Bluefield Daily Telegraph, Bluefield, WV

Opinion

February 22, 2010

Washington in the 21st century: Leaders failed to learn from history

The brilliant economist Dr. Thomas Sowell looks back on the Great Depression: “Nothing established the idea that government intervention in the economy is essential like the Great Depression of the 1930s. The raw facts tell the story of that historic tragedy: National output fell by one-third between 1929 and 1933, thousands of banks failed, unemployment peaked at 25 percent, corporations as a whole lost money two years in a row. Prior to this time, no president had attempted to have the federal government intervene to bring a depression to an end.” Presidents Herbert Hoover and Franklin D. Roosevelt opted for government intervention and the results of that ill-advised approach are a painful part of our history.

Contrast that with the stock market crash of 1987, which was similar in size to the crash of 1929, but the recovery from it was years shorter in duration. President Ronald Reagan’s administration, in sharp contrast to the administrations of Hoover and FDR, and despite media outrage at the government’s inaction, did nothing; no bailout, no stimulus, nothing, according to Dr. Sowell.

Those two experiences have taught our elected leaders nothing. Beginning with the administration of George W. Bush and continuing with, and accelerated by, the administration of Barack Obama, we have embraced the failed policies that gave us the Great Depression and, interestingly, the same policies that brought on the financial crisis of 2008: excessive government intervention in the private economy.

On October 14, 2008, the Bush administration announced a series of initiatives to stabilize the markets, the $700 billion Troubled Asset Relief Program (TARP). Then on February 18, 2009, in Colorado, Mr. Obama signed the $787 billion — now up to $865 billion — stimulus bill.

How have these measure fared in ending the recession that began in December of 2007?

The Government Accountability Office said last October, a year after TARP was born, that it found no evidence that the program prevented a financial meltdown, nor did it stimulate banks to start lending to business again at needed levels. Although $500 billion in TARP loans have been repaid to the federal treasury, the program did not accomplish the vast majority of its goals.

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