The grand myth that's been taught to whole generations is that the government is "forced" to intervene when there is a downturn that leaves millions of people suffering. The classic example is the Great Depression of the 1930s. What most people are unaware of is there was no Great Depression until after politicians started meddling in the economy.
There was a stock market crash in October 1929 and unemployment shot up to 9% — for one month. Then unemployment started drifting back down until it was 6.3% in June 1930, when the first major federal intervention took place. That was the Smoot-Hawley tariff bill, which more than a thousand economists across the country pleaded with Congress and President Hoover not to enact.
But then, as now, politicians decided they had to "do something." Within 6 months, unemployment hit double digits. Then, as now, when "doing something" made things worse, many felt the answer was to do something more.
Both President Hoover and President Roosevelt did more—and more, and more. Unemployment remained in double digits for the entire remainder of the decade....
What about the track record of doing nothing? For more than the first century and a half of this nation, that was essentially what the federal government did — nothing. None of the downturns in all that time ever lasted as long as the Great Depression. An economic downturn in 1920-21 sent unemployment up to 12%. President Warren Harding did nothing, except for cutting government spending. The economy quickly rebounded on its own.
The problem with doing nothing is simple... doing nothing does not provide employment to the millions of members of the governing class who meddle in our lives to make their own livings. I'm not sure Tocqueville said this, but I know he would have understood it: when the number of people in government employment reaches a certain critical mass, it becomes its own constituency, and the opportunity to restrain the size of government without upheaval is lost. We're long since past the critical mass for the size of government in America.