When history does not suit the Liberal agenda, the Left will always follow the same strategy – they rewrite it. Whether its delusional thinking on their part or simply a belief that the majority of Americans are ignorant, politicians love to give us their version of history to solidify their questionable and unconstitutional policies.
President Obama’s address to Congress this week did just that. The president told the nation that he rejected the view “that says our problems will simply take care of themselves, that says government has no role in laying the foundation for our common prosperity. For history tells a different story. History reminds us that at every moment of economic upheaval and transformation, this nation has responded with bold action and big ideas.”
This is an unbelievably false statement with no basis in reality. In fact, history tells us just the opposite. Unless you mean “bold” tax cuts and “big” spending reductions, the use of “Bold action and big ideas” to counter an economic depression did not begin until FDR’s New Deal.
“Bold actions and big ideas” have been used to treat the symptoms of every economic recession since the 1930s and the results always end up the same, more economic misery and stagnation. Our greatest periods of economic growth and activity have always come when the government lessened its role in the economy.
Throughout the 19th and early 20th centuries, the United States faced economic depressions, called “panics” in those days, in approximate 20-year intervals – 1819, 1837, 1857, 1873, 1893, 1907, and finally the big one in 1929.
And until 1929, Washington stayed out of the economy and let the free market regulate and correct itself. Bad loans made in ignorance or greed were simply lost. If bankers mismanaged their institutions, they paid the price, and that price was being out of business. There were no government bailouts to cover mistakes and stupidity. But they knew that going in.
Capitalism is a brutal, cutthroat system, and most liberals refuse to understand it. To be successful, you must be smart, innovative, efficient, hardworking, or otherwise you will lose your shirt. Capitalism is a system for winners and achievers, a system whose rewards are great if you put forth the effort. On the other hand, socialism, to be blunt, is a system for losers. Socialism rewards the slothful, the ignorant, and those with no ideas or initiative. It rewards, to those who do nothing, handouts from the government off the backs of someone else’s hard work. It has never been the American way.
Early Americans understood this perfectly and did not look to government to close the gap between achievers and non-achievers. America was an idea, a place where you were free to pursue your own happiness, so long as you did not infringe on the rights of others. Every American has a right to pursue happiness; no one has any right to demand it.
During the early economic downturns, the federal government reacted with these ideals in mind.
President Martin Van Buren responded to the Panic of 1837 by cutting taxes and reducing government. In his annual message to Congress that year, he reminded the members that the founders “wisely judged that the less government interferes with private pursuits the better for the general prosperity.” He also began the effort to totally separate the government from banks, rather the opposite approach we have chosen today. As a result, the panic did not last nearly as long as it could have.
In 1893 another severe depression struck the nation, which many historians and economists contend was every bit as strong as the 1930s. Unemployment hit 20 percent, 16,000 businesses closed, 150 railroads went into receivership, and 600 banks went out of business. President Cleveland responded with a laissez faire approach that lessened its effects, refusing to use government programs to intervene. As a result, the depression was over quickly and did not last nearly as long as the Great Depression, though it was nearly as bad in many ways. The nation’s GNP stood at $13.3 billion in 1893 and by 1894 had dropped to $12 billion. However, by 1896 the nation had nearly regained all losses, and by the next year, 1897, had surpassed its 1893 level.
Obama went on to list the “bold action and big ideas” we supposedly embarked on in times of economic trouble. “In the midst of civil war,” he said, “we laid railroad tracks from one coast to another that spurred commerce and industry.”
Actually, this took place after the war. The vast majority of railroad track in existence in the United States was laid during the late 19th century.
Railroad corporations were the quintessential “big business” of its day, the Wal-Mart, Microsoft, and Enron of the late 19th century. They were the beneficiaries of large government subsidies but were also unbelievably corrupt and inefficient. Of the five transcontinental railroads built during that time period, only one did not end up in bankruptcy, and that was James J. Hill’s Great Northern, which operated free of government handouts. It was also the most efficient and the least expensive of the five.
And though it is true that the railroads helped spur the explosive economic growth of that time period, it was also an era of unfettered capitalism. There were almost no regulations or taxes on businesses that would hamper growth. It was this laissez faire approach, and not government aid, that caused the great economic boom of the late 19th century.
The United States went from being a second-rate economy to the greatest on earth, leading the world in manufacturing, mining, commerce, and agriculture by 1900. Deriving revenue from tariffs and excise taxes was sufficient enough for the federal government to run a budget surplus every year from 1866 to 1893, the year of the economic panic. Though this has been lost on the Left.
“In each case,” President Obama continued, “government didn’t supplant private enterprise, it catalyzed private enterprise. It created the conditions for thousands of entrepreneurs and new businesses to adapt and to thrive.” Yes, Mr. President, the government can be a catalyst, but not with government action. The catalyst early Americans used was government inaction. The more the government stayed out of the free enterprise system, the more prosperous the nation would become. Let individuals pursue their own dreams and the whole of society will benefit.
But Obama and the Democrats do not believe in any economic policies based on laissez faire capitalism. Obamanomics holds, as does its twin brother Keynesianism, that government can stimulate economic growth with spending programs, particularly deficit spending. The catalyst Obama refers to is a massive infusion of cash into the economy through spending, a recipe that has never worked and if used too much will most certainly bring on massive inflation.
During the severe recession of 1919-1920, a downturn that could have very easily plunged the country into a depression, if it wasn’t one already, President Harding and his treasury secretary, Andrew Mellon, responded by massively cutting both taxes and spending, rather than using a government “catalyst” of new programs. The top tax rate under Woodrow Wilson stood at 70 percent, but Harding cut it to 25. The federal budget also saw a cut of 40 percent. We can’t even get a cut of one percent today.
The Harding administration also reduced immigration to cut down on the number of workers available for the fewer jobs available in the market. The result was the greatest economic boom in peacetime in American history. British historian Paul Johnson notes that Harding’s response was “the last time a major industrial power treated a recession by classic laissez-faire methods.”
“Now is the time to act boldly and wisely – to not only revive this economy, but to build a new foundation for lasting prosperity.”
And finally, Mr. President, we need no “new foundation.” The old one worked just fine, as long as it was adhered to. Americans are the smartest, most innovative, creative, and hardworking people in the world. Yes, we can do it, but without government help. Earlier Americans created the greatest engine of economic growth in the history of the planet, all from a frontier wilderness without any help from government. When American know-how is unleashed, so too will be a revival of the American economy.