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ndpruitt03
7/15/2010, 10:58 PM
If you look at what Obama is doing, FDR did the exact same thing 70 years ago and none of it worked.

The Obama hero who failed
By: Walter Williams

July 15, 2010

Let's think about President Obama's failed economic stimulus program. Before getting to the nitty-gritty of why stimulus packages fail, let's look at the failed stimulus program of Obama's hero, Franklin Delano Roosevelt.

FDR's Treasury Secretary, Henry Morgenthau, wrote in his diary: "We have tried spending money. We are spending more than we have ever spent before and it does not work. ... 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!"

Morgenthau was being a bit gracious. The unemployment figures for FDR's first eight years were: 18 percent in 1935; 14 percent in 1936; by 1938, unemployment was back to 20 percent. The stock market fell nearly 50 percent between August 1937 and March 1938.

Columnist Walter Lippmann wrote, "With almost no important exception every measure he (Roosevelt) has been interested in for the past five months has been to reduce or discourage the production of wealth." The last year of the Herbert Hoover administration, the top marginal income tax rate was raised from 24 to 63 percent.

During the Roosevelt administration, the top rate was raised at first to 79 percent and then later to 90 percent. Hillsdale College economic historian Professor Burton Folsom notes that in 1941, Roosevelt even proposed a whopping 99.5 percent marginal rate on all incomes over $100,000. Much more of the Hoover/FDR fiasco can be found in "Great Myths of the Great Depression".

The Great Depression did not end until after WWII. Why it lasted so long went unanswered until Harold L. Cole, professor of economics at the University of Pennsylvania, and Lee E. Ohanian, professor of economics at UCLA, published their research project, "How Government Prolonged the Depression" in the Journal of Political Economy (August 2004).

Professor Cole explained, "The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes. Ironically, our work shows that the recovery would have been very rapid had the government not intervened." Professors Cole and Ohanian argue that FDR's economic policies added at least seven years to the depression.

Where do the trillion-plus dollars come from that Congress and Obama are spending in an effort to stimulate the economy? How about Santa Claus, or maybe the Tooth Fairy? If you said, "Come on, Williams, you're being silly! The only way government can spend a dollar is to tax or borrow it," go to the head of the class.

In the case of a tax, one should ask what would that taxpayer have done with the dollar had it not been taxed away. He would have spent it on something that would have created a job for someone. If the government hadn't borrowed the dollar, it might have been invested in some project that would have created a job.

When government taxes, borrows and spends, it shifts unemployment from one sector to another. Of course, the sector that benefits tends to be a political favorite of the shifter.

Between 1787 and 1930, our nation has seen both mild and severe economic downturns, sometimes called panics, that have ranged from one to seven years. During that interval, no one considered it to be the business of the federal government to try to get the economy out of a depression because there was no constitutional authority to do so.

It took Hoover, FDR and a frightened and derelict U.S. Supreme Court to turn what might have been a three- or four-year sharp downturn into a 15-year meltdown.

http://cnsnews.com/commentary/article/69458

delhalew
7/15/2010, 11:28 PM
Control

Leroy Lizard
7/15/2010, 11:29 PM
http://mudflats.files.wordpress.com/2008/05/kaos.jpg

ndpruitt03
7/16/2010, 12:10 AM
http://fee.org/articles/great-myths-of-the-great-depression/

There's some great stuff here on what caused the great depression.

Ike
7/16/2010, 12:20 AM
Just a few things:


If the government hadn't borrowed the dollar, it might have been invested in some project that would have created a job.

This is not necessarily true right now. US Firms are currently holding something like 1.8T in reserves that are not being spent on job creation. US Treasury rates are at historic lows (because lots of people/firms want to hold them), while the interest firms must pay on their own bonds are much higher (because fewer people/firms are willing to invest in other private entities due to the uncertainty of the economic climate). If the government doesn't borrow a dollar right now, that dollars most likely fate would be that it will sit in somebody's or some firms coffers because that firm is fearful of a 'double dip', as they like to say. With so much money chasing after US Treasurys right now to drive the rates so low (last I checked, a few days ago, a 10Y note was at less than 3%), the market is basically saying "Uncle Sam, please, borrow my money!" Why? Because even at a low rate of return, it's still better than stuffing it in a mattress, and much less risky than lending/investing in private companies. Especially if what the market fears is deflation (which it does). If government borrowing were crowding out private investment, the interest rate on government debt would be higher than that of corporate debt. Currently it is not, even though we've dumped a couple trillion dollars worth of debt on the market very recently.



When government taxes, borrows and spends, it shifts unemployment from one sector to another. Of course, the sector that benefits tends to be a political favorite of the shifter.

In normal times, I'd believe that statement. The problem is that now, demand has cratered across all sectors...except for US Treasuries. And it doesn't take much labor to produce US Treasuries.



Thats all I wanted to add. Otherwise, carry on.

ndpruitt03
7/16/2010, 12:40 AM
US Firms are holding about 1.8T because they don't know what's going to happen next. They are basically holding onto that money for a rainy day because they have no idea what Obama will do next. Same thing happened with the gold standard in the 30s. What did FDR do? Destroy the gold standards to solve that problem.

As soon as businesses know what will happen and have the money to spend they will hire more people or they won't and they'll just use the money to keep their businesses a live as long as they can. But they have to pay a lot to hire people right now with the added health tax coming up. If they can't pay for all of their employees health care. Then you have the Wall Street bill which was written just like the stuff for Freddy and Fannie and that was a disaster if that doesn't go well for the financial sector then that 1.8T is not going to be used for employees. It'll be used to try and keep the business afloat.

RUSH LIMBAUGH is my clone!
7/16/2010, 12:56 AM
Don't let the Frozen legal student read this thread. His admiration for FDR is legend.

Frozen Sooner
7/16/2010, 01:51 AM
If you look at what Obama is doing, FDR did the exact same thing 70 years ago and none of it worked.


You keep saying this, and you keep being wrong.

Frozen Sooner
7/16/2010, 01:52 AM
Don't let the Frozen legal student read this thread. His admiration for FDR is legend.

Yeah, guy ended a Depression and substantially won World War II. You're damn right I admire him.

RUSH LIMBAUGH is my clone!
7/16/2010, 01:53 AM
Yeah, guy ended a Depression and substantially won World War II. You're damn right I admire him.Continued Condolences.

Frozen Sooner
7/16/2010, 01:56 AM
You're a really weird cat, man.

ndpruitt03
7/16/2010, 05:47 AM
Why did the Great Depression last nearly FDR's entire presidency. If you don't want to believe me how about his own administration.

Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”

In his private diary, FDR’s very own Treasury Secretary, Henry Morgenthau, seemed to agree. He wrote: “We have tried spending money. We are spending more than we have ever spent before and it does not work. … 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!”

After weighing his options, Roosevelt settled on a 21 cent price hike because “it’s a lucky number.” In his diary, Morgenthau wrote, “If anybody ever knew how we really set the gold price through a combination of lucky numbers, I think they would be frightened.”

Will we choose to subject ourselves — this great country — to the despotism of bureaucracy, controlling our every act, destroying what equality we have attained, reducing us eventually to the condition of impoverished slaves of the state? Or will we cling to the liberties for which man has struggled for more than a thousand years? It is important to understand the magnitude of the issue before us. … If we do not elect to have a tyrannical, oppressive bureaucracy controlling our lives, destroying progress, depressing the standard of living … then should it not be the function of the Federal government under a democracy to limit its activities to those which a democracy may adequately deal, such for example as national defense, maintaining law and order, protecting life and property, preventing dishonesty, and … guarding the public against … vested special interests?

Director of the Bureau of the Budget Lewis W. Douglas who quit after FDR's first year because he was doing exactly what the last president did.

Okla-homey
7/16/2010, 06:04 AM
Yeah, guy ended a Depression and substantially won World War II. You're damn right I admire him.

uhhh, no. WWII ended the Depression. And FDR merely gave Arnold, Eaker, Spaatz, Spruance, Nimitz, Ike, Mac, Stillwell and the Manhattan Project the resources they needed to win WWII.

delhalew
7/16/2010, 07:24 AM
Yeah, guy ended a Depression and substantially won World War II. You're damn right I admire him.

FDRs best friend and right hand man said otherwise. Don't let that stop you from sticking to the script you've been given.

Ike
7/16/2010, 08:10 AM
uhhh, no. WWII ended the Depression. And FDR merely gave Arnold, Eaker, Spaatz, Spruance, Nimitz, Ike, Mac, Stillwell and the Manhattan Project the resources they needed to win WWII.

So out of curiosity, how was WWII, from the perspective of an economy, any different than massive government borrowing and spending?

From the economy's point of view, the govt borrowed massive amounts of money to build massive amounts of planes, tanks and ships and bullets and bombs and guns. That put a lot of people to work. And they also hired a lot of people to go use that equipment.

StoopTroup
7/16/2010, 08:52 AM
FDR didn't have an Iphone....so....you are comparing apples to oranges. Also...FDR couldn't shoot hoops and wasn't an illegal immigrant.

This thread is so full of fail. :D ;)

texaspokieokie
7/16/2010, 09:05 AM
Basically, the enlisted men in WWII were like slaves. they had no choice,(drafted) & they risked (many thousand gave) their lives for peanuts.

even when i was in the USAF in the 60s;base pay was only about $80/mo.
of course i wasn't drafted & was never in any danger. we fought the wars
of 1961 & 62 (there was nothing) in the far off battlefields of Tulsa.

When the old men fail @ their diplomatic jobs, they send in the young men to clean up the mess. sometimes @ a terrible cost.

when i was very young, i thot FDR was the greatest. the older (& i'm very old)
i get the more i come to realize that that wasn't the case.

I admire Truman more than FDR.

Okla-homey
7/16/2010, 09:13 AM
So out of curiosity, how was WWII, from the perspective of an economy, any different than massive government borrowing and spending?

From the economy's point of view, the govt borrowed massive amounts of money to build massive amounts of planes, tanks and ships and bullets and bombs and guns. That put a lot of people to work. And they also hired a lot of people to go use that equipment.

I dunno, perhaps because the DOLLARS SPENT ACTUALLY CREATED JOBS and trained the workforce. And those workers, when they no longer needed to build planes and tanks, were able to shift to building cars and refrigerators. As opposed to p1ssing away gajillions on stupid stuff that don't create jobs and to repay political debts.

JohnnyMack
7/16/2010, 09:18 AM
2008 called, it wants its article back.

Ike
7/16/2010, 09:22 AM
I dunno, perhaps because the DOLLARS SPENT ACTUALLY CREATED JOBS and trained the workforce. And those workers, when they no longer needed to build planes and tanks, were able to shift to building cars and refrigerators. As opposed to p1ssing away gajillions on stupid stuff that don't create jobs and to repay political debts.

So to be clear: You would agree that government borrowing and spending *can* get us out of economic trouble, so long as that money is spent wisely (i.e. on things that do not terribly crowd out private sector spending, and on things that when no longer needed leave the creators of said stuff in a position to somewhat easily transfer to another line of work). Would I be correct in that statement?

Frozen Sooner
7/16/2010, 09:29 AM
uhhh, no. WWII ended the Depression. And FDR merely gave Arnold, Eaker, Spaatz, Spruance, Nimitz, Ike, Mac, Stillwell and the Manhattan Project the resources they needed to win WWII.

Pardon me. I guess because he didn't get up out of his wheelchair and strangle some Nazis he deserves no credit. Ridiculous.

While the massive outlay in government spending needed to fight WWII certainly helped, the prior massive spending in infrastructure (WPA, TVA, etc) laid the groundwork for a massive expansion in industrial production.

Frozen Sooner
7/16/2010, 09:32 AM
I love how time and time again historical data gets posted showing that the trendlines of negative GDP growth and rising unemployment were reversed right about the time the New Deal was enacted, but because the Great Depression wasn't ended THAT VERY SECOND those programs were completely unsuccessful. Economies have momentum. You don't reverse a downturn in a day, a week, or even a month.

In the words of someone else, "don't let that stop you from sticking to the script you've been given."

Okla-homey
7/16/2010, 09:33 AM
So to be clear: You would agree that government borrowing and spending *can* get us out of economic trouble, so long as that money is spent wisely (i.e. on things that do not terribly crowd out private sector spending, and on things that when no longer needed leave the creators of said stuff in a position to somewhat easily transfer to another line of work). Would I be correct in that statement?

Clearly, the 1940's proved that in that period, government borrowing and spending to buy war material "fixed" the economy. But its folly to expect it would work the same way now. Too many variables to draw that conclusion. Not least of which is we are no longer a manufacturing based economy.

What is known to work in the information age is reducing corporate and capital gains taxes. But that's an anathema to the cuurent bunch running the government who favor "trickle up poverty."

soonerscuba
7/16/2010, 09:37 AM
What is known to work in the information age is reducing corporate and capital gains taxes. But that's an anathema to the cuurent bunch running the government who favor "trickle up poverty."How exactly do we plan on subsidising losses without these very revenue streams? Until we allow failing companies to fail, I see no reason to give them breaks.

Okla-homey
7/16/2010, 09:38 AM
Pardon me. I guess because he didn't get up out of his wheelchair and strangle some Nazis he deserves no credit. Ridiculous.

While the massive outlay in government spending needed to fight WWII certainly helped, the prior massive spending in infrastructure (WPA, TVA, etc) laid the groundwork for a massive expansion in industrial production.

Cling to that bro. That philosophy is precisely what will put the grown-ups back in charge in 2012. Me? I lived through Carter. Like Jesus needed the Devil, Reagan needed Carter.

Okla-homey
7/16/2010, 09:41 AM
How exactly do we plan on subsidising losses without these very revenue streams? Until we allow failing companies to fail, I see no reason to give them breaks.

That thinking, and the fear in boardrooms over the unknown regardng this administration's next stunt, ain't helping. It paralyzing growth.

delhalew
7/16/2010, 09:47 AM
So to be clear: You would agree that government borrowing and spending *can* get us out of economic trouble, so long as that money is spent wisely (i.e. on things that do not terribly crowd out private sector spending, and on things that when no longer needed leave the creators of said stuff in a position to somewhat easily transfer to another line of work). Would I be correct in that statement?

Not even war can get us out of a depression anymore. We are no longer an industrial nation.

soonerscuba
7/16/2010, 09:53 AM
That thinking, and the fear in boardrooms over the unknown regardng this administration's next stunt, ain't helping. It paralyzing growth.I don't think it's exactly socialist thinking to somehow suggest that lack of demand is affecting capital outlay much more so than a percieved fear in a mythical boardroom, and it's certainly easier to pin blame on government than a lack of demand. The good news in all of this is that retail is up and consumer credit is down, which means people are buying more crap, but this time with money they actually have. Frankly, the economy for the past 30 years was an illusion built on credit, and the shift from that isn't going to be easy or quick. I would prefer a prolonged recovery built on something at least tangible to a 20k market built on sand and credit tomorrow.

Ike
7/16/2010, 09:59 AM
Clearly, the 1940's proved that in that period, government borrowing and spending to buy war material "fixed" the economy. But its folly to expect it would work the same way now. Too many variables to draw that conclusion. Not least of which is we are no longer a manufacturing based economy.

What is known to work in the information age is reducing corporate and capital gains taxes. But that's an anathema to the cuurent bunch running the government who favor "trickle up poverty."

While I am not opposed to lowering taxes to help the economy, the problems I see with it are the following: This tact was proven to beat back stagflation (high unemployment + high inflation), which is what Regan was faced with. In this case, we have almost zero inflation, and indeed, the market still fears deflation. As noted above, US firms are currently holding about 1.8T in reserves (there was a WaPo article on that yesterday)...not using that money to hire, and not using that money to invest. They are scared of investing. Lowering CapGains taxes won't make a large difference towards making those investments less scary. The big money will still, as it is now, be chasing after US Treasuries... Lowering corporate taxes will likely result in those firms simply holding on to more of their money....still bracing for deflation. In the current climate, I don't see just lowering corporate taxes and capital gains taxes as helping much. I do see a possible ray of hope there in that if we do so, and do not cut government spending, then we'll have to borrow more, meaning that US treasury rates should rise some, making private investment look a little more attractive...but I don't know that it would be enough.

SoonerStormchaser
7/16/2010, 10:03 AM
You're a really weird cat, man.

Dude, as much as he can be a tad annoying at times, I gotta agree with RLIMC. FDR really DID prolong the depression, whether he intended to or not can be debated...the evidence is there. And to top it all off, he started this Social Security BS that is now seen as a God-given right by people when it was just meant to be nothing more than an economic stimulus package.

delhalew
7/16/2010, 10:03 AM
I don't think it's exactly socialist thinking to somehow suggest that lack of demand is affecting capital outlay much more so than a percieved fear in a mythical boardroom, and it's certainly easier to pin blame on government than a lack of demand. The good news in all of this is that retail is up and consumer credit is down, which means people are buying more crap, but this time with money they actually have. Frankly, the economy for the past 30 years was an illusion built on credit, and the shift from that isn't going to be easy or quick. I would prefer a prolonged recovery built on something at least tangible to a 20k market built on sand and credit tomorrow.

While I agree with your sentiment on having a recovery based on real money rather than numbers in the air, the only thing that can accomplish that is job growth. Policies that strengthen the FED and give the gov total control over business will do the opposite.

Frozen Sooner
7/16/2010, 10:06 AM
Dude, as much as he can be a tad annoying at times, I gotta agree with RLIMC. FDR really DID prolong the depression, whether he intended to or not can be debated...the evidence is there. And to top it all off, he started this Social Security BS that is now seen as a God-given right by people when it was just meant to be nothing more than an economic stimulus package.

Again, most of the key economic indicators reversed their slide right around the time of the New Deal.

And if you think it's "debatable" whether FDR intended to prolong the Great Depression...seriously? You think he may have wanted the Depression to last longer?

delhalew
7/16/2010, 10:07 AM
Dude, as much as he can be a tad annoying at times, I gotta agree with RLIMC. FDR really DID prolong the depression, whether he intended to or not can be debated...the evidence is there. And to top it all off, he started this Social Security BS that is now seen as a God-given right by people when it was just meant to be nothing more than an economic stimulus package.

Precisely, these same entitlements are the reason we are likely to see a crushing VAT tax in addition to the income tax. Politicians are terrified of trying to change our entitlement tailspin.

SoonerStormchaser
7/16/2010, 10:07 AM
Froze, Why not? We can all agree that politicians will say and do just about ANYTHING for political gain.

Frozen Sooner
7/16/2010, 10:15 AM
Because a bald assertion of ill-intent and then saying it might be true isn't the same thing as making it debatable. By your same logic I could say it's "debatable" that the attacks of 9-11 were planned by the US government (they weren't, of course.) I could say it's "debatable" that the Republican Party arranged for the Iranian Hostage Crisis (no, they didn't.)

SoonerStormchaser
7/16/2010, 10:21 AM
Yah, but we all know that GWB had the intel that OBL was up to something and didn't do anything til after it happened. Kinda like FDR and Pearl Harbor. Did they intentionally wait to let it happen before sounding the rallying trumpet so they could toot their own horns towards political gain? Probably not...but since we're not telepathic, how do we know 100% for sure?

Just playing devil's advocate here...I admire FDR and Truman, but to think they're sanctimonious is just dumb.

delhalew
7/16/2010, 10:24 AM
Again, most of the key economic indicators reversed their slide right around the time of the New Deal.

And if you think it's "debatable" whether FDR intended to prolong the Great Depression...seriously? You think he may have wanted the Depression to last longer?

It sounds crazy on it's face, but you have to admit that Americans never would have stood for such progressive policies (some of which were lifted from the platform of the socialist party platformof the previous decade) were they not in such dire straights. Even the Supreme Court fell pray to the severity of the times.

Frozen Sooner
7/16/2010, 10:25 AM
:D I don't think sanctimonious means what you think it does. :D

I'm pretty sure the claim that FDR knew of the impending attacks against Pearl Harbor was debunked a while ago, but I understand what you're trying to say.

I don't claim FDR was a saint. I just happen to admire the guy-a position you apparently agree with. The claim that he WANTED to prolong a the Depression, though, doesn't rise to debatability.

SoonerStormchaser
7/16/2010, 10:30 AM
Ok...sacred cow then...

NormanPride
7/16/2010, 11:10 AM
I think you're looking for sacrosanct.

ndpruitt03
7/16/2010, 11:29 AM
Nobody is saying FDR wanted to prolong the depression. He honestly felt his laws were going to end the depression. Just like Hoover thought the same with all of the money he spent and acts he passed.

In 1932 the democrats ran on doing the exact opposite of what they did and what Hoover was doing. They ran on cutting the tax which was raised more than at any non war time in this history of the US. And repealing the Smoot-Hawley Tariff which basically shut the USA from all trade. That's probably what really caused the Great Depression. And they didn't really even repeal it, they only weakened it. FDR ended up raising taxes more than even Hoover did. But he did have an excuse of having the war. But that's not even close to the worst thing he did.

The worst thing FDR did was basically destroy the gold market which was the security blanket for most businesses because paper money wasn't reliable at all at the time. This gave the federal government all control over the money.

The New Deal in was a 10 billion dollar spending bill. Despite the fact that they only had 3 billion dollars to spend.

The AAA taxed agricultural processers and then used that money to kill farm animals and pay farmers not to do their job. It ended up just making less food for people to eat. Destroying farms that are having a tough time isn't going to change that much.

Unemployment under the new deal never went to 14%. And that was after most of the New Deal was repealed by the Supreme Court. And when it did get down to 14% the next year it raised back up to 20% . Some areas still had over 50% unemployment like in Ohio and Michigan. Oh and you know what caused the depression within a depression in 1938? The Wagner act which basically gave power to unions, which lead to a lot of boycotts, strikes, and violence that led to companies being afraid to hire anyone. Right after it was signed unemployment went right back up. And stayed right about 20% till WW2 started.

SoonerStormchaser
7/16/2010, 11:51 AM
Yah NP...the wrong word just came to mind...ugh. Stupid overly-developed vocabulary!

Ike
7/16/2010, 03:50 PM
Just to give an idea of how bad unemployment is right now, here is a scary plot.

http://i.huffpost.com/gen/184173/TERRIFYING.jpg
http://www.brookings.edu/opinions/2010/0702_jobs_greenstone.aspx
So if we somehow manage to add jobs at the rate of the BEST year of the 2000's, then it will take about 12 years to close the employment gap.

If we add jobs at a rate of the best year of the 1990s, it will still take 5 years to close the employment gap.

And if we manage to add jobs at the rate of the best month of the 2000s, it will still take about 3 years.



A pretty herculean task. This recession (or at least the unemployment from it) could easily last through 3 presidents, not counting GWB.

ndpruitt03
7/17/2010, 11:01 AM
And businesses today don't know what the government will do next to hinder them from doing what they need to do to run their business. What restrictions will the government come up with next? Small businesses are probably gonna end up extinct if this administration gets what they want.