At times Barack Obama has compared himself and his policies to that of FDR, the President during the Great Depression.That is turning out to be a very valid and frightening comparison.
The traditional social studies text book view is that Herbert Hoover turned a recession into the great depression, by sitting on his hind quarters doing nothing. Actually that is a result of political propaganda of Roosevelt and his administration. The Truth is that both Herbert Hoover and then FDR turned the recession into a depression by OVER-tinkering with the economy. They were like the Tim Allen character on Home Improvement fooling with things until they blew up. Facts are, the Great Depression did not end until America started investing in Big business. That didn’t happen until we were forced to take that action because of WWII.
As late as 1938, nine years into the depression, almost one out of five workers remained unemployed. What the government gave with one hand, through increased spending, it took away with the other, through increased taxation, and the increased power of labor. But that was not an even trade-off. As the root cause of a great deal of mismanagement and inefficiency, government was responsible for a lost decade of economic growth.
In a 2004 paper, Harold L. Cole and Lee E. Ohanian, both of UCLA, and the Federal Reserve Bank of Minneapolis argued that the Depression would have ended in 1936, rather than in 1943, were it not for policies that magnified the power of labor and encouraged the cartelization of industries.
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Doesn’t that sound a bit like the Economic policies of Barack Obama? higher taxes, higher spending, and a bias toward big labor whether its right for the country or not:
“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. lamented Henry Morgenthau, FDR’s Treasury secretary. Unemployment declined when America began selling materials to nations engaged in a war America would soon join.
In “The Forgotten Man: A New History of the Great Depression,” Amity Shlaes of the Council on Foreign Relations and Bloomberg News argues that government policies, beyond the Federal Reserve’s tight money, deepened and prolonged the Depression. The policies included encouraging strong unions and wages higher than lagging productivity justified, on the theory that workers’ spending would be stimulative.
FDR won the presidency in the campaign of 1932 and took the reins of power in March of 1933. Upon taking office he immediately launched a whirlwind of spending programs, legislation and reforms known as the New Deal. In the first 100 days he unleashed unprecedented activity and expansion of the federal government. This governmental hyperactivity remained the hallmark of the Roosevelt administrations throughout his long presidency.
In order to be allowed to form such a cartel, Roosevelt insisted that each “participating industry raise wages and accept collective bargaining with an independent union.” This meant that those who still had jobs were able to sell their labor above its market value, but it made the situation more difficult for the unemployed as businesses could not afford to expand their work force at the inflated rates of pay.
Murphy notes how Roosevelt’s measures were implemented with great speed and on a large scale. By 1934 over 500 industries operated under the “Codes of Fair Competition,” covering almost 80 percent of private, nonfarm employment. This meant that within 18 months of Roosevelt’s inauguration, the federal government had managed to influence prices and wages in the bulk of the US economy….Roosevelt refused to give up his policies of prices and wages manipulation even after it became obvious they did not have the desired effect. His harmful actions were driven by the belief that government bureaucracies are better at solving economic problems than the free market itself. The nation paid dearly for Roosevelt’s conceit with the longest and most severe depression in American history.
FDR is thought of as an economic “messiah” but when his New Deal and all of FDR’s economic policies are examined it can be argued that they were a disaster for America. The sad part is that President Obama is intent on following the same basic economic strategy.