Saturday, September 8, 2012

The Not so New Deal

I recently came across this image and text on Facebook. I found the image to be over the top and the accompanying text interesting. I decided to take each bullet point and add my commentary.

(name removed) did a little research and came up with the following about Franklin Delano Roosevelt:
1. Brought the country back from financial collapse.
2. Established and protected Social Security.
3. Worked toward ending a war.
4. FDR was completely opposed to everything Hitler stood for - the biggest threat to national security. Hitler died on April 30, 1945 by taking poison and then shootin
g himself with a pistol. (corrected)
5. Wife was an advocate of the disadvantaged
6. Invested in jobs and the nation's infrastructure.
7. Spoke to the people not at them.
8. Strong advocate of the military and its soldiers and sailors.
9. Strong foreign policy record in the presence of tyrants.
10. Established and sustained regulation of Wall Street.
11. A champion of minority groups.
12. Ended discrimination in the military.

Sound familiar?

FDR is consistently considered one of the top three Presidents in history but the Tea Party consider him a dangerous Progressive much as they have maligned Obama.

1.      1. Brought the country back from financial collapse.

This is one topic that seems to come up more and more since Obama was elected. There are many comparisons of Obama to FDR.  Obama loves to use the comparison himself. I can’t talk about this topic without mentioning the fact that some believe segments of the Democratic Party engineered this recession so that they could reclaim the power that Franklin D. Roosevelt and the democrats once held.
Below is a chart of congress by party since beginning of this tug of war.

I am always amazed when people credit FDR for bringing the country back from economic collapse when it was he who kept people in poverty for a decade. Yes of course what I just said goes against everything you ever heard in school. For a start let’s look at the unemployment numbers.

Average rate of unemployment
in 1929: 3.2%
in 1930: 8.9%
in 1931: 16.3%
in 1932: 24.1%
in 1933: 24.9%
in 1934: 21.7%
in 1935: 20.1%
in 1936: 16.9%
in 1937: 14.3%
in 1938: 19.0%
in 1939: 17.2%

We can compare that to the unemployment of today and to that of the previous decade. For almost two decades the country has been at what is considered full employment, which is 4.5% to 5.5%. We can debate the reason for the economic downturn in 2008, but this isn’t the time. For now we just know it happened. Since that time we have drifted between 7.9% to 10.1% unemployment. The average tends to linger just above 8%. We are told by Obama this is the new normal. We know it’s not normal and never will be.

FDR instituted the New Deal which in part included the building of infrastructure. We can look around at all the parks and statues to see the things FDR built. Those projects created much needed jobs for which people were grateful. This is why FDR became somewhat of a legend and was elected to four terms. He also installed price controls which froze the price of many goods. This prevented the economy from growing.

Here is the economic lesson we must learn.  Price controls can stop a decline in economy; it essentially freezes it in place and has a place in the scheme of things. Price controls also prevent the economy from growing. If companies cannot increase profits then they cannot hire additional workers and boost wages.

Thankfully, Obama hasn’t taken that route. He does continuously talk about infrastructure spending. The country has an economic cycle that resembles a sine wave.  There will be lows and highs. It’s during these highs we build infrastructure and send people to the moon. Progressives like Obama and FDR practice Keynesian economics where the government spends during a down turn in the economy. It was this practice in part that helped lock the USA in depression for a decade.

US Gross Domestic Product (current dollars)
The Great Crash, 1929-1933
in 1929: $103.6 billion
in 1930: $91.2
in 1931: $76.5
in 1932: $58.7
in 1933: $56.4

Obama, for the most part has been held in check and not allowed to dramatically raise taxes. FDR also manage grow the economy by not raising taxes. As the economy grows the government can spend more because it should be taking in more revenue from the current tax rate. This spending does allow for more economic growth.  In 1937 FDR raised taxes and reduced spending which sent the country once more into an economic spiral. This is because so much of the country’s economy was based on government spending. The mortal since in economics is to raise taxes in a recession, even if it’s on the rich.

I must reiterate, the so called Bush tax cuts are a decade old and have to be considered the current tax rate. Failing to renew those tax cuts can be seen no way other than a tax increase. This would be an economic sin. 

2.Established and protected Social Security

We must first remember that Social Security was in the beginning a volunteer program. The program is run much the same today as it was in the beginning except for now participation is mandatory for most people. The big debate today is that Obama and the democrats want to keep it mandatory, while the republicans wish to return it to its roots where it was voluntary.

We also have to look at the budget deficit when looking at Social Security since the trust fund is composed of private Treasury bills.  At the time of this writing the budget deficient is $16 trillion, which makes those t-bills virtually worthless.

Obama has cut the payroll tax which funds Social Security and other benefits. With social Security facing problems, cutting the money going into the fund could have disastrous results later on. Instead of saving Social Security he might be hastening its demise. He has turned his head to any attempts at securing Social Security.

In conclusion we find that Obama differs from FDR in this area.

3.      Worked toward ending a war.

This is where there is a huge difference between Obama and FDR. FDR led the country to defeat Japan because we had been attacked. We fought until the enemy was on its knees and destroyed. Japan is now one of our greatest allies.

Obama has essentially surrendered in Afghanistan. He has negotiated to allow the Taliban back into the government. We will leave Afghanistan essentially as it was found.I could go into how FDR planned and schemed to get us into a war with Japan and then into the war in Europe, but that can take far too long. I will add some of his words form 1940.

Mr. Roosevelt said at Boston on October 30: "I have said this before, but I shall say it again and again and again: Your boys are not going to be sent into any foreign wars."

The same thought was expressed in a speech at Brooklyn on November 1: "I am fighting to keep our people out of foreign wars. And I will keep on fighting."

The President told his audience at Rochester, New York, on November 2: "Your national government ... is equally a government of peace -- a government that intends to retain peace for the American people."

On the same day the voters of Buffalo were assured: "Your President says this country is not going to war."

And he declared at Cleveland on November 3: "The first purpose of our foreign policy is to keep our country out of war."

     4.  FDR was completely opposed to everything Hitler stood for - the biggest threat to national security. Hitler died on April 30, 1945 by taking poison and then shooting himself with a pistol. (corrected)

Hitler worked closely with the unions to build his empire.  Obama helped orchestrate the handover of General Motors to the unions and the federal government. He did much the same with the Chrysler Corporation.

Hitler, FDR, and Obama have all worked to expand the size and scope of the central government. They all imposed strict regulations on businesses of all types. They were all very business friendly as long as that business toed the party line. Today we see Obama sending copious amounts of money to industries that promotes his green agenda and donate to his campaign. All three embraced the socialist agenda. The three men may have more in common that this statements portends.

5.      Wife was an advocate of the disadvantaged

Who isn’t an advocate of the disadvantage? The greatest way to help the disadvantage is to maintain equal liberties for all Americans and to support a healthy economy.  Neither FDR or Obama managed to produce a healthy economy while spending trillions on social programs.

          6. Invested in jobs and the nation's infrastructure
      Obama and FDR invested huge amounts of money in jobs and both have the highest unemployment of any presidents. It’s the private sector that must invest in jobs, not government. Anytime government creates a job it adds little or nothing to the economy. Anytime the government spends/invests money it is taken from the economy.
     Most of this nation’s infrastructure belongs to state and local governments, and often private industry.  By increasing taxes the federal government robs these local governments and private industry from growing or doing much needed repairs.  The federal government takes money from states and then makes them beg for the money back. When states do manage to get some of that money back it often comes with conditions.  I have written often on how the federal government withholds tax money to effect regulations that congress had already denied the federal government. 

                     7. Spoke to the people not at them

    Both often tell/told people what they wanted to hear

          8. Strong advocate of the military and its soldiers and sailors

This is an area where FDR and Obama are different. Once FDR committed to military action he supported them morally and financially. Obama and the democrats have time and time again tried to push through spending bills to de-funded military action. 

9.      Strong foreign policy record in the presence of tyrants.

While Nazi Germany ravaged Europe FDR did nothing. His speeches supported the isolationist stand of the USA at the time. Obama has apologized countless times to the tyrants of today. He bows before dictators. He refuses to stand with Israel against Iran’s development of nuclear weapons. In the Libyan action Obama said, “We lead from behind.”  Any general or former president will tell you that one does not lead from the rear.

10.  Established and sustained regulation of Wall Street.

This came from both presidents as a result of the financial collapse. It could be said the one good thing FDR did was the safeguard that prevented banks from investing in the stock market. In 1999 Congress enacted, and President Clinton signed into law, the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act which repealed parts of the Glass–Steagall Act that prohibited banks from entering the investment, commercial banking, and insurance services since its enactment in 1933. The Glass–Steagall Act was passed in an effort to prevent another chain of bank failures that created the Great Depression. It would have also helped lessen the effects of this recession. Obama’s financial reform did not rebuild this wall nor did it cover Fannie Mae and Freddie Mac, the center of the crisis.

11.  A champion of minority groups.

For this one let’s just look at Obama. Today minorities have the highest unemployment rate. One can stand on television and talk, but we must look at the results of their actions. The results of Obama’s and the democrat’s policies have done more to harm minorities.  We have only to travel to the inner cities and the projects to see the results of the Democratic Party’s war on poverty. 

When Obama first became president he proudly proclaimed to be against gay marriage.  Now that he seeks re-election he has had a change of heart and supports gay marriage. Many of the obstacles for a couple not sanctioned by a government marriage are government induced. As president, Obama and the democrats could have changed the tax laws which would have allowed unmarried couples to file taxes jointly. If he truly cared he would work to change laws that require any marriage to be sanctioned by government.

12.  Ended discrimination in the military.

I guess this means allowing gays to serve openly. Don’t Ask Don’t Tell  was passed by the Clinton Administration. Having never served in the military I can’t best judge what would have been best for the military. I can say the same for Obama; he should have left that decision to those who run the services.
For the past several decades the military has been one of the least discriminating entities in this country.

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