How to Increase Unemployment

HISTORY tells us that when unemployment is high, presidential incumbents lose. That includes every incumbent President in the twentieth century who has faced 7 per cent unemployment on election day and a higher unemployment rate than two years earlier: Herbert Hoover, Gerald Ford, Jimmy Carter. That is the situation George Bush faces today. An unhappy public wants something done about the sluggish economy. Yet the evidence from the past tells us that the best thing government can do to reduce the ranks of the unemployed is—nothing.

In response to the Panic of 1907, Congress created a central bank to maintain stable economic conditions. The Federal Reserve System began operations on January 1, 1914, and within six years prices in the U.S. had doubled. In the seventh year of its operation, 1920, the nation had the largest single-year deflation of its history, with wholesale prices falling more than 36 per cent in a single year.

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About the Author

Richard Vedder

Richard Vedder is a professor emeritus at Ohio University and a senior fellow at Unleash Prosperity.

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About the Author

Lowell Gallaway

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Franklin Delano Roosevelt

HISTORY tells us that when unemployment is high, presidential incumbents lose. That includes every incumbent President in the twentieth century who has faced 7 per cent unemployment on election day and a higher unemployment rate than two years earlier: Herbert Hoover, Gerald Ford, Jimmy Carter. That is the situation George Bush faces today. An unhappy public wants something done about the sluggish economy. Yet the evidence from the past tells us that the best thing government can do to reduce the ranks of the unemployed is—nothing.

In response to the Panic of 1907, Congress created a central bank to maintain stable economic conditions. The Federal Reserve System began operations on January 1, 1914, and within six years prices in the U.S. had doubled. In the seventh year of its operation, 1920, the nation had the largest single-year deflation of its history, with wholesale prices falling more than 36 per cent in a single year.