Given that many of our policymakers are looking to the 1930s for answers to the current Depression, it’s important to clear some widespread myths about the Great Depression. Most of these myths have their root in the belief that the Great Depression was caused by laissez fair government policy and that the New Deal launched by FDR quickly got the United States out of the Great Depression:

Myth: The Great Depression has been our country’s only depression.

Fact: Our country has had several depressions, the Great Depression was simply the longest and the worst. There is no exact definition of what is a ‘depression’ versus a recession. Most of these depressions were referred to as ‘panics.’ Notably was the Panic of 1893, which lasted from 1893-1898. During this time, unemployment is estimated to have been well over 10% at points. Remember though, this depression lasted only five years. The Great Depression lasted over a decade and was only cured by World War II.

Myth: Herbert Hoover was ‘hands off’ on the economy, which led to the Great Depression

Fact: Quite the opposite. Hoover’s tinkering with the economy helped precipitate the Depression. Long before he was ever President, he actively denounced free market, laissez faire thinking. Hoover did initiate some public works projects (similar to the New Deal), though not nearly in the same scope as FDR since he did not want Americans to be too dependent on the government (Hoover believed such actions should be voluntary). Hoover’s policy disasters included interventions in the labor market and foreign trade.

To combat unemployment,  President Hoover initiated the Mexican Repatriation program. The goal of this program was to remove Hispanics from America because they were viewed to be taking American jobs. Hoover’s Mexican Repatriation program led to the deportation of 400,000-500,000 Hispanic Americans. Their migration was both forced and voluntary and ran through 1937. All this had the effect of simply increasing the cost of labor, decreasing the demand base, and thus hurting the ability of companies to be efficient and make profits, leading to more unemployment and a greater downward spiral. While no one is pushing for a Mexican Repatriation today, there are plenty who are pushing to cut off H1B visas, which would have a similar economic effect of the Mexican Repatriation program.

Hoover’s foreign trade antics are notorious. Most notably was his passage of the Smoot-Hawley Tariff. This tariff led to retaliations by other foreign countries and foreign trade plummeted. This had the effect of sinking global productivity and efficiency in an already tenuous environment. Luckily, most of the world has learned the lesson from this tariff, though people who want NAFTA repealed apparently have not. Think what having to pay $40 to buy a t-shirt or $150 to buy a pair of shoes would do in this already sagging economy.  That is the effect of tariffs.

Myth: FDR’s New Deal Got Us Out Of The Depression

Fact: The New Deal, if anything, simply prolonged the Depression. First, let’s use some basic logic. The Great Depression was not over until America entered WWII, almost nine years after FDR took office. Unemployment during the New Deal averaged over 17%, even with the increase in government jobs.

Most of the New Deal projects were wasteful government spending. This ultimately had the effect of raising the country’s debt, resulting in higher business taxes. The higher business taxes and regulation stunted economic growth in the private sector. Essentially, FDR’s New Deal sacrificed businesses for government. As we have learned countless times through history, whether it is the Soviet  Union, Cuba, or the post office, governmental central planning does not produce prosperity nearless as well as private free enterprise.

Even FDR’s treasury secretary admitted the New Deal was a colossal failure. In 1939, he wrote: ” “We are spending more than we have ever spent before and it does not work. . . . 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!”” What was an enormous debt then is a pittance now. The debt/GDP as a result of the New Deal never went above 50%. Obama’s policies may take us well over 120%, possibly as high as 200%.