George Will made a statement on This Week with George Stephanopoulus that I think gets to the heart of arguments with conservatives about the government and the economy.
He stated something like:
When was the last time we had a recession that lasted this long, the answer is never because markets are self healing.
The implication is that government intervention is unnecessary because this will all take care of itself eventually and perhaps even sooner or just as soon with no government intervention. Same argument conservatives make about the Great Depression.
I believe the quote is in this segment, but my computer wouldn't play the whole thing, so I apologize if I'm wrong.
http://i.abcnews.com/...
Of course, the problem with this argument is that we HAVE had depressions besides the Great Depression that lasted longer and were not accompanied by government intervention.
Just look at the history of the business cycle presented by the National Bureau of Economic Research.
http://wwwdev.nber.org/...
In fact, the longest depression ever started in 1873 at a time when government was very small and none of the interventions we have now were in place. No income tax existed so it's hard to blame on high taxes, and yet, there it was.
It's worth noting too, that from some accounts, the economy didn't recover very strongly from the 1873 panic and depression. It just limped along until the next depression in the 1890s, which itself was followed by another depression in the first few years of the 20th Century.
This flies in the face of the notion that markets are "self healing."
At the bottom of the NBER's chart of business cycles, they post an average of lengths of recessions over certain periods.
Notice that in the period from 1945 to 2001, the average length of the contraction was 10 months. But for the period from 1854 to 1919, the average length of the contraction was 22 months, nearly twice as long.
This particular undermines the self healing argument if GDP went down significantly more during these 19th Century events than in post WWI recessions because it means that the damage from the 19th Century events was lasting. Unfortunately, GDP statics only seem to go back to 1929 on BEA's website, but you can at least see that GDP doesn't ever go down very much (at least until recently)
http://www.bea.gov/...
Wikipedia has a more comprehensive list of recessions that shows the same thing with more detail:
http://en.wikipedia.org/...
So, if markets are self healing if we just leave them alone, then how do conservatives explain the 19th Century when markets were completely left alone and the federal government had little role in the economy and very low tax rates??!!!
In addition to countering the bogus claims about the Great Depression being lengthened by FDR, we need to be demanding conservatives explain this. And we need to find examples from other countries as well -- Argentina comes to mind.
I have looked and been unable to find any kind of GDP data for the 19th Century, which I suspect would also be helpful. I hope folks will pass that on if they find it.
UPDATE: I've made some changes to reflect skepticism about what Mr. Will actually said. I can't seem to play the online video so I'm not sure still, but I've written this so that it could fit better what he said if those who think they heard differently are right. I've also expanded on my point a little regarding the self-healing concept being bad.