Interesting thoughts on 2010 vs. 1937

John Lott puts together a very fair-minded piece about the question of what factors were most "effective" at pushing the nonfarm unemployment rate from 14% to about 19-20% in 1938: was it, as Paul Krugman would assert, a lack of federal spending?  Was it, as Newt Gingrich asserts, the confiscatory income taxes Roosevelt levied?  Or, was it, as Lott asserts, significantly the result of the implementation of the Social Security tax and new bank regulations which effectively confiscated large portions of bank reserves?  Lott follows up with a poll of forecasting economists, who suggested that government needs to get out of the way.

The column, and its links, are worth a read.  My take--I'm sure to no one's surprise--is to simply ask whether government can manage something this big--the problem of a lack of knowledge.  Even if you could trust government types to perform ROI analysis in the same way that a business would, they simply would not see the opportunities that entrepreneurs, nor would they have the same incentive to make it work correctly.  They simply don't have the knowledge, nor do they have skin in the game.

Hence, my take is that Gingrich and Lott have it right; Roosevelt's (and earlier, Hoover's) interventionism created, and sustained, the Great Depression until Hitler and Hirohito removed the excuses for that intervention.  Hopefully President Obama gets better economic advisers than those he's had, and soon.