Bill Clinton says no one could have turned the economy around in just four years- Is he correct?
Former President Bill Clinton has received many accolades recently from the right and the left concerning the economy he presided over in the 1990′s.
But even the ego maniacal Clinton told a packed house in Charlotte last week that even he couldn’t have got the country out of its economic doldrums in one term of a presidency. This gave Obama supporters and media pundits a bumper sticker slogan they may ride all the way to the November election.
… the difference this time is purely in the circumstances. President Obama started with a much weaker
economy than I did. Listen to me now. No president, no president — not me, not any of my predecessors — no one could have fully repaired all the damage that he found in just four years.
Was Clinton accurate? Is it true that no one and no policy could fix our anemic economy?
The answer of course is no.
Remember our 29th President, Warren G. Harding? Maybe you do. He is barely discussed in our classrooms.
Even a more difficult question, remember the depression of 1920-1921? Probably not. Academia from our high schools to our universities don’t acknowledge it or teach it, the media either ignores it or are totally oblivious to it and our representatives in Washington have no interest in anyone knowing about it.
This “blip” in the history of the United States is highly instructive.
Much like other depressions and recessions, including the one that started in 2007, the Federal Reserve had been inflating the money supply quite dramatically after World War I. When the Fed finally decided to raise the discount rate, the economy slowed quite a bit.
It was the middle of 1920 and production had dropped 21 percent in 12 months (worse than in 1930 after one year into the Great Depression). Unemployment was at 12 percent and the Gross National Product dropped by 17 percent.
How did Warren Harding handle the economic downturn? He did just the opposite of Herbert Hoover, FDR, George Bush and Barack Obama, instead of trying to “stimulate” the economy; he cut the budget in half.
Instead of doing what the Keynesians of that time suggested and economists like Paul Krugman say now, he attacked the depression by cutting government spending and taxation and reducing the public debt.
The government and the Fed didn’t do any of the actions we saw in the Great Depression or now; they refrained from public works spending, government deficits and inflation—the conventional wisdom as the best solutions to get out of an economic downturn.
The market was instead able to make the appropriate corrections, debt was liquidated and we took our losses.
By August 1921, the economy started over again. Unemployment was down to 6.7 percent in 1922 and 2.4 percent by 1923. Just a blip in our history…
Now you see why Bill Clinton is absolutely incorrect.
It’s only the approach that Harding chose is one that only a rare politician today would choose. Not Barack Obama (obviously), not Mitt Romney (who has no real budget cutting plan and actually wants to increase defense spending).
History does demonstrate that a totally different, a 180 degree different approach has and could fix the damage of decades of bloated government, horrible Fed policies and our welfare/warfare state have produced.