The Great Depression of 2008?

So how do we avoid a repeat of the 1930s? It may not be possible to dodge it altogether but there is no reason it has to be that bad for that long. An economic depression is usually defined as a severe downturn that lasts several years. If you are retired and depending on your 401K the downturn is probably already severe. The market didn’t fully recover from the 1929 crash until 1954. That’s longer than most people can expect to be retired. If you live in Phoenix and your major asset is your house, that’s tanked too. If you’ve lost your job this is a tough time to be trying to find a new one. Those things alone will almost certainly translate to major losses for a lot of people and they will be permanent for some of us. Those of us who don’t have to sell anything to meet expenses any time soon should thank our lucky stars and think about living within our means for a while. We should also be paying close attention to what the government is doing. I would argue that the last depression was in large part caused and prolonged by bad government policy. If we have another one, we can look to the same source.

We’ve learned at least one lesson. The Federal Reserve is pumping money into the economy like crazy and they can be expected to continue doing that for as long as money is tight. Uncle Sam did the opposite eighty years ago with disastrous results. But two lessons we haven’t learned. We are clamoring for higher taxes on corporations and individuals, and for protectionist trade legislation. Both of those things are really awful ideas. We live in a global economy and trade is its life blood. These are tough economic times by anyone’s definition. If we are to get through them international trade will play a very large role. And Americans don’t need handouts so much as jobs, good jobs, and I don’t mean government jobs. We tried that in the 1930s too. So did Stalin. He kept at it, we backed off, and as they say the rest is history. We need those jobs in the private sector and that means private investment. The last thing we should be doing is discouraging investment with higher taxes on those most able to invest. One new lesson we ought to learn too. Our economy runs on energy, cheap, reliable, plentiful energy. It’s there, government really doesn’t have to do anything about it except get out of the way but we do need to stop this insane idea of deliberately driving up liquid fuel prices in order to discourage use of the internal combustion engine. Clean them up? Certainly, but we need those engines and the engines need fuel.

Here is what I propose. There are at least three free trade pacts gathering dust on congressional tables. Pass them. Get serious about the Doha Trade Talks. Renegotiate NAFTA? Yes. Expand it to include the rest of the Americas. Send the world a message that the world’s most vibrant economy is still open for business. We’ve been scaring our trading partners half to death for the last two years with our protectionist rhetoric. We’ve got some confidence building to do. Make the Bush tax cuts permanent. The impending expiration is like an anvil around the necks of a lot of business owners. We need those businesses to be growing. Making the cuts permanent would be a big boost. Stop this foolish talk about windfall profits taxes and start encouraging the development of alternative energy supplies, all of them, not just the favored few that have the blessing of the extremist environmental lobby. That means wind, solar, shale oil, clean coal, algae culture, nuclear power, and anything else that comes along and shows promise. We have the wherewithal to supply all our energy needs at affordable prices from domestic sources. Do it. Do it cleanly but do it. We don’t want to see another depression.