The Flip Side of the 'It Would Have Been Much Worse' Excuse For Failure.
First, the current recession is not the worst economic downturn other than the Great Depression of the 1930s. The Great Depression of 1920 brought unemployment of 11.7% (from 1.4% in 1919) and a drop in the stock market of 47%. The top tax rate at that time was 73%.
Arguing against the Progressives who called for stimulus, Secretary Mellon and President Coolidge instead choose to cut the top tax rate of 73% down to 25%, stimulating the economy along with job growth driving unemployment back down to 3.2%.
The current argument by the Obama administration that "it would have been much worse if not for the stimulus" is little more than a lame excuse for failure. In fact, only two economic downturns in our history have extended well beyond the usual 18 months. The two that have been turned into long drawn out painful events exceeding all others are The Great Depression of the 1930s and the current recession. Both are unique in that the Liberal Progressives, with little or no political opposition, were able to enact and apply Keynesian Economics theories. In both cases, these theories worsened the severity and prolonged the downturns. Proof of these failures is the fact that Liberals continue to argue that "they needed larger stimulus." If their stimulus plan had shown any sign of success, "larger stimulus" would not be needed nor called for. Progressives claim their failure is in some way proof that they were right.
After three years of nearly $4 trillion of Obamanomic stimulus consisting of little more than, foolish pork, union payoffs and bailouts, the economy shows little sign of improvement. "If only we had spent more." In fact, during the 1930s, we did spend more, much more. It too failed. Henry Morgenthau, Jr., FDR's Treasury Secretary, said the following in 1939 to the House Ways and Means Committee: "We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get jobs. We have never made good on our promises. I say after eight years of this administration: We have just as much unemployment as when we started and an enormous debt to boot."
I can find no other time when abject failure has been used as an explanation for success. After six years of New Deal, WPA and a host of other big Government stimulus programs, unemployment effectively increased (when adding the WPA employed to the unemployed) up through 1939. "Doing more", more government jobs, more government spending and more government stimulus in fact, increased the severity of the downturn. While we can easily argue that both the Great Depression of the 30s along with the current recession are huge failures of big Government stimulus programs while no one seems to be able to find a single event when Keynesian economics has ever succeeded. Part of the Keynesian theory may in fact be the complaining that routinely follows its failure. FDR, according to a letter from Mr. Keynes, apparently didn't execute Keynesian theory properly while the current administration, according to Progressives like Paul Krugman, didn't spend enough. Maybe it just doesn't work.