Recession and Production

There has been much debate over the past months about how an economy best recovers from a recession. It is clear that President Obama and Congress believe the answer is to simply spend our way out of it. The argument goes that by government spending money it will act as a catalyst that will ignite our economic engine once again. I reject that theory entirely. I do not believe we can spend our way out of a recession, because it has never worked before. The answer, then? We must produce our way out of a recession.

Now let me be clear. Producing our way our of a recession necessarily involves a certain amount of spending. But that spending has to a painful necessity, with a clear purpose. The spending has to be directed towards investments that are capable of growing on their own (this is important), and add to the utility of the people. For example, investing in alternative energy is a terrible idea, because none of these industries have reached the point to be self sustained without government subsidies. You are simply adding debt to more debt. The gleeful notion that we just need to spend and spend and everything will get better is ridiculous. History has taught us this.

The great depression was a terrible time in our country's history. Text books teach us that it was a heroic President Roosevelt and his life saving New Deal that finally pulled us out of our slump, thus proving that government intervention and massive spending works. Even Obama stated that this was inarguable. The facts, however, tell another story. The New Deal began in in 1933 and four years later the economy actually got worse! From 1933 to 1939 the federal expenditure tripled. And employment did not recover until into 1940. According to wikipedia, there is still widespread debate about whether or not the New Deal actually lengthened and deepened the depression.

That is the equivalent of saying that the economy will still be as bad in 2017, but yet somehow Obama's policies are working. Are you kidding me? And a look into history shows us that the real catalyst to our recovery from the Great Depression was World War II. We produced our way out the depression, and the war provided the means whereby we could do so. Of course, it required a responsible investment, but it wasn't the spending, the government intervention, or the massive regulations that saved us. It was the ability for our country to find a way to increase productivity.

Flash forward to the 1980s. Again, American found itself in a serious recession. This time President Reagan inherited the problem and was faced with tough decisions about how to help put the economy back on track. Massive spending? Tax the rich? See, this is the dirty little secret that you will never hear from a liberal. Reagan did neither. And it worked. In fact, he cut taxes from a staggering 70% to a reasonable 28% over 7 years for top personal tax bracket. He did not expand domestic government or churn out massive spending bills and regulations. Why? Because he understood that it was only the productivity of the people that would reverse the economic trends. He knew that he needed to foster an environment where that could happen. He believed in free market principles and in the American people.

After 7 years, the results speak for themselves. The GDP almost immediately began to grow at an annual rate of 3.4%, unemployment tumbled, and 16 million net jobs were added to the economy. What an incredible contrast to the 7 years following the new deal. So, why aren't we being taught this? Because liberalism owns our government and our media. Because the goal of liberalism is power, not prosperity. We must reject this notion that spending our way out of a recession is the only way. It has never, and will never work.