Former Senator Phil Gramm has in today's Wall Street Journal an interesting look at the Great Depression, and the echoes of FDR's policy choices that he sees in President Obama's policies. He notes that if employment is the measure, the U.S. has done worse with the 'stimulus' than most other countries affected by the financial crisis and recession.
Obama administration officials such as Treasury Secretary Tim Geithner have argued that without their policies the economy would be worse, and we might have fallen "off a cliff." While this assertion cannot be tested, we can compare the recent experience of other countries to our own.
The chart nearby compares total 2007 employment levels in the United States, the United Kingdom, the 16 euro zone countries, the G-7 countries and all OECD (Organization for Economic Cooperation and Development) countries with those of the second quarter of 2010. There are 4.6% fewer people employed in the U.S. today than at the start of the recession. Euro zone countries have lost 1.7% of their jobs. Total employment in the U.K. is down 0.6%, G-7 average employment is down 2.4%, and OECD employment has fallen 1.9%.
This simple comparison suggests two things. First, that American economic policy has been less effective in increasing employment than the policies of other developed nations. Second, that if there was a cliff out there, no country fell off. Those that suffered the most were the most profligate...
Indeed. But Mr. Gramm's look back at the depression-era policies of Mr. Roosevelt finds dramatic increases in spending - which started under Pres. Hoover - and in taxes, that did little to stem the depression, but rather prolonged it. He also finds much of the same tax-the-rich class warfare that we hear from Mr. Obama. This quote from Winston Churchill is instructive.
The Roosevelt administration also conducted a seven-year populist tirade against private business, which FDR denounced as the province of "economic royalists" and "malefactors of great wealth." The war on business and wealth was so traumatic that the League of Nations' 1939 World Economic Survey attributed part of the poor U.S. economic performance to it: "The relations between the leaders of business and the Administration were uneasy, and this uneasiness accentuated the unwillingness of private enterprise to embark on further projects of capital expenditure which might have helped to sustain the economy."
Churchill, who was generally guarded when criticizing New Deal policies, could not hold back. "The disposition to hunt down rich men as if they were noxious beasts," he noted in "Great Contemporaries" (1939), is "a very attractive sport." But "confidence is shaken and enterprise chilled, and the unemployed queue up at the soup kitchens or march out to the public works with ever growing expense to the taxpayer and nothing more appetizing to take home to their families than the leg or wing of what was once a millionaire. . . It is indispensable to the wealth of nations and to the wage and life standards of labour, that capital and credit should be honoured and cherished partners in the economic system. . . ."
Sharp guy, that Churchill. It's too bad his bust is no longer in the White House. Mr. Obama and his fellow Democrats would rather tilt at the windmill of "the wealthy" (otherwise known as "those who employ") for what they perceive as their traditional political gain than pursue policy that would grow the economy. Most economists, and most politicians, in fact, will tell you that it's a bad idea to raise taxes in a struggling economy. Last quarter growth was 1.7%. Positive, but barely so, and in no way indicative of a "robust recovery."
The Boston Globe, no friend of Republicans, finds fault with Obama's Democrats for failing to address the pending tax increase issue before adjourning for midterm campaigning. Predictably, it wanted the tax increase to be blocked for middle class taxpayers but still to take place for the job creators. But nothing was done, and that in itself is a problem.
Democrats worry that they have been robbed of their most valuable populist talking point: that cuts on income taxes should be extended for the middle class, but not for the wealthy.
“It is both a political and a governmental mistake,’’ said Representative Michael Capuano, a Somerville Democrat, of the delayed vote. He pushed for a vote this week and tried floating an alternate proposal — to no avail. “To me, it is a classic example of what’s wrong with Washington.’’
The tax cut extension is expected to remain a political issue over the next few weeks, but not in the way Democrats had initially intended. Rather than using it on the campaign trail against Republicans, Democrats could find themselves on the defensive as the GOP yesterday began framing the vote delay as an example of government ineptitude and cowardice.
Democrats have only themselves to blame for the mess they will see one month from tomorrow. They could have pursued policies that would allow recovery to take place. (Note: government does not create recovery, but it can create the environment for it.) Then, able to point to that accomplishment with pride, with employment once more growing, Mr. Obama and his hyper-partisan, hyper-liberal congressional leadership would have had the political capital necessary to try to pass their agenda with support not just from newspaper editors and CNN/MSNBC talking heads but with some of the 53% that voted for him. Now, however, they chose in their policies the triple binds of hamstringing recovery, robbing Americans of freedom in the healthcare bill, and creating unsustainable debt while threatening tax increases.
And Americans are angry. Rightly.
