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Affluent Christian Investor | December 4, 2023

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Elizabeth Warren’s Great Depression Economics, Part 1

Senator Elizabeth Warren speaking in New Hampshire, 2019. (CC BY 2.0)

Elizabeth Warren is currently being credited as the front-runner for the Democratic nomination and the one who will go head-to-head with President Trump. So what would a Warren Administration look like (or any of the current democratic potential nominees, for that matter)? Who knows? Can we predict the future? Well, we absolutely can! Allow me to explain how.

While we cannot predict the future in specific detail, we do have the ability to generally predict forecast the economy.  As George Santayana famously said, “Those who cannot remember the past are condemned to repeat it.”[1] The past is a lens into what is bound to happen next. Again, it doesn’t give us enough to paint a vivid picture, but it’s a picture nonetheless—a starting point so we aren’t blind to what’s to come.

If you know and understand the economic patterns and data of the past, you can decipher the economic future. For example, examining the basic economic patterns during the end of the second Bush and Obama administrations, the economic drop was primarily due to the housing crash and the negative impact resulting from this ripple effect. The Bush polices instituted after the housing crash were mostly economically unsound. Then, to make matters worse, the Obama Administration layered on more bad decisions.  A completely predictable lingering effect lagged the economy for almost a decade. The results of such phenomena was a sluggish economy. This story is well described by economist Robert Higgs in his excellent 1997 article, Regime Uncertainty.[2] In 2017 the United States had a very rapid positive economic effect from the Trump administration making policy changes which resulted in a quick economic rise – and to record levels in some measures. Again, it was all very predictable – Obama’s silly magic wand comment notwithstanding.

I am not stating that all policies of all three administrations (Bush 2, Obama, and Trump) were or are completely good or bad – simply that if basic good or bad policies are instituted the basic results and trajectory are predictable in general terms and patterns.

Historically, looking at presidential administrations like: Wilson followed by Coolidge/Harding (down to up), Coolidge followed by Hoover/Roosevelt (up to down), Carter followed by Reagan (down to up), and End of Bush 2/Obama follow by Trump (down to up), the patterns were all predictable. I will zoom in on the transition from Coolidge Administration to the Hoover and Roosevelt Administrations to illustrate the pattern. This pattern would be a predictor of the Elizabeth Warren Administration if she were elected in 2020 based on her continued rhetoric on income taxes, wealth taxes, and the like. Essentially, the economy would take a large downward turn, which helps neither the higher income nor lower income individuals.

The natural right to our property notwithstanding, the economic result or pattern would resemble the 1930s. In October 1929, as the United States felt the economy tumble, unemployment rates went from 5 percent in November followed by an increase to 9 percent in December that year. Rolling through 1930 the unemployment rate did a slow but generally steady improvement throughout that year, reaching 6.1 percent by the next October (1930). But by the 4th quarter of 1930, the Hoover Administration’s economic improvement packages began to take effect. The results were devastating.

Only two months later, and closing out 1930, unemployment shot up to 14.4 percent. It would linger in the teens range for an entire year then increase into the mid-20s during 1932. President Hoover’s miserable economic record would hand Roosevelt the presidency at the end of 1932. FDR’s campaign platform criticized Hoover’s economic record and excessive spending. But once Roosevelt assumed office in 1933, he simply took Hoover’s programs and amplified them. He brought in an entire package of new programs of spending, massively increasing the general government’s scale and power in an unprecedented manner. FDR made Hoover’s stimulus spending packages appear small scale in comparison.

By this time, the Great Depression was in full swing and would not relent. Unemployment lagged perpetually through the rest of the decade; remaining in the twenties (peak of 28.3 percent in 1933) and teens (valley of 11.6 percent in 1939) throughout. It was utterly devastating.[3] Just as presidential candidate Warren insists she will institute higher taxes on the wealthy (whoever they are), its effect is always economically destructive to everyone, but the middle and lower income citizens suffer the most. This historically was illustrated by Roosevelt’s Revenue Acts of 1935 (significant income tax increase) and 1936 (taxed wealth, not just earnings), as unemployment lingered in the high teens and lower 20 percentages. Most Americans suffered from this economic scourge.

Welcome to President Warren’s brave new America. Like the economic patterns of the past, when mistakes are ignored, as George Santayana explained over a century ago, we are doomed to repeat them.

A couple of closing notes. First, since the United States is much more massive economically and industrially today than in the 1930 we would most likely not suffer the high unemployment this country did back then.   However, the basic pattern would remain as it did during the Great Recession of the past decade. Secondly, the next two articles will discuss in further detail more of the economic impact of the 1930s from several other perspectives.

[1] George Santayana, 1905, The Life of Reason: the Phases of Human Progress, Vol. I, Reason in Common Sense, (New York, NY: Charles Scribner’s Son), p. 284.  Santayana’s quote is a slight modification of Edmund Burke’s (1729 – 1797) quote, “Those who don’t know history are destined to repeat it.”

[2] Robert Higgs, Spring 1997, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War,” The Independent Review, Vol. 1, No. 4, pp. 561-590.

[3] All unemployment numbers taken from Richard K. Vedder and Lowell E. Gallaway, 1997 (originally publish 1993), Out of Work: Unemployment and Government in Twentieth-Century America, (New York, NY: New York University Press), p. 77, Table 5.1, Estimated Monthly Unemployment Rates, November 1929-December 1939.



Originally published on Townhall Finance.


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