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Objective Religions Studies
Debunking Creationisms

How to fix a Recession (the right way)

It was an economic downturn of vast proportions. The estimated gross national product fell 24 percent. The number of unemployed workers more than doubled. By any measure, it was a severe recession. But this wasn't the recession of 1929 or 2008. This was the recession of 1920.
 
Most people have never heard of this period. Many history books barely touch on it. Even those in the field of economics rarely mention it. Far more time is devoted to the gloom and doom of the Great Depression throughout the 1930s and the more recent downturn that began in 2008. So why was the depression of 1920 overlooked? There are many reasons, but the simplest is because it was over so quickly. It lasted a mere 18 months before the economy recovered and boomed again. It set the stage for the economic growth of the roaring 20s, arguably one of the most prosperous times in American history.
 
So what happened? How did the economy turn around so quickly? And why wasn't the turn-around as quick when another downturn occured in 1929? The answer is one of the great footnotes in American economic and political history. But it is a footnote many policy-makers would be wise to learn from.
 
At the time, Warren G. Harding was president. He came into office just in time for the downturn to hit. Such a downturn is usually a death sentance for any president (just look at Herbert Hoover). But unlike Hoover, Harding took a different course of action. Instead of pushing government programs or passing a stimulus package, he cut taxes and he cut spending. Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924. For federal spending, in 1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930. In addition, the Federal Reserve didn't act in any significant way. They largely held steady and let the economy recover on it's own. And it did in a mere year and a half.
 
It is basically the opposite of what other great depression fighters like Franklin Roosevelt did and what Barack Obama is doing. By cutting spending and lowering taxes, capital is freed up and growth is allowed to resume. It follows the most basic of economic principles and history vindicates the lesser known Harding more than any of the so called 'great' presidents after him. They failed to heed his principles when the next depression hit. And instead of a swift turnaround, America entered the Great Depression which would last for over a decade. By interfering in the economy, overspending public money, and incurring more debt the downturn was worsened. History may not describe it so, but hard data tells the real story. Unemployment averaged nearly 17 percent throughout Roosevelt's long tenure while it reached a record low of 1.8 percent under Harding.
 
It is an unfortunate oversight of history that Harding's handling of a depression was so successful and all those that followed were so poor by comparison. That's not to say he deserves all the credit. In the downturns that followed the Federal Reserve played a larger role, rarely standing back and doing nothing like it did in 1920. But future presidents continued to make the same mistakes as Roosevelt. It is the very definition of insanity, doing the same thing again and again and expecting a different result. Only doing the same thing in this instance doesn't just fail to fix the problem, it makes it worse.
 
Barack Obama would be wise to follow the lessons of 1920. He would be wise to look at the bold actions of Warren G. Harding instead of Franklin Roosevelt. The potential for damage is much greater now than what it was in 1920. The old addage of not heeding history and being doomed to repeat is not only a lesson, it's a warning. And it's a warning Obama isn't heeding.
 
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What's Intuitive Isn't Always True

Human intuition is an amazing yet complex phenomena. Many everyday decisions are made on intuition. Sometimes it's as simple as deciding what to eat and other times it's as complex as formulating an economic policy. Intuition is like instinct in that it feels intrinsically right so people don't question it or think too much about it. It's a good thing too because it saves on mental energy. But there are times when intuition may be false.
 
Take the current prevailing intuition among politicians and the average joe regarding the economy. They rationalize that since the economy has slowed, government spending will stimulate it by pumping money into it. It's an age-old tactic championed by the likes of FDR and Barack Obama. It sounds good on paper. It makes intuitive sense that pumping money into the economy will stimulate it. But anybody who has a more intimate knowledge of economics understands that it doesn't work that way. Government spending does not create any new wealth. It just takes the wealth from one area and tries to redistribute it into another, often hindering those who would create new wealth. It's the reason why the New Deal didn't end the Great Depression and why these huge economic bubbles keep popping and creating great upheavals. John Stossel explained it a great deal in his article appropriately titled "We can't spend our way to prosparity" 
 
Take another less complicated example. In the 70s, the drinking age laws across the country were changed from 18 to 21. The intuitive reasoning was that if the law said that youths couldn't drink until a later age it would cut down on alcohol related deviance. This makes sense on the surface, but research and statistics do not fully support this. The law will not stop youths from drinking. It is not a behavior that involves intruding upon the natural rights of others. It is an entirely self-regulated behavior that affects only the user and how it affects that user will differ from how it affects others. So while many may drink responsibily, there will be those who abuse it. But that applies to any substance or behavior including other drugs and activities like driving. In fact, some researchers claim that those who drink underage do so in more risky ways. Because its legality is taboo, it becomes a sourse of rebellion among users and that can be a reinforcing factor. Another article by John Stossel helps explain this matter further.
 
Take this notion of intuition other domains such as religion and faith. Many reason that if life looks like it's been created then maybe there's a creator. Others reason that because they intuitively feel the presence of the divine, there must be a divine force. These notions seem entirely reasonable, but they have no objective basis in reality. They are entirely subjective assumptions bound by human error. Intuition by its own nature is someone's way of coming to a conclusion when they do not have all the facts. And the irony is that nobody has all the facts and probably never will. So at the expense of torturing themselves over so much uncertainty, intuition provides what seems a safe and reasonable assumption that fills an otherwise uncomfortable void.
 
From humans to insects, intuition has its uses and shortcomings. What seems to make sense doesn't always hold true in a larger scheme. That is why it is important to use inductive reasoning, following the evidence to a conclusion before making a large assumption. And for that which is unknown or unknowable, one must become comfortable with the notion of uncertainty. It's difficult to say sometimes, but the best answer is often "I don't know." But uncertainty is not easy to deal with. Many would rather be certain than be right. That can provide comfort, but it can also cloud judgment. And in a society as complex as ours, poor judgment can lead to major consequences.
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