Did Stimulus And Bank Bailouts Save Us From Another Great Depression?


How many times have you heard in the past five years that the massive federal spending on stimulus and bank bailouts saved us from the next Great Depression? It’s probably too many to count. I guess the meme works politically, considering that President Obama was reelected in 2012 despite a consistently sluggish economy. Hopefully voters by this point have moved beyond the “it could have been worse” mentality and are starting to ask why it isn’t getting better. Either way, it’s important to point out that maybe all of that government spending didn’t prevent things from getting worse. Maybe it’s even possible that it prevented the economy from rebounding.

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That’s the point of a recent article by Stephen Moore at the Heritage Foundation.

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We let the left write the history books on the Great Depression, and 70 years later it’s an Aesop Fable. Most Americans, my 12-year-old included — are taught that FDR’s New Deal rescued us from the Great Depression and moved millions of Americans out of misery.

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Actually, as Amity Shlaes shows in her classic book “The Forgotten Man,” nearly every government regulatory bureau and spending program only lengthened the Depression and disrupted the normal healing powers of a free economy.

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Eight years after the New Deal was launched, the unemployment rate was still in double digits, and it was not until the start of World War II — when millions of young men were put in military uniform as the nation mobilized for a global war — did the Depression end. These basic facts somehow get twisted into the enduring fiction that the New Deal worked.

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Which brings us to the Great Recession in 2008 and its aftermath.

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What is highly inconvenient for the left apologists for the Obama blitzkrieg of government programs and debt in 2009 and 2010 is that at the start of his presidency, he did lay out a counterfactual of what would have happened without the deluge of federal spending and debt.

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Here’s the punch line. According to the White House’s own calculations, the economy would have been better off today if the government had done nothing instead of spending and borrowing $6 trillion.

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The unemployment rate without the stimulus was expected to be 5% today. Instead it is 6.3% and in reality closer to 10%.

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Another way to put this is that if the labor force had not declined and we had the 5% unemployment rate Obama says we would have had without the stimulus, there would be 5 million more Americans working today.

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Please be sure to read the whole thing, and share it with your friends. It’s important to get the facts out there. Letting the left write economic history (or any history) is a very bad idea.

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Also, if you haven’t read “The Forgotten Man” by Amity Shlaes, I can’t recommend it enough. There are few books on economic history that are so well written. I just checked Amazon and an illustrated edition is now available. I’m thinking about buying this new edition myself to assist me in countering what my kids learn in school.

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Coolidge looks good too, but I haven’t read it.

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Update: Dianny’s latest rant is kind of related and worth taking the time to read. This picture sums it up perfectly.