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THOMAS SOWELL: An Unusual Economy? – RCP

August 29, 2011

An Unusual Economy?

August 30, 2011

By Thomas Sowell

Many in the media are saying how unusual it is for our economy to be so sluggish for so long, after we have officially emerged from a recession. In a sense, they are right. But, in another sense, they are profoundly wrong.

The American economy usually rebounds a lot faster than it is doing today. After a recession passes, consumers usually increase their spending. And when businesses see demand picking up, they usually start hiring workers to produce the additional output required to meet that demand.

Some very sharp downturns in the American economy, such as in the early 1920s, were followed quickly by bouncing back to normal levels or beyond. The government did nothing — and it worked.

In that sense, this is an unusual recovery in how long it is taking and in how slowly the economy is growing — while the government is doing virtually everything imaginable.

Government intervention may look good to the media but its actual track record — both today and in the 1930s — is far worse than the track record of letting the economy recover on its own.

Americans today are alarmed that unemployment has stayed around 9 percent for so long. But such unemployment rates have been common for years in Western European welfare states that have followed policies similar to policies being followed currently by the Obama administration.

Those European welfare states have not only used the taxpayers’ money to hand out “free” benefits to particular groups, they have mandated that employers do the same. Faced with higher labor costs, employers have hired less labor.

via RealClearPolitics – An Unusual Economy?.

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