FDR, Obama: Economic Mismanagement

Discussion in 'Economy' started by PoliticalChic, Oct 1, 2010.

  1. PoliticalChic
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    PoliticalChic Diamond Member

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    Amity Shlaes
    The Rules of the Game and Economic Recovery
    https://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2010&month=09

    From that article:


    1.When you go to research the 1930s, you find that government prevented recovery. Roosevelt and his New Deal policies impeded recovery, especially during the latter half of the decade. In short, the prolonged Depression can be put down to government arrogance—arrogance that came at the expense of economic common sense, the rule of law, and respect for property rights.

    2.Consider the centerpiece of the New Deal’s first 100 days, the National Recovery Administration (NRA), : prices needed to be pushed up to make recovery possible, whereas competition constrained recovery by driving prices down. They held that big firms in industry—those “too big to fail”—were to write codes for all members of their sector, large and small—which naturally worked to the advantage of those larger firms. As for consumer choice, it was deemed inefficient and an inhibitor of recovery.

    a. As Henry Morgenthau reports in his diaries, prices were set by the president personally. FDR took the U.S. off the gold standard in April 1933, and by summer he was setting the gold price every morning from his bed. Morgenthau reports that at one point the president ordered the gold price up 21 cents. Why 21, Morgenthau asked. Roosevelt replied, because it’s 3 x 7, and three is a lucky number. “If anyone knew how we set the gold price,” wrote Morgenthau in his diary, “they would be frightened.”

    3. As for big labor, the Wagner Act of 1935 proved to be quite destructive. It brought on drastic changes at factories, including the closed shop—the exclusion of non-union members. Another innovation it helped bring about was the sit-down strike, which threatened the basic property right of factory owners to close their doors. Most importantly, it gave unions the power to demand higher wages—and they did. A wage chart for the 20th century shows that real wages in the 1930s were higher than the trend for the rest of the century. This seems perverse, considering the economic conditions at the time. The result was high paying jobs for a few and high unemployment for everyone else.

    4. It is not hard to see some of today’s troubles as a repeat of the errors of the 1930s. There is arrogance up top. The federal government is dilettantish with money and exhibits disregard and even hostility to all other players. It is only as a result of this that economic recovery seems out of reach.

    a. The key to recovery, now as in the 1930s, is to be found in property rights. These rights suffer under our current politics in several ways. The mortgage crisis, for example, arose out of a long-standing erosion of the property rights concept—first on the part of Fannie Mae and Freddie Mac, but also on that of the Federal Reserve. Broadening FDR’s entitlement theories, Congress taught the country that home ownership was a “right.”

    b. Property rights are endangered as well by the ongoing assault on contracts generally. A perfect example of this was the treatment of Chrysler bonds during the company’s bankruptcy, where senior secured creditors were ignored, notwithstanding the status of their bonds under bankruptcy law.

    c. Three other threats to property loom. One is tax increases, such as the coming expiration of the Bush tax cuts. More taxes mean less private property. A second threat is in the area of infrastructure. Stimulus plans tend to emphasize infrastructure—especially roads and railroads. And after the Supreme Court’s Kelo decision of 2005, the federal government will have enormous license to use eminent domain to claim private property for these purposes. Third and finally, there is the worst kind of confiscation of private property: inflation, which excessive government spending necessarily encourages. Many of us sense that inflation is closer than the country thinks.
     
  2. Neubarth
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    Neubarth At the Ballpark July 30th

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    The entire article above is bullshit.
     
  3. Neubarth
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    Neubarth At the Ballpark July 30th

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    The stupidity of the article is appalling and evident for all to see. At the time, the United States was the leading manufacturing country in the world, BUT the world market was buying far less. Our economy depended upon world sales and they were not there. Saying that any government policy caused that lack of sales because the rest of the world was in Depression is just inane. The World had to start buying for the American economy to improve. When the world started buying American product, the American economy went up, too. It is amazing how that happens.
     
  4. PoliticalChic
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    PoliticalChic Diamond Member

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    Let's see some real data..make your point, if you can.

    Point out any errors, else one may decide that your post is an example of "stupidity [and] appalling and evident for all to see."

    1.Gene Smiley, a professor of economics at Marquette University provides more than 15 pages of relentless evidence that the fuzzy, price-fixing cartelization promoted by that ill-conceived legislation worsened the climate for American business. Wages soared in 1933 in the face of high unemployment, forced up by the underconsumptionist mandates of the NRA, which, in turn, thwarted the budding recovery that followed the end of the 1933 banking crisis. Workers were priced out of the market, virtually halting a promising rise in employment. Activist government intervention in the economy—new regulatory agencies like the Securities and Exchange Commission and the National Labor Relations Board, new make-work relief agencies like the Civilian Conservation Corps, new entitlement programs like Social Security—did not speed recovery, but actually retarded it compared with historical American norms (e.g., the 1920-1922 downturn) or those of other countries.
    The Claremont Institute - What Went Wrong?

    2. The promotion of labor unions by New Deal laws (especially the Wagner Act of 1935) unquestionably hastened the demise of much of American manufacturing, as capital fled the high labor costs that unions encouraged. Minimum-wage laws did little to help the poor, but created unemployment for some workers, disproportionately members of minority groups. In short, many Depression-era laws did nothing to end the Depression, but imposed significant long-term costs on American society.
    Ibid.

    3. ... a decline in the ratio of deposits to currency, beginning in October 1930, that was the single most important factor in the monetary decline. This deterioration of the monetary stock was magnificently described by Milton Friedman and Anna Schwartz in their Monetary History of the United States more than 40 years ago. The international dimension was a secondary cause.
    Ibid.

    4. In 1935, the Brookings Institution (left-leaning) delivered a 900-page report on the New Deal and the National Recovery Administration, concluding that “ on the whole it retarded recovery.”

    5. Arthur Schlesinger, Jr., liberal New Deal historian wrote in The National Experience, in 1963, “Though the policies of the Hundred Days had ended despair, they had not produce recovery…” He also wrote honestly about the devastating crash of 1937- in the midst of the “second New Deal” and Roosevelt’s second term. “The collapse in the months after September 1937 was actually more severe than it had been in the first nine months of the depression: national income fell 13 %, payrolls 35 %, durable goods production 50 %, profits 78% .

    Did you actually read her article, or merely the synopsis? What are the errors?

    Rather than barnyard euphemisms, where are your documented disagreements with Ms. Shlaes?
    Without same, I'll stick with her ratiocination.
     

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