Monday, May 24, 2010

The New Deal Repeated...

The New Deal Repeated...
My grandfather told me of a time when an agency of the federal government came into his small northern Utah town and slaughtered all the yearlings in order to prop up the price of beef cattle. He said, "some of my friends hadn’t had meat in over a year." The yearlings were not only slaughtered, but they were wasted when people were hungry. The idea that The New Deal was a good deal has gone on too long.
When we are facing trouble, we are afraid and anxious for someone to do something. But that isn’t always the best thing. G.K. Chesterton once wrote, "We are perpetually being told that what is wanted is a strong man who will do things. What is really wanted is a strong man who will undo things; and that will be the real test of strength."
Several scholars in three different articles in the Wall Street Journal school us on the real facts of the New Deal. For starters here is one point, "Roosevelt did famously well by one measure, the political poll. He flunked by two other meters that we today know are critically important: the unemployment rate and the Dow Jones Industrial Average. In his first inaugural address, Roosevelt spoke of a primary goal: "to put people to work." Unemployment stood at 20% in 1937, five years into the New Deal. As for the Dow, it did not come back to its 1929 level until the 1950s. International factors and monetary errors cannot entirely account for these abysmal showings." The Great Depression is said to have lasted about 10 years, but the poor affects to the markets did not correct until the 1950's. That is a high price to pay for experimentation.
We are now 2-3 years into a deep recession and repeating bad history. Really, I believe that is the love affair with socialism that almost every generation wants to try like an experimental drug. And yet, like drugs, the outcome is a foregone conclusion.
In Roosevelt’s time, people felt that private industry was incapable of getting power to people in out of the way places, and so the government must do it. But, government does not have the ability to add value to the economy. It cannot give anything that it first does not take from the people. And so, nationalizing industry has always been a disaster.
Today there is an oil spill in the Gulf of Mexico. BP is having a heck of a time stopping the leak since they are required by law to drill so far from shore that the leak, almost a mile under water, is pretty difficult to stop. So, whose fault is it that the spill continues? Banks were required by government to lend to those whose credit was less than stellar. Whose fault is it that the housing market went bust? President Obama and the current congress propose more government involvement and more government solutions. They will, as they did in the 1930's further and deepen the disaster.
We have people in power who reverence The New Deal. And now, as we look at the fixes for this recession that started with President Bush and have been accelerated by President Obama, we can see that history is being repeated. Unemployment has not been reduced at all, but has risen. There are those that say unemployment numbers are much higher than being reported. Unemployment numbers don’t take into account those who have severance, those who have used up unemployment benefits, those who are under employed, or those who have given up looking.
And during this time of hardship, those who reverence The New Deal seek to expand government programs. Health care is a human right. Welfare recipients who already receive land lines via government assistance now are eligible for cell phones in 20 states. If you want to update your car, your furnace, your kitchen appliances, you just apply to a government program and the Government will fix you up.
While these programs have never been so all encompassing, they have always failed and so on a bigger scale, we know they will fail on an unprecedented scale. More importantly, they are morally wrong. " the argument of markets has its own powerful morality. It is immoral to cause unemployment by pretending that a big government policy is morally necessary. When Andrew Mellon and Calvin Coolidge put through their tax cuts in the 1920s, they made the efficiency argument that supply-siders make today: lower rates could yield, they posited, higher revenues. But they also had a moral argument: high taxes were wrong, confiscatory and illiberal, in the classical sense."
What happened after Roosevelt died having literally being elected four terms, "President for life"? "Roosevelt died before the war ended and before he could implement his New Deal revival. His successor, Harry Truman, in a 16,000 word message on Sept. 6, 1945, urged Congress to enact FDR's ideas as the best way to achieve full employment after the war. Congress—both chambers with Democratic majorities—responded by just saying "no." No to the whole New Deal revival: no federal program for health care, no full-employment act, only limited federal housing, and no increase in minimum wage or Social Security benefits. Instead, Congress reduced taxes. Income tax rates were cut across the board."
In addition to all that, a constitutional amendment (the 22nd) was ratified in 1951 that states, "No person shall be elected to the office of the President more than twice..." To me that says that FDR was not so revered by those who knew him best.
"The main lesson we have learned from the New Deal is that wholesale government intervention can -- and does -- deliver the most unintended of consequences. This was true in the 1930s, when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk."
I hope our countrymen will very soon decide that The New Deal was a bad deal and leave off it’s destructive policies and ideas once and for all.