“The worst crisis since the Great Depression.” – Barack Obama
How did we come out of the Great Depression during the 1930’s? Some argue it was the New Deal implemented by FDR. I’ll tell you that wasn’t the case and that the actions taken, actually made the economy worse. Seven years into the New Deal, unemployment sky-rocketed over 20%. Henry Morganthau, Roosevelt’s Treasury Secretary, stated the following-
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . I say after eight years of this Administration we have just as much unemployment as when we started. . . And an enormous debt to boot.”
We made it out of the Great Depression despite the New Deal. In the late 1930’s, before we entered World War II, we were selling mounds of weapons to other countries; guns, planes, tanks, etc. . American people went to work and were paid for creating these goods because of the wars in other theatres. These were not “New Deal” jobs, they were private sector jobs. When the government tries to create jobs, as the New Deal did, it hinders the private sectors ability to generate and sustain jobs.
How did we come out of the Great Depression during the 1930’s? Some argue it was the New Deal implemented by FDR. I’ll tell you that wasn’t the case and that the actions taken, actually made the economy worse. Seven years into the New Deal, unemployment sky-rocketed over 20%. Henry Morganthau, Roosevelt’s Treasury Secretary, stated the following-
“We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . I say after eight years of this Administration we have just as much unemployment as when we started. . . And an enormous debt to boot.”
We made it out of the Great Depression despite the New Deal. In the late 1930’s, before we entered World War II, we were selling mounds of weapons to other countries; guns, planes, tanks, etc. . American people went to work and were paid for creating these goods because of the wars in other theatres. These were not “New Deal” jobs, they were private sector jobs. When the government tries to create jobs, as the New Deal did, it hinders the private sectors ability to generate and sustain jobs.
As suffocating as the credit crisis is today, it’s not the worst since the Great Depression (another scare tactic from our President). Ronald Reagan was elected President in 1980 when this country was economically worse off than it is today. Unemployment was 10.7%, as opposed to 7.2%,. inflation was 14.76%, as opposed to .03% and interest rates were over 20%, as opposed to 5%.
FDR and Barack Obama (Obama on a MUCH LARGER scale) did the opposite of what Ronald Reagan did. Reagan cut the income tax for the top bracket from 70% to 28%. He passed the Economic Recovery Tax Act of 1981, which provided the largest tax cuts ever enacted. Many economists call this “Trickle-down economics.” The more money a restaurant owner has, the more willing he’ll be to open a new restaurant…creating more jobs. He also decreased non-defense government spending during his two terms. The net job increase was 16 million jobs while inflation and interest rates dramatically decreased. With the decrease in taxes and government spending, revenue to the government increased! Reaganomics.
So far we’ve established the New Deal (increased government spending and increased government intervention) failed and Reaganomics (decrease government spending and decreased government intervention) succeeded. Unfortunately we haven’t learned from past successes and past failures. Our government has decided to spend more money than it ever has in the history of our country, without proof it will work, and has taken direct ownership in private companies. Obama disagrees with “Trickle-down economics”. If he disagrees with “Trickle down” please explain what giving billions of dollars to banks to have them provide credit to people represents. That’s trickling down through corrupt companies on Wall Street after being siphoned off by government bureaucracy! If fifty cents out of every dollar would have made it from the top of the private sector to the bottom, you can bet we’ll be lucky to get a nickel down through the money grabbing filter of the federal government.
Two different philosophies. The American way…or the government way. What would Ronald Reagan do if he were President today? You decide.
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2 comments:
Whether you expect money thrown out of the Washington window to trickle down, trickle up, or trickle sideways it is bound to go somewhere. For fundamental soundness we are better off with a limited government and a free private sector so people can make their own decisions about how to spend the money they earn.
Its a mistake to idealize Reagan too much. The numbers don't bear it out. Government spending actually increased dramatically during the Reagan years, even with Republicans controlling Congress. Military spending got the biggest boost. Cuts in social spending were token-ish and exaggerated by Reagan's left-wing critics.
Reagan oversaw a different bank subsidy and subsequent crisis by increasing the FDIC insurance from $40k per person to $100k per person multiplied by however many different banks the person used. Then there was a partial deregulation of the subsidized industry allowing it to make risky investments with capital obtained at cheap rates by the subsidy of increased insurance (the 80's phenomenon of 'jumbo cd's') which led to the savings and loan crisis.
Like practically every predictable consequence of government intervention since Wilson's indulgence in currency inflation Hoover's misguided masterminding of an engineered economy, the fallout gets falsely blamed on too little government, and we create new and different crises for the future with misguided government policies.
People who don't understand math and who base their political decisions on affinity and personality will look at the Obama stimulus package and not notice it is the same crap as the Bush stimulus package with a different colored label. Partisan politics just distracts from these fundamental issues.
I agree with almost everything. I don't agree that this crisis is not as bad as the crisis in the late 1970's. We are in just the beggining of this crisis. In my opinion, using the baseball analagy, we are in the bottom of the 1st inning.
FDR turned the depression into the great depression. This is what our politicians don't understand, and you hit the nail on the head with this point Shea.
Anytime the government gets involved in artificially stimulating the economy it gives false signals to entreprenuers. Spending starts to increase because businesses see more customers coming in the door. So businesses hire more workers to handle the additional work. But when the stimulus money runs out, consumers again stop spending which causes businesses to lay off the workers they thought they needed to hire. We need permanent stimulus, which is permanent lower taxes, and less government intervention so businesses can make intelligent decisions on forecasting demand for their products.
I think Obama is a smart man and he probably knows this. But if he wants to remain in office he needs to show he is doing something. If he withdrew the government stimulus the economy would be worse in the short-term (so he would not get re-elected), but in the long-term we would have true economic growth.
We need to abolish the federal reserve so businesses can start to make sound forecasting decisions without wondering what sort of fed stimulus is waiting around the corner.
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