“Enthusiasm is like running in the dark. You might get there, but you might also get killed.” I don’t know the origin of that quote, but it seems to be appropriate for today’s politicians. To say that current economic events are challenging is a vast understatement. They are running around in the dark, trying this and that, hoping to find the magic pill to make everything better. What’s worse is that many people in this country are demanding that they run around in the dark, believing that they are superheroes with laser vision.

As disturbing as this news is to some people, the sorry fact is that they are not superheroes. They can’t make it all better. They only have the power to make it worse. Listening to the two major presidential candidates, it becomes painfully obvious that they don’t have a clue. They do have a plan though. That plan is to spend lots of taxpayer money to try this, and if it doesn’t work, then try that. It is the same plan that Franklin Roosevelt graciously took over and greatly expanded from his predecessor, Hebert Hoover. Together, they used it to successfully transform a cyclical downturn into the deepest and longest depression in American history, with double digit unemployment for more than a decade.

The major impetus of the several New Deals of the 1930’s was to keep prices high, on the false assumption that high prices were to support high wages, which in turn was to provide the demand for the products. All industries were forced into cartels of the outwardly fascist National Recovery Administration. The cartels set mandatory high prices and made rules for the participants, Agriculture programs, in order to keep farm prices up, destroyed millions of pigs, burned millions of bushels of wheat and plowed under millions of acres of cotton at a time when millions were unemployed and in need of lower costs. Tariffs were also raised to keep domestic prices high, a very perverse situation.

The 1930’s economy suffered a massive deflation of the money supply, due to the inherent instability of the fractional reserve banking system. Contrary to what you often hear, deflation isn’t all bad, at least in a free economic environment. With deflation, prices automatically and necessarily fall. There are fewer dollars in the system, so each dollar buys more goods. That is, unless politicians want to save us from the curse of low prices. If wages and prices are allowed to adjust to the new economy, there will not be severe unemployment, and lower wages will be offset by lower costs of food, housing and everything else. In the 30’s, price adjustment was actively and strenuously prevented. People got the worst of both worlds, high prices and no job.

One of the most basic economic lessons is that, when prices are held higher than market levels, there will be an excess supply and a short demand. Unemployment is nothing more than an excess supply of labor and a shortage of jobs, due to artificially high wages. The high levels of unemployment of the depression were the inevitable results of the actions taken by government. At exactly the wrong time, high minimum wage laws sealed the fate of millions of workers who were priced out of the market.

Does any of this sound vaguely familiar? The wise men in Washington are dealing with this highly deflationary time by trying to keep prices up. They are paying billions to wealthy bankers so that poor Joe on the street can pay inflated prices and high taxes. They still pay farmers billions of dollars to not grow crops so they can keep food prices high. They make American businesses uncompetitive in world markets with high taxes, tariffs, protectionism and regulations. Higher minimum wages are further pricing low skill workers out of the job market. In short, it seems like they are using the playbook from the 1930’s.

Prices need to adjust and markets need to clear, a painful process. Without the adjustment, the real problems will fester, as they did for more than a decade of the depression. The parallels are too close to ignore, and we, as a country, are walking the same road. It really isn’t a case of running in the dark. It’s a matter of closing our eyes because we are getting close to the edge of the cliff. We need to open our eyes and give our congress people a taste of unemployment in November.