Don’t Believe The Sky Is Falling
Every day we hear politicians telling us that we are in the midst of the worst economic crisis since the Great Depression. While we may be heading in that direction, current evidence suggests that this is a gross exaggeration. Either the people who are trying to convince us that the sky is falling are woefully ignorant of the facts, or it is nothing but a cynical ploy to persuade voters to accept government actions that would be intolerable under less drastic circumstances.
While our economy shows every sign of getting worse before it turns around, the fact is that we are in far better shape today than we were in the early 1980’s. Our current unemployment rate seems high in comparison to the historically low levels we have enjoyed in recent years, but we have to remember that the jobless rate reached 9.7% in 1982. We also had three consecutive years of double digit inflation, with a peak annualized rate of 14.76% in March of 1980. The housing market was also in crisis brought on by record high interest rates. In May of 1982, the average rate for a 30 year mortgage was 15.57%. Compared to these numbers, our current economic situation is not nearly as dire as some people would like us to believe.
Challenging economic times represent a great opportunity for politicians to gain acceptance for programs that the public would never support under ordinary circumstances. It is imperative for voters to have a sense of historical perspective in order to avoid being duped. Unfortunately, it is far easier to create a new government program than it is to get rid of an old one.
President Roosevelt was able to muster strong support for the passage of the Social Security Act in 1935. In the midst of the Great Depression, he was able to sell it as a means of reducing unemployment by removing older workers from the job market. It’s impossible to say whether voters would have supported the same program in 1928 or 1948, but it’s a safe bet that they would have taken a more careful look. We need to take a more careful look today at the hastily conceived interventions that are being sold as the solution to our current economic woes. If we fail to do so, we run the risk of creating massive obligations that will be with us for generations after the current crisis has passed.