Exactly what we don't need

So, was talking to my wife's sister the other day. She's a junior at Wisconsin and she asked if I've come around and changed who I plan to vote for, and I said, Why would I? After the usual line about Palin this and Palin that, and Biden brings all this experience, blah blah blah, I then said, well, if it's experience, why aren't you voting for McCain? She then went in to a spiel about this and that, then said, and I'm gonna paraphrase, "Obama is like FDR, and that's what we need. When FDR became president, he wasn't very well known, and, sure some of his policies didn't work, but he was willing to try lots of things to get people to work." I had to stop her there- First, FDR's policies didn't work because they were unconstitutional, amongst other things (see below). Second, FDR was the Democratic nominee for Vice-President in 1920, a sitting governor of New York, former Assistant Secretary of the Navy, and, finally, the cousin of a guy named Theodore Roosevelt. Roosevelt got elected because he was able to convey to the American public that he could and would do something; well, he did do something all right. He turned a regular old recession into The Great Depression. Let's just say that if we need another FDR and Obama is him, I say No thanks. We cannot afford another FDR.

When FDR took office, unemployment was around 25%, but during the period until 1940, unemployment averaged above 17%, and didn't fall to under 10% until 1941, when it hit 9.9%- 6 years AFTER FDR took office. There is increasing economic evidence that BUT FOR FDR's New Deal policies, unemployment would have been much lower and the Great Depression would have ended well before U.S. entered World War II. As Walter Lippmann wrote: "the essence of the New Deal is the reduction of private corporate control by collective bargaining and labor legislation, on the one side, and by restrictive, competitive and deterrent government action on the other side.” In other words, the New Deal was nothing short of the federal government's taking over and managing the economy without a care as to the ability of businesses to conduct their affairs. As the authors of the UCLA study conclude: "Our work shows that the recovery would have been very rapid had the government not intervened." Or, as historian David Kennedy wrote in "Freedom from Fear," “Whatever it was [the New Deal] was not a recovery program, or at any rate not an effective one.”

Now, was FDR able to communicate with the common guy, sure; was his leadership on handling the lead up to World War II and other international programs effective, sure; but on the domestic front, his policies were an absolute disaster. When a panic hit the U.S in 1938, there was a spike in unemployment from 14.3% back up to 19%. As the UCLA paper posits- the passage of the National Industrial Recovery Act, even though it was declared unconstitutional 2 years later, and FDR's keeping as close to that Act's goals as possible, still accounted for "60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943."

According to the UCLA analysts-

"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."

Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt's policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data.

In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.

"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

Instead, what we need is a program that, as President Kennedy once described in an address to the Economic Club of New York (December 14, 1962): "In short, to increase demand and lift the economy, the Federal Government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures." Further, President Kennedy insisted there should be a tax cut on "personal as well as corporate income taxes, for those in the lower brackets, who are certain to spend their additional take-home pay, and for those in the middle and upper brackets, who can thereby be encouraged to undertake additional efforts and enabled to invest more capital."

Obama's tax plan only gets half of it right- he's proposing to decrease taxes for "95%" of taxpayers (let's say lower and middle classes), nevermind that 30% of those taxpayers don't pay taxes anyway, which means they are not getting a tax cut, but are getting a government handout, in order to pay for those handouts, and other new programs, he also proposes to increase taxes on upper middle and upper class, plus proposes a huge increase in government spending, and, on top of all that, an additional increase in social security taxes on those who make more than $250,000; the same people who would be subject to the increase in personal income tax now get hit twice. (Note: Obama proposes that this increase in Social Security tax start in 10 years, but simply by saying that, he can start including revenues from the future to pay for current program costs- once again, the future is compromised to pay for the present.) All to pay for Obama's redistribution of wealth program. As Robert Carroll from the Tax Foundation says, "When Mr. Obama's full package of upper-income tax increases goes into effect, the top marginal tax rate would be nearly 50 percent, a incentive-destroying level we haven't seen since 1986." In a separate article, Carroll also notes that under Obama's tax plan, marginal tax rates go up, even on workers making as little as $30,000. As the article puts it: "Most low- and moderate-income couples would see their effective marginal tax rates rise, in some cases, significantly. Indeed, some low- and moderate-income taxpayers will see their marginal rates rise to more than 50 percent." These rates rise because "the combination of the phase-out of the [Earned Income Tax Credit], the "Making Work Pay" credit, and the child and dependent care credit pushes the effective marginal tax rate to as high as 51.7 percent. That is, the taxpayer who benefits from all these provisions at a lower income discovers that he gets to keep less than one half of every additional dollar of earnings in the roughly $30,000-to-$43,000 range." As a worker makes more money, he is entitled to less and less of his previous benefits, even if he only makes $40,000 a year. By the way, the Tax Foundation even notes that Obama's tax vision is to redistribute wealth.

So, where are we? We know that many of FDR's domestic policies "may not have worked," as my sister-in-law puts it, and there are very good reasons why they didn't work, but those that did work, hurt this country more than helped it. And that Obama, by using our present economic crisis to his political advantage, hopes to more fully realize those failed domestic policies of 80 years ago. Hope and change he may be, but hope is never a strategy and his view of change is something we cannot afford.