Harding's Stimulus Plan
David Henderson, Arnold Kling & Bryan Caplan, I would love to read your take on Jim Powell’s article about the 1920-1921 depression. Is Jim Powell showing huge bias? Can we learn anything that would be helpful in the current situation from the 1920-1921 depression? Could it be that there is a trade off between a shorter more severe down turn were certain workers are crushed and a longer but less down turn were pain is less but more persistent?
I admit that until Floccina made me aware of this article, I had not known much about it. So here are my answers:
1. No, I don’t think Jim Powell is showing huge bias, at least not in the way that term is usually used. It’s probably true that Powell starts with a bias, as I do, in favor of the view that government will tend to mess things up, but there’s a lot of evidence behind that “bias.” Moreover, if you have that bias but are open to counterevidence, then I don’t see much problem.
2. I think we can learn something from Harding’s response. I think we would have a much better shot at improving the economy, short term and long term, if government cut spending and taxes as drastically as Harding did.
3. I think there is such a tradeoff, although I don’t think workers were crushed. Some might have been worse off, but I would reserve the term “crushed” to describe having coercion used against them, as many in Congress want to do with the mis-labeled “Employee Freedom of Choice Act.” (This Act, if passed, would further enhance the power of unions to be the sole bargaining agent for workers, even if individual workers don’t want it to be.)
Finally, as a bonus, I’ve often said in talks that my favorite 20th century president was silent Cal Coolidge. Move over, Cal, and make way for your predecessor.