The Prolonged New Deal – Jared
February 3, 2009 1 Comment
President Barack Obama has proposed his economic recovery package: a massive New New Deal. The plan? Infuse billions of taxpayers dollars into the economy to attempt to speed recovery by providing money to failing businesses, who can give people work, giving the dollar more “velocity” and jumpstarting the economy.
But the legacy of the New Deal is not what most Americans think. The Wall Street Journal has presented new evidence that the New Deal prolonged the depression. Let me give you an concluding excerpt:
The main lesson we have learned from the New Deal is that wholesale government intervention can — and does — deliver the most unintended of consequences. This was true in the 1930s, when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk.
What have we learned in the last 80 years? We should have learned that “wholesale government intervention” cannot fix the problem. FDR tried it and the economy didn’t turn for the better until 1938, when he began to reverse his policies. The 1970’s were tragic for the American economy, and the reduced tax burden and dropping of price controls in the 1980’s revived the American economic machine.
We have to let the market work, to a degree. Those poorly designed regulations of the banking system should be fixed so it will not happen again. We have learned a lesson about what does and does not work. To interfere is only to prolong the crisis and I fear the reason for prolonging it is for political reasons. Economic dependency generates “power” and the middle class may be the next target.