This is a transcript of a discussion on yesterday’s show:
President-elect Barack Obama calls it “the largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s.”
The New Deal – all over again.
Most of the infrastructure spending being proposed for the massive stimulus package that Obama and congressional Democrats are readying, however, is not based on anything new. The money will go to projects that have been on the wish lists of state highway departments for years.
Obama wants to “rebuild America” with an “infrastructure bank” run by a new board that would award $60 billion over a decade to projects such as high-speed rail to take the country in a more energy-efficient direction. But the current economic issue has put some pressure to start projects immediately – low hanging fruit - “use it or lose it,” according to Obama. What he means is that while America is in a spending mood, we gotta get some stuff started. Gotta get the spending started. But let’s take a look at the New New Deal – and actually the Old New Deal for that matter.
FDR created a lot of government work during his New Deal Administration before WWII – 1934 – 1940, we were in a deep depression caused by the type of economic policy we followed in the 1920’s. In 1929 financial disaster struck. By 1934, unemployment was 17.4 percent. So FDR came into office with Relief, Reform, and Recovery – I will fix the economy. When we entered WWII, the economy was not terribly better than is was in 1934 – unemployment was still 17.4 percent and had not dropped below 14% at any time during this period. The New Deal was all about government spending and regulation. The New New Deal is all about government spending and regulation – this is why we have the “deregulation” caused our economic problems meme out there now. They are already making the case for more regulation. There is going to be a car czar. There is going to be a new board to oversee this $60 in improvements that is the low hanging fruit of the “chase your tail economic policy” that is going to end up defining Obamanomics.
President Elect Obama is going to fix the economy the same way and with the same effects. The New Deal took money out of the economy and put it into government work programs and hand outs. But the soup kitchen lines didn’t go away. And when people finished the CCC projects, and left their camps to go back home – the jobs still were not there. Only a war saved America from another 10 years of depression.
Let me quote a recent article at RealClearPolitics.com by Mona Charen
“Amity Shlaes’ “The Forgotten Man” reminds us that FDR was a class warrior with a vengeance, always at pains to pin the nation’s ills on “economic royalists” who had, he claimed, depressed wages, fixed prices, and conspired to keep all of the nation’s wealth in their own greedy hands. FDR’s war on businessmen (which featured not just rhetorical but actual criminal prosecutions) spread fear and timidity throughout the entrepreneurial sector. Shlaes writes, “The New Yorker magazine’s cartoons of the plump, terrified Wall Streeter were accurate; business was terrified of the president. But the cartoons did not depict the consequences of that intimidation: that businesses decided to wait Roosevelt out, hold on to their cash, and invest in future years.”
President Obama wants to spread the wealth and spend more of your money; and the same thing is going to happen. This recession is going to go on longer than it would if that money was kept in the economy.
It is only recently that the New Deal myth has really taken hold. At the time there was less pretense. In “New Deal or Raw Deal?” Burton Folsom of Hillsdale College quotes Treasury Secretary Henry Morgenthau. Testifying before the House Ways & Means Committee in May of 1939, - and this was a guy who was an ally and acolyte of FDR – here is what he said in his testimony.
“We are spending more money than we have ever spent before and it does not work. … I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. 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.”
So, FDR’s failed policy is the basis for President Obama’s economic policy. Taking more money from you and spending on government projects.
Now, let’s take another view. Let’s look at what happens when your employer has more money. Let’s look at what happens when YOU have more money.
When your employer has more money, they tend to invest it. They invest in better computers for example. They invest in better benefits to retain good employees. They give out bonuses for good performance. Raises are significantly higher in the corporate world than they are during tight years. In a country where our businesses pay higher tax rates than 95% of the rest of the world, the President Elect wants to take more money from your employer and then give it to someone who hasn’t worked for it. Wouldn’t you rather that money went to you than to the government? Doesn’t it make more sense to leave that money with you than to take it, process it through this archaic economic structure of the government and then give it back to you? Isn’t that an expensive way to let you keep your money? That is, if you get any back at all. Some of you – more than anyone is willing to admit – are going to pay into a tax system and get nothing back. Your money goes to someone else.
But President Obama is going to preside over his call to service programs and his New Deal programs. Make work government spending instead of putting that money into the private sector, where it is spent efficiently. Government is almost NEVER the efficient way to get something done. The New New Deal – channeling FDR.
This goes back to what I was saying during the campaign. You had Barack Obama channeling JFK, MLK, RFK. Then we have the “shoes photo” where he is channeling Adlai Stevenson. Then on election night – which was profound and memorable to me – I a think we were seeing Ronald Reagan being channeled. Now it is FDR. I don’t think we have met Barack Obama yet – but to be fair, all we have are the 8-9 press conferences he has had since election night.
We will get to know the Real Barack Obama over the next 4 years. That should worry you a bit - I was hopeful until I saw his choices for Cabinet positions. Liberals in key positions and moderates where he could afford them. What does that mean? Liberal policy on key issues and moderate policy where he can afford it.