Not a Moment to Spare?

“[W]e don’t have a moment to spare,” says President Obama, describing the urgency to pass his economic stimulus plan. To “turn the economy around” what is needed is “swift and bold action.”

But what, pray tell, will happen if that moment passes? Will the economy continue to sink forever? Will it never “turn around” on its own—and what exactly would it look like if it “turned around”?

“Swift and bold action” is Washington’s formula for every real and perceived crisis. Intimidated and scared into supporting wars on terror, drugs and poverty for years, Americans still seem prone to accept another enormous fleecing of their hard-earned wealth and priceless liberty in the hopes of addressing a crisis exacerbated and exaggerated by the very power elite that stands most to gain from the power grab. And what specifically is done, without a “moment to spare,” matters less than that it is done now. As in the show “Yes, Prime Minister,” the slogan is “Something must be done. This is something. Therefore we must do it.”

What if nothing is done, however? As Robert Higgs explains, the “Great Escape” from the Great Depression happened smoothly because the government had not managed the transition out of the war with massive increases in spending, but instead got out of the way: “[M]ost of the wartime economic controls were discontinued, more than 10 million men were mustered out of the armed forces, and the released warriors and civilian war workers quickly found private employment or left the labor force for home or school.” While many people agitated for a costly transition program to produce jobs for all these people leaving the military, the economy absorbed them once some of the strangulation it had endured under wartime central planning was taken away.

The 1921-22 depression, like the others not addressed by a New Deal or trillions in bailouts and stimulus spending, was sharp but ended quickly. If we did let this moment pass without adopting Obama’s first in what will likely be a long series of large interventionist schemes, I would bet that recovery would similarly be painful but quick. If only we could test this and make the government leave the economy alone for a year, I am very confident the recovery would impress almost everyone. Instead, we will likely get this and more interventions and Keynesian spending packages, which will only prolong our financial troubles and thus inspire calls for more intervention.