Similarly, the economy has its own cycles of prosperity and recession which come and go. In a recession, ineffective and obsolete businesses fail, speculative bubbles burst and overextended consumers cut back spending. The result is a renewal of vigorous economic activity by more efficient businesses and unleveraged consumers. Individuals and businesses make rational economic decisions based on where they are in the economic cycle. As a result, economic excesses created during prosperity are corrected during periods of recession.
Capitalist economies are very robust and recover from recessions regardless of government intervention. This has been true since the spectacular boom and bust of Dutch Tulip Mania in the 17th century. It has been true in America since the Industrial Revolution. Government intervention may accelerate or retard a recovery, but it does not stop it. Historically, most government intervention has retarded recoveries. The most egregious example of retarding recovery was the government intervention of the New Deal in the Great Depression. During this period, economic recovery programs, new regulations and higher taxes prolonged the recovery for a decade. Government policy delayed the economic recovery, but did not stop it.
Those who think that our current economy is improving are correct. Unfortunately, the current economic policies of ineffective stimulus, pending mandates on health insurance, pending tax increases, excessive deficits and over-regulation are impeding the recovery and not helping it. It is like the farmer who is over-watering his crops after it rains or putting on too much fertilizer because he is impatient for his crops to grow. If the government wishes to help the economy, it should implement policies that follow the medical profession’s first principle — do no harm. These policies include reduced taxes, balanced budgets and less regulation.
Williams can be heard nightly on Sirius XM Power 169, 7-8 p.m.