A Cautionary Tale

Countering the received wisdom that President Franklin Roosevelt's economic policies saved the country from the Great Depression, an article in the August edition of Journal Of Political Economy argues that his policies in fact prolonged the depression by years.

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.

"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened.""

Unfortunately, lawmakers cannot restrain themselves. And Heaven help us if both houses of Congress and the White House are held by the same party. There will be nothing to stop them.