Posted by
Always To The Right on Saturday, January 10, 2009 12:15:05 PM
Barack Obama, it is said, will inherit the worst times since the
Great Depression. Not to minimize the crisis we are in, but we need a
little...
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Not to minimize the crisis we are in, but we need a little perspective here.
The Great Depression began with the Great Crash of 1929. By 1931, unemployment had reached 16%.
By 1933, 89% of stock value had been wiped out, the economy had
shrunk by one-third, thousands of banks had closed, a third of the
money supply had vanished, and unemployment had reached 25% — among
heads of households. And in those days, there was no unemployment
insurance, no Medicare, no Medicaid, no Social Security, no welfare.
FDR's answer: vast federal spending, tough new regulations on
business and higher taxes — like Herbert Hoover before him, only more
so.
The Depression lasted until war orders from the Allies brought U.S.
industry back to life. Before 1940, not once did unemployment fall
below 14%. In May 1939, Treasury Secretary Henry Morgenthau testified:
"We are spending more money than we have ever spent before, and it
does not work. . . . 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."
Politically, the New Deal was a smashing success, with FDR's landslides in 1932, 1934 and 1936 virtually wiping out the GOP.
Yet, economically, the New Deal was a bust, failing utterly to
restore prosperity. Despite the indoctrination of generations of
schoolchildren in New Deal propaganda, that is the hard truth.
Already staring at a $1.2 trillion dollar deficit for the year
ending Sept. 30, about 8% of the entire U.S. economy, Obama intends to
add a stimulus package of $700 billion to $1 trillion, yet another 5%
to 7% of gross domestic product. The resulting deficit would be twice
as large as Reagan's largest, 6% of GDP, which was the largest since
World War II.
And how is this Niagara of money to be spent?
Hundreds of billions will go out in checks of $500 to $1,000 to
wage-earners and individuals who do not even pay taxes. This is much
like the George McGovern "demogrant" program of 1972, where every man,
woman and child, if memory serves, was to get a $1,000 check from the
U.S. government.
Other hundreds of billions will go to shore up state and municipal
spending. Other hundreds of billions will go for "infrastructure"
projects, another name for earmarks, which is a synonym for pork.
Now, as Obama does not intend to raise taxes, at least now, he is
going to have to borrow this near $2 trillion from foreigners or U.S.
taxpayers, or the Fed will have to create the money. Undeniably, this
will have an impact upon the economy. But what will that impact be?
Where in history, other than World War II, is there evidence that such a mass infusion of spending restored prosperity?
Obama and the Democrats are taking a historic gamble, not only with
their careers but with the country. If this monstrous stimulus package
— plus the trillions in hot money — do not work, if the two ignite
rampant inflation — rather than real growth — we are all out of
options. The toolbox is empty.