The Harding Plan: Cut spending and Get Out of the Way.

Because slashing spending during a recession causes the economy to shrink.

1921 called, they said you can't be any wronger

The 1921 recession was caused in the first place by shrinking government spending as war spending declined.

The recession was over half way through 1921! You should take a look at what actually happened.

Mellon advised that assets, liabilities and labor needed to reprice so the government did virtually nothing and the deep recession was over in 18 months!
 
Also, Sowell's unemployment figures are based off of old estimates that didn't hold up under later study. More modern research shows the peak unemployment of the recession was lower (~9% instead of ~12%) and the rate did not decline as much afterwards (~5% in 1923 instead of ~2%). Even though there were strong deflationary pressures, the modern research aligns more closely with the output data.

Show me

and please don't site Krugman or anyone else who is consistently wrong in the trillion column
 
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1921 called, they said you can't be any wronger

The 1921 recession was caused in the first place by shrinking government spending as war spending declined.

The recession was over half way through 1921! You should take a look at what actually happened.

Mellon advised that assets, liabilities and labor needed to reprice so the government did virtually nothing and the deep recession was over in 18 months!

The 1921 recession was a typical post-war demobilization slump. Same thing happened the Second World War, the Civil War, and the War of 1812.
 
Also, Sowell's unemployment figures are based off of old estimates that didn't hold up under later study. More modern research shows the peak unemployment of the recession was lower (~9% instead of ~12%) and the rate did not decline as much afterwards (~5% in 1923 instead of ~2%). Even though there were strong deflationary pressures, the modern research aligns more closely with the output data.

Show me

http://minneapolisfed.org/Research/events/1985_10-24/Romer_UnemploymentData.pdf

Before you assault it because of who the author is, it's actually a paper that's critical of the idea that post-WW2 planners were particularly effective.
 
Thomas Sowell

An Economic 'Plan'?


1. Former president Bill Clinton told the Democratic National Convention that Barack Obama has a plan to rescue the economy, and only the fact that the Republicans stood in his way has stopped him from getting the economy out of the doldrums.

2. From all this, and much else that is said in the media and on the campaign trail, you might think that the economy requires government intervention to revive and create jobs. It is Beltway dogma that the government has to "do something."

3 History tells a different story. For the first 150 years of this country's existence, the federal government felt no great need to "do something" when the economy turned down.

Over that long span of time, the economic downturns were neither as deep nor as long lasting as they have been since the federal government decided that it had to "do something" in the wake of the stock market crash of 1929, which set a new precedent.

4. One of the last of the "do nothing" presidents was Warren G. Harding. In 1921, under President Harding, unemployment hit 11.7 percent -- higher than it has been under President Obama. Harding did nothing to get the economy stimulated. [/B

5. ]Far from spending more money to try to "jump start" the economy, President Harding actually reduced government spending, as the tax revenues declined during the economic downturn.

6. The 11.7 percent unemployment rate in 1921 fell to 6.7 percent in 1922, and then to 2.4 percent in 1923. It is hard to think of any government intervention in the economy that produced such a sharp and swift reduction in unemployment as was produced by just staying out of the way and letting the economy rebound on its own.

7. Something similar happened under Ronald Reagan. Unemployment peaked at 9.7 percent early in the Reagan administration. Like Harding and earlier presidents, Reagan did nothing, despite outraged outcries in the media.

8 The economy once again revived on its own. Three years later, unemployment was down to 7.2 percent -- and it kept on falling, as the country experienced twenty years of economic growth with low inflation and low unemployment.

An Economic 'Plan'? - Thomas Sowell - Page 1

The Harding Plan: Cut spending and Get Out of the Way.


Reagan increased spending while cutting taxes. That imbalance was effectively stimulus spending.

To compare now to 1921 is preposterous.
 

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