(This is a repeat of an article I published March 1st, with some modifications)

From 1969-1982 the United States experienced its worst economic slow down since the depression. Deemed as a period of stagflation (stagnation + inflation),Richard Samuelson, in a recent Newsweek article, described it this way: “a spiraling combination of high (or rising) inflation, high (or rising) unemployment, and economic slow down over a long period of time.”

What spawned and then fed this lengthy economic struggle? Continued attempts at improving an economic turn-down by increasing government spending. Through a combination of government programs and tax reductions over a period of time, the feds worked to ease the pain of struggling Americans. This not only fueled inflation, it swelled the US deficit. The government kept sinking deeper, as it struggled with burdensome loan interest.

It wasn’t until 1982, when the hard decision was made to reduce the federal deficit, that things started turning around. The government tightened its belt and raised taxes.

“Americans stopped spending and businesses stopped borrowing. The country fell into a deep recession.”

But, as difficult as this year was, the destructive economic cycle finally broke, and in 1983, the economy finally started turning around.

Does any of this sound familiar? The government gave us rebate checks, in spite of the national deficit reaching record heights. The government is making the same mistakes made in the 1970’s. If we are to turn our current economic problems around, officials need to look at history, and make some unpopular decisions.

Samuelson describes it this way:

“Naturally, no leading politician is willing to acknowledge the self-evident implication: that recessions, though unwanted and hurtful to many, are not just inevitable; sometimes they’re also necessary to prevent the larger and longer-lasting harm that would result from resurgent inflation.”

Greenspan and Burnanke.
Apple, Tree?

For more information on the National Deficit, see my post The Dope on National Debt.

Related Posts

• September 26, 2008 -- Try Your Hand at Solving the National Debt Crisis (0)
• August 24, 2008 -- The Dope on National Debt Revisited (6)
• March 30, 2008 -- The Dope on National Debt (12)
• October 9, 2008 -- Hold Your Breath - The World of Underwater Finances (0)
• October 7, 2008 -- Getting Rich on the Backs of Others - the Middle Class Squeeze (1)