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Photo taken from deck of Warren's home.

The Middle Ground

Someone (who will remain nameless) recently posted on his FaceBook page that, while socialism doesn’t work, neither does an unfettered free market. “Can’t we find a ‘middle ground’?” he asked.

I’ve got news for him. This is it. This is the “middle ground.” How’s it working out? Where we are now is the middle ground, It is not pure socialism but it is certainly not a free market either.

What has this middle ground gotten us? The longest recession since the Great Depression, that’s what. But hang in there, they might yet turn it into Great Depression II by trying to “fix” it. That’s how we got Great Depression I.

Sure the free market is not perfect, if by perfect you mean no ups and downs, no inconvenience to anyone, full employment and so on. But the free market is waaaayyy better than the middle ground.

The free market is self-correcting. Sometimes these corrections are small, sometimes larger — a recession. But recessions are corrections, they are a necessary mechanism. of the free market. Ups and downs are normal. It takes government interference to turn a minor bump in the road into a pothole or worse — a sinkhole.

Ask people what caused the Great Depression and they’ll probably tell you it was caused by the stock market crash of 1929. But the crash of ’29 resulted in merely a recession, and one that was largely over before government decided to take action.

Following the stock market crash, unemployment rose to nearly ten percent. But, eight months later (June, 1930), unemployment was just 6.3 percent and falling. The recession was largely over. Then Herbert Hoover and the Congress, against the advice of smarter people than they, passed the Smoot-Hawley tariff act to “protect” American jobs from low-priced imports.

A year later the unemployment rate was 15 percent and a year after that, it was 25.8 percent. There followed a decade of misery only government can create. When FDR was elected to the presidency, he added to the problem with more taxes and government programs.

You see, five months after Smoot-Hawley “protected” American jobs from cheap imports, unemployment started going up again. Why? Because other countries passed tariffs in response to ours and that reduced American exports, costing countless American jobs. An action intended to protect American jobs had exactly the opposite effect. (This is often the case in government.)

The Great Depression did not start with the stock market crash, it started with Smoot-Hawley. It started when government tried to “fix” the stock market crash recession (which was already largely over). Historically, that is, before 1930, government had always just let things run their course and recessions fixed themselves. But in 1930, government passed tariffs, raised tax rates on rich people and the Federal Reserve handled the money supply terribly — all while trying to fix what they perceived to be what was broken about the free market.

Our current recession is the longest since the Great Depression, and for the same reason — government is trying to “fix” things and going about it all wrong. It is impossible to tax, borrow and spend our way to prosperity. Yet we seem determined to follow Greece, Italy and others down this path.

During the recession of 1987, President Reagan was roundly criticized for doing nothing to aid the recovery. The recession fixed itself in short order and the economy went on to more than 20 years of prosperity (for which Bill Clinton took credit).

The current recession started when the housing market went kablooie due to the sub-prime mortgage crisis. Of course, there would have been no sub-prime mortgage crisis if Bill Clinton’s H.U.D. secretary had not forced lenders to loan money to people who could not afford to repay it (in another attempt to fix a perceived fault in the free market system). There’s your “middle ground” in action.

Like Hoover and FDR, most politicians know lots about politics, but little about economics. When you try to fix something you don’t understand, you’ll likely make things worse.

No, the free market may not be perfect but it’s way better than any “middle ground” you can find.

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