Jolting economic change we don't need

Thomas Sowell:

Barack Obama says that we have to "jolt" the economy. That certainly makes sense, if you take the media's account of the economy seriously-- but should the media be taken seriously?

Amid all the political and media hysteria, national output has declined by less than one-half of one percent. In fact, it may not have declined even that much-- or at all-- when the statistics are revised later, as they very often are.

We are not talking about the Great Depression, when output dropped by one-third and unemployment soared to 25 percent.

What we are talking about is a golden political opportunity for politicians to use the current financial crisis to fundamentally change an economy that has been successful for more than two centuries, so that politicians can henceforth micro-manage all sorts of businesses and play Robin Hood, taking from those who are not likely to vote for them and transferring part of their earnings to those who will vote for them.

For that, the politicians need lots of hype, and that is being generously supplied by the media.

Whatever the merits of trying to shore up some financial institutions, in order to prevent a major disruption of the credit flows that keep the whole economy going, what has in fact been done has been to create a huge pot of money-- hundreds of billions of dollars-- that politicians can use to give out goodies hither and yon, to whomever they please for whatever reason they please.

No doubt we could all use a few billion dollars every now and then. But the question of who actually gets it will be strictly in the hands of Barack Obama, Nancy Pelosi and Harry Reid. It is one of the few parts of the legacy of the Bush administration that the Democrats are not likely to criticize.

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The Great Depression of the 1930s was in fact the longest-lasting of all our depressions.

Government policy in the 1930s was another bipartisan disaster. Despite a myth that Herbert Hoover was a "do nothing" president, he was the first President of the United States to step in to try to put the economy back on track.

With the passing years, it has increasingly been recognized that what FDR did was largely a further extension of what Hoover had done. Where Hoover made things worse, FDR made them much worse.

Herbert Hoover did what Barack Obama is proposing to do. Hoover raised taxes on high-income people and put restrictions on international trade, in order to try to save American jobs. It didn't work then and it is not likely to work now.

Perhaps the most disastrous of all the counterproductive policies of the federal government was the National Industrial Recovery Act under FDR, which set out to do exactly what the politicians today want to do-- micro-manage businesses.

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Some are now arguing that the Democrats want to jump over their meddling in business to the World War II engine that pulled us out of the depression by going straight to the big deficit spending. Obama is already backing off his tax hike pledge and will probably back off his anti free trade talk. Democrats are also worried about the depressing effect of their carbon energy phobia. But their meddling with the car business and with the financial sector gives hints of their control freak policies and their distrust of markets.

Sowell's point about national output is one that I have wondering about. So far, I have not seen the soup lines and the dust bowl that would confirm a depression.