The Great Depression has gotten a great deal of attention over the past year. Policymakers, including President Barack Obama and Federal Reserve Chairman Ben Bernanke, have spoken of not making the same policy mistakes as back then.
Unfortunately, too often, the wrong lessons have been learned. Bernanke, for example, seems to think that the Great Depression was all about the Fed’s monetary policy being too tight. The Obama administration, leaders in Congress, and many of their supporters apparently choose to ignore the ills caused by misguided trade and tax policies at the time.
Both are wrong. The Great Depression was overwhelmingly about bad trade, tax, spending and regulatory policies.
If you have not read it, check out Arthur Laffer’s piece from the September 22 Wall Street Journal. It’s invaluable in terms of a quick, solid primer on the roles that massive increases in tariffs, and in federal and states taxes played in sinking the economy into depression and keeping it there, along with the part that the Roosevelt administration, not necessarily the Fed, played in messing with the nation’s money. These remain critical lessons for today.
Raymond J. Keating
Small Business & Entrepreneurship Council