The main lesson we have learned from the New Deal is that wholesale government intervention can -- and does -- deliver the most unintended of consequences. This was true in the 1930s, when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk.
President Barack Obama and Congress have a great opportunity to produce reforms that do return Americans to work, and that provide a foundation for sustained long-run economic growth and the opportunity for all Americans to succeed. ... A large fiscal stimulus plan that doesn't directly address the specific impediments that our economy faces is unlikely to achieve either the country's short-term or long-term goals.
Monday, February 2, 2009
In this WSJ article Cole & Ohanian dissect the Great Depression and FDR's New Deal, and list painful mistakes that unnecessarily prolonged that crisis -- mistakes that should be avoided at all costs by the new administration (HT Ellery Jr.). Here are some of their conclusions: