote Republican!” Had citizens “had enough” inflation, enough high taxes, enough price controls, and enough coddling of unions with their frequent strikes? Out of control of Congress since 1930, Republicans used these simple words and promised to end controls, lower taxes, and restrict labor unions. The strategy worked: in 1946, both houses of Congress flipped.
We face a similar time today. The administration said they could keep unemployment under 8% and that their stimulus plan would create jobs. Contrary to recent claims of jobs “saved”, his stimulus plan is not working, and those ‘too big to fail’ do not include you! Had Enough?
Increasing government spending will never produce sustained prosperity. It’s time we learn from history. Every time we have cut government spending and lowered taxes, we have stimulated the private sector, produced jobs and unleashed economic growth.
In 1980 and 2001, Reagan and Bush helped turn around the economy with tax cuts. Unfortunately, corresponding spending cuts did not materialize, and the federal government just got bigger.
I’m optimistic that America will once again right its course. Our best days need not be in the past. Polls are now indicating that Republicans may be given another chance to learn from both their past successes and failures. This time they must do more than lower taxes; they must actually cut government spending before Washington drowns us in debt we can’t pay off.