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Sic Semper Tyrannis

Friday, January 09, 2009

The New Deal and the Great Depression

Via Ed Driscoll, this Heritage Foundation chart showing unemployment rates during the Great Depression:

Heritage writes:

President-elect Barack Obama wants to blow at least $1 trillion, and probably more, on a New New Deal. Before he does, perhaps we should take a look at the real record of the Old New Deal on unemployment.
I don’t like this argument: even if FDR “never drove unemployment under 20 percent until the US geared up for WWII,” unemployment did fall following enactment of the New Deal. Maybe there were other factors, maybe not, but this hardly proves that massive government intervention isn’t a “solution.”

This Thomas Sowell column is far more useful (emphasis added):
The Vedder and Gallaway statistics allow us to follow unemployment month by month. They put the unemployment rate at 5 percent in November 1929, a month after the stock market crash. It hit 9 percent in December-- but then began a generally downward trend, subsiding to 6.3 percent in June 1930.

That was when the Smoot-Hawley tariffs were passed, against the advice of economists across the country, who warned of dire consequences.

Five months after the Smoot-Hawley tariffs, the unemployment rate hit double digits for the first time in the 1930s.

This was more than a year after the stock market crash
. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.