Murray N. Rothbard, “Bush and the Recession” (1992)

This file is a single polemical economic essay by Murray N. Rothbard, later collected in Making Economic Sense. Its scope is narrow and topical—the Bush administration’s response to the early-1990s recession—but Rothbard uses that episode to restate a broader Austrian-libertarian critique of Keynesian macroeconomics, central banking, deficit policy, and political management of public confidence.

Rothbard’s central thesis is that Bush’s recession policy failed because it remained trapped inside Keynesian assumptions: recessions are treated as collapses of spending and confidence rather than as corrections after inflationary credit expansion. The essay opens by framing Keynesianism not as a mistaken technical doctrine only, but as the ruling ideology of modern macroeconomic policy.

President Bush's reaction to this grim recession has been Keynesian through and through—not surprising, since his economic advisers are Keynesian to the core.

The argument then reconstructs what Rothbard takes to be the Keynesian story of recession: consumers and investors lose confidence, spending falls, and government must compensate through deficits, monetary stimulus, or psychological reassurance. Rothbard’s conceptual move is to oppose this “confidence” theory with a causal account centered on previous monetary distortion.

To Keynesians, recessions come about via a sudden collapse in spending—by consumers and by investors.

From there the essay turns to the political logic of Keynesian policy. If deficit spending has become permanent and vast, Rothbard argues, politicians cannot plausibly present still larger deficits as an emergency solution. They therefore try to stimulate private borrowing and spending by managing public expectations. In Rothbard’s reading, the Bush administration’s shifting language—no recession, then recovery, then “weak recovery,” then “double-dip”—was not innocent error but a consequence of a theory that makes public morale an instrument of policy.

If increasing the deficit further is no longer a convincing tool of government, the only thing left is to try to stimulate private spending.

Rothbard’s discussion of interest rates and credit cards gives the essay its practical core. He treats Bush’s pressure on credit-card rates, and Senator Al D’Amato’s near-coercive legislative version of the same idea, as symptoms of price-control thinking. Interest rates, for Rothbard, are not moral declarations by bankers but market prices shaped by risk, borrower behavior, credit quality, and supply and demand.

Prices are set according to the market forces of supply and demand.

This section also lets Rothbard distinguish consumer rhetoric from consumer action. People may complain about credit-card rates, but many users either pay balances monthly and ignore interest, or carry balances in ways that make switching difficult. A forced reduction in rates would not simply cheapen credit; it would alter the entire credit package, leading banks to restrict access, tighten standards, or change fees. Thus the essay’s anti-Keynesianism becomes an anti-interventionist account of how partial controls misread the market relationships they disturb.

The final third shifts from criticism to prescription. Rothbard rejects “revenue-neutral” tax cuts as another Keynesian trap, because they preserve the premise that government revenue must remain intact. He calls instead for large reductions in income taxation and government spending, arguing that recovery requires private saving, investment, and a reduced state claim on productive resources.

What is needed is the courage to bust out of this entire fallacious and debilitating Keynesian paradigm.

Rothbard’s alternative is not stimulus but liquidation of the state burden: lower taxes, lower spending, more private saving, and an end to policies that try to sustain boom-era malinvestments through artificial credit. He also criticizes supply-siders insofar as they defend tax cuts only by promising unchanged revenues; for him, reducing government revenue is itself desirable because it removes resources from “wasteful government boondoggles.”

The essay’s relevance lies in its compact display of Rothbard’s Austrian political economy: recessions are not failures of confidence to be cured by public relations, but consequences of prior monetary expansion; prices cannot be improved by political jawboning; and deficits are not medicine but part of the disease. Its closing gesture makes the polemic explicit, placing Keynes alongside Marx and Lenin as twentieth-century icons to be repudiated.

The real way to achieve freedom and prosperity is to hurl all three of these icons of the twentieth century into the dustbin of history.