Recessions, Historically Speaking

August 29th, 2010 by Lee Eldridge

Recessions are UnavoidableI have some bad news for you. We will have another recession. I’m not sure when, but it’s coming. Want to know how I know? Because there’s ALWAYS another recession.

President Obama has continued to blame eight years of failed policies for our most recent recession: “The policies that crashed the economy, that undercut the middle class, that mortgaged our future, do we really want to go back to that, or do we keep moving our country forward?” says Obama.

Yet one of the administration’s themes about raising taxes on the “rich” is because we’d be returning to the tax rates of the ’90s, and the ’90s were such a glorious economic time. It must have been the higher tax rates that allowed us to thrive through the economic boom of the ’90s. Yet what did the economic boom of the ’90s create? A recession that began with the tumbling of the NASDAQ in March of 2000. And yes, Bill Clinton was still president in March of 2000.

So was the boom of the ’90s because of successful economic policies? Or was the recession that followed because of failed economic policies?

“Theoretically, economic recessions are unavoidable as in a perpetual fluctuation of economic boom and decline,” says  Yang Yang the EconGuru. “Not a single nation is doomed with forever recession nor are they blessed with forever booming.”

Do you know how many recessions we’ve had since the beginning of the Great Depression? From the recession of 1937 through now, we’ve lived through 13 recessions. That’s one recession about every six years.

How many years were there between the recession that followed the ’90s boom and our most recent recession? Six years.

Recessions have come during or on the coattails of the presidencies of Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush, Clinton and Bush. That’s every president since the Great Depression. (See this list of recessions.) This doesn’t include pre-depression recessions.

Using President Obama’s logic, it appears we’ve had failed economic policies during every presidency for the last 70 years.

Government Policy
So now that we’ve established that recessions are unavoidable, can the government prevent a recession? Should the government attempt to prevent future recessions? The answer is simple: no.

One of my greatest fears about the economy is that the federal government will do everything it can to prevent future recessions, but all they’ll end up doing is creating a climate that will stifle growth and prevent future booms. Government policy cannot prevent future recessions. But it certainly can stifle economic growth and opportunity.

The Blame Game
I guess it’s human nature to assign blame. And the government certainly bares some responsibility. It was (failed) economic policy from the ’90s that created the housing bubble that was never fully corrected in the recession of 2001. And (failed) economic policy certainly contributed to the atmosphere that created the recent failures in our banking industry. But even if the government does everything right (and they never do), I can guarantee you one thing: We will have another recession.

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