The Great Depression of 1920 and why I support Mitt Romney over Barack Obama

By Steven Moen     9/27/12 7:00pm

 

Do you remember the Great Depression? I'm sure you studied it a lot in your history and economics classes. But I'm sure you are thinking of the Great Depression of 1929, not the Great Depression of 1920. You might be asking yourself: What's the Great Depression of 1920? The reason why you haven't heard of it is because the Great Depression of 1920 never happened. That's right, while there was a massive spike in unemployment in 1920 (up to 12 percent), the U.S. economy recovered very quickly and unemployment dropped back to 6.7 percent by 1921 and to 2.4 percent in 1923. How did this happen? Well, according to the Obama administration, "all economists agree" that the stimulus caused unemployment to be lower than it otherwise would be. Well, I call B.S. on that claim. Now, while it is true that some economists agree that stimulus spending helps, there are also doctors who will pitch burn-fat-while-you-sleep pills and the benefits of smoking. 

Let's look a little more at 1920. Was there a stimulus bill passed in 1920? Nope, President Warren Harding cut spending - he cut the budget in half between 1920 and 1922. Did the Federal Reserve do a long spurt of "quantitative easing," i.e. printing lots of money? No, the Federal Reserve did not even do any open market operations yet, so it couldn't have been the Fed that got us out of the depression. Was there a war that helped boost demand? No again. The three usual answers that people give for why recessions end all fall flat. 

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Look at today - we've tried a $787 billion dollar stimulus, lots of money printing (quantitative easing), and protracted wars in Afghanistan and Iraq - and our unemployment is down 1.9 percent from a peak of 10 percent in November of 2009. Getting the government out of the way of a recovery - by reducing spending and not printing vast amounts of money - works much better than the government trying to stimulate the economy by doing the opposite. 

The candidate who will be less involved in the economy is certainly Mitt Romney, and he is the better candidate for that reason. Mitt Romney has pledged to do much of what Warren Harding did: cut taxes, lower spending, and stop rapidly printing money. Romney wants to lower taxes across the board for both corporate and personal income, reduce spending to around 18-20% of GDP, and replace Ben Bernanke with someone who will enact a tight money policy. Supporting Barack Obama, a man who is unwilling to give the U.S. economy the best medicine known for a recession - benevolent neglect - is much worse for the country. Americans will stay needlessly poor and underemployed under Barack Obama. Not being able to purchase pot legally or being able to marry someone you love, while certainly important, does not matter if you can't afford to stay in your house or send a child to college. So, for these reasons, Mitt Romney is the better candidate. 

So there's my endorsement. It's bittersweet - I disagree passionately with Mitt Romney on many important issues. I'd prefer Ron Paul to Mitt Romney, just as liberals might prefer Dennis Kucinich to Barack Obama. But elections are about a choice between imperfect alternatives, and so Mitt Romney is the best choice for people who want the economy to improve, and therefore allow Americans to have the best possible quality of life. 

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