Austerity vs. Stimulus – What else do you need to know?

Deprogramming Liberalism ^ | June 13, 2012 | Jim Autio

[DeprogramLiberalism]

The 1920s began with a severe post WWI depression even worse than the start of the Great Depression of the 1930s. During the Roaring Twenties (get the name?) Presidents Warren G. Harding and Calvin Coolidge implemented an austerity strategy, including a re-embracing of the laissez-faire free market policies from the late nineteenth century. It included severely cutting taxes across the board, a huge reduction in government size, massive spending reductions, and extensive deregulation. Their only mistake was not cutting trade barriers, so when the Smoot-Hawley Tariff Act was proposed in 1929 under new President Herbert Hoover to drastically increase tariffs and implement stricter domestic industry protection (a decidedly non-free market policy), the stock market reacted with its infamous crash.

Throughout the Dirty Thirties Presidents Herbert Hoover and FDRHoover stood by Smoot-Hawley and rejected free market policies in favor of a hybrid progressive-fascism mostly imported from Europe, instead dramatically increasing government size, imposing massive stimulus spending programs, heavy regulation, high taxes, and selective industry subsidies and bailouts (just as President Obama has done, for the most part). Here are the respective results:
  

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The nonfarm unemployment numbers of the twenties and thirties were a close equivalent of today’s U6 measurement, which has ranged from 14% to 18% during the Obama Malaise (a much more accurate measure during high unemployment than the pathetically deceptive U3 used by the media and the administration).

I have a question:

If it was possible to magically start another decade right this moment that could mirror either the Roaring Twenties or the Dirty Thirties, which one would you choose?

Answer that question, then answer this question:

Since we cannot magically bring back a prior decade, which government policies do you think would work best to fix America’s debt problem and end the current Obama Malaise of high unemployment?

BTW. Liberals have been saying that austerity doesn’t work – look at Europe. First – what austerity? Failed economies don’t equal austerity. Liberals – please name for me one European country that as an economic policy has cut taxes, cut spending, cut the size of government, and cut regulations. Second, the whole of the European continent would have to embrace austerity, not just a couple of failed states. Greece and Spain enacting a few meagre austerity measures will have about as much effect on the whole European economy as would Maryland and Rhode Island in regard to the U.S. economy. Austerity will have to be country-wide in the U.S. and continent-wide in Europe.

Update: Dr. Doom, Marc Faber, has earned his nickname through by being perhaps the greatest prognosticator of the macro economy in our time, having predicted many economic calamities just before they happened. He has called the current debt burden much more than just a “fiscal cliff”, but a “fiscal Grand Canyon”. It seems Dr. Doom agrees with austerity over stimulus, at least when it comes to government size and spending. “My medicine for the U.S. is: Reduce government by minimum 50 percent. The impact would be immediately an improvement in the economy.” West in a ‘Colossal Mess’ in Five to 10 Years: Marc Faber