The Pre-Depression Economy
We talk about the 1920s as the “Roaring 20s,” a time of legendary economic prosperity. If you were a member of the monied elite of the time, or within striking distance of joining their ranks if you got the right breaks, then yes, it was all champagne, flappers and F. Scott Fitzgerald and your yacht was rising on a tide of increasing stock values that no one thought would end. On the other hand, if you a regular lower or middle class person, you saw work come and go, wages stagnate, and the divide between the “have nots”, “the haves” and the “have mores” increase exponentially.
And all that was before the whole house of cards came crashing down. Today, instead of the stock market, it was the mortgage market. Once more, the problem came down to government regulation. In this case, the Clinton Administration and congressional Democrats pushed banks into making risky—read sub-prime—loans, Republicans complained and asked congressional leaders to do the right thing but did little more (except for one cantankerous old maverick in the Senate who introduced legislation to rein in Fannie and Freddie, only to have Senate Democrats kill it before it reached the Floor). We saw the stock market rise with the real estate market, the economy seemed to be going well, yet few jobs were created. Even Bush called it a “jobless recovery.”
Once again, those in the markets were doing well, those who were not saw jobs come and go and wages stagnate. This difference this time is that everyday people were given mortgages they could not afford by mortgage bankers who knew they couldn't afford the loans but didn't care. The government told them to do it and gave them a reason—in the forms of Fannie and Freddie—not to worry about it.
Once again, that was before the whole thing came crashing down.
Responding to a Depression
We needn't go into the details of the Great Depression—we've all seen the photos of the poor and dispossessed and heard tales of investors leaping from tall buildings as their fortunes vanished—except to say this: It began with a failure in a single area of the economy and then radiated out from there until it pulled the whole economy to ruin. This time around it was sub-prime mortgages—a market that should have never been created in the first place—and that spread to legitimate mortgages until the whole mortgage industry was embroiled. From there it hit the commercial credit market, the stock market, the commodities market (at least the price of gas is dropping), insurance, banking, the auto industry, consumer credit and there is no telling when or where it will stop.
Back in 1929, the first time all Hell broke loose, then-President Herbert Hoover supported a course of governmental austerity in which government spending would be cut. Hoover considered the market crash to be a market correction and if the market was left alone, it would clean out corruption and bad business practices and recover to be much healthier. Congress had other ideas and forced Hoover to intervene. Hoover did so reluctantly, his efforts consisting of spending to stabilize the business community. He thought that returning prosperity would eventually "trickle down" to the poor majority. Today, we have massive federal spending to stabilize the business community. Call it a rescue or a bailout or even a crap sandwich, the goal of it is to stabilize American financial businesses. The idea today, as it was then, that the benefits would work their way down to poor and downtrodden.
Unfortunately for Hoover, the poor and downtrodden were unwilling to wait for prosperity to return. Hoover found himself blamed for the crisis—much like Bush is blamed today and just as unfairly—and so he was easily defeated in the presidential election of 1932 by Democrat Franklin D. Roosevelt.
The New Deal
Roosevelt's New Deal stood on three, equally important concepts: Relief, recovery and reform—ease the suffering, fix the problems and keep them from happening again. The First New Deal sought to accomplish this from the top down, like Hoover's programs, but it did little to alleviate the suffering of individuals, so a second, more socialistic New Deal was put into effect that attempted to end the Depression by spending at the bottom of the economy where government funds attempted to turn non-consumers into consumers again. This was the time of the Works Progress Administration, a huge federal jobs program crafted to hire unemployed breadwinners for the purpose strengthening their family's well-being as well as boosting consumer demand. Over the course of its life (1935-43) over eight million Americans worked on WPA projects. Roosevelt also set up the 1935 Social Security Act to create a modest worker-funded, federally-guaranteed, pension system to act as a safety net for older workers and promote increased consumer demand. Another significant component was the National Labor Relations Act of 1935, also called the Wagner Act after its sponsor, Senator Robert Wagner of New York. This law attempted to prevent employers' use of intimidation and coercion in breaking up unions and set up the National Labor Relations Board to guarantee the right of collective bargaining for American workers.
While these last two are still with us, as are many other innovations of the Roosevelt Administration, there are really only two things we know about their efficacy. The first is that Roosevelt spent record sums of money and raised taxes to confiscatory levels to pay for the spending; that he received support in this from the Soviets and America's own, home-grown socialists; and the second is that World War II put a sudden and dramatic end to both the Great Depression and the New Deal, so we have no way of knowing whether or not it would have ultimately worked.
The New, New Deal
Welcome to 2008. We see the conditions that led up to the Crash of 1929 being played out again. We have the crash itself and see it affecting many other sectors of the economy; we have a Republican president taking the heat for the problem, even though he did not create it, by the people who actually did create it and their minions; and we have a left-wing savior who is as vague on how he will solve the problem as Roosevelt was, but who promises to deal with the problems from the bottom up, just as the second New Deal did, spending lavish amounts of money and taxing the American people and American business to the bone to pay for it. He even supports measures to strengthen trade unions by eliminating secret ballot voting in union votes, opening the way for strong-arm tactics against those who don't support unionizing their workplace.
The Bottom Line
What we don't see are any safeguards to make sure that this never happens again. Obama and the Democrat leaders in Congress are all about Relief. There is a touch of recovery and very little reform. Obama seems to be following the Roosevelt blueprint, but he is planning to take it to its logical conclusion. You can see it in the statements he makes, the words he uses and the people he associates with. If, after listening to his 2001 Chicago Public Radio interview, his comments to Good Morning America or what he said to Joe the Plumber, you still don't get that he is, in fact, a socialist with heavy Marxist leanings, then you have not been paying attention. How else can you explain the way they punish news outlets for printing and broadcasting things they don't like. Three major papers were kicked off the Obama campaign plane because they all endorsed McCain. The Obama campaign denied this, of course, but it is hard to get around that “coincidence” after the way the TV stations in Orlando and Philadelphia were treated.
Roosevelt's New Deal was all about getting people back to work, stabilizing the economy and ending a dark period in American history. Many historians and economists blame his policies for lengthening the Depression far beyond what it would have been had he left things alone. That is a topic of debate since World War II changed everything. What is certain is that Roosevelt pushed us to the Left, introducing many socialist elements into American society, and that many of the things he did were patently unconstitutional and were struck down by the Supreme Court. However, that said, his reasoning was more practical than it was ideological. You cannot say that for the Democrats of today.
In the face of fact, in the face of common sense, Obama, Reid and Pelosi are preparing to tax and spend their way to an even Greater Depression than we have seen before. Instead of creating a climate where business and entrepreneurship can flourish, they are far more concerned with redistribution of wealth, media control and turning the US into a European-style welfare state.
At least then it will be fair, right?