The Institute of Economic Affairs in Britain has a new paper on the role of government in economic contractions in the United States, noting the interventions policies of Hoover and FDR, mistakes being repeated by Bush and Obama. (Click here for the full 144-page report)
Presidents Hoover and Roosevelt exacerbated the depth and duration of the economic downturn by fiscal policies harmful to the private sector – wealth-destructive tax increases, socialist increases in government spending and dangerously rising budget deficits – as well as by interventionist industrial and labour-market policies modelled on those of fascist Italy.
As our monograph shows, President George W. Bush learned all the wrong lessons from that historical experience. From 2001 onwards, his administration, together with the Greenspan-Bernanke Federal Reserve Board, pursued crudely expansionist Keynesian fiscal and monetary policies that fuelled stock-market and housing-market bubbles similar to those of 1929. When the Federal Reserve belatedly tightened monetary policy in 2007, the bubbles burst, and economic contraction quickly followed. Like Hoover before him, Bush and the US Congress reacted by dramatically increasing the level of government intervention and by resorting to a policy of overt budget deficits.
Like FDR before him, President Obama has ratcheted up the Bush doctrine, increasing budget deficits to levels unheard of since World War II, and pursuing socialist economic policies – trade protection, nationalisation of banks, nationalisation of automobile companies, nationalisation of health-care, an unconstitutional invasion of private contracts, an expansion of union power, and economically inefficient environmental policies – that are all wealth-destructive.
Arnold Kling also had a related piece on The American this week titled Regulation and the Financial Crisis: Myths and Realities.
For more on the financial crisis, the Winter 2009 Cato Journal had a number of articles; there is a copy in circulation in the Commonwealth Foundation (men’s) reading room.