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A Second Great Depression? You Decide!

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As I have been discussing--much to the chagrin of the local media such as it is--the past four years how the American economy has been headed down the wrong path.   The great gap between rich and poor has widened dramatically over the past two decades mostly due to the dramatic changes in tax policy that disproportionately benefited the most affluent at the expense of the vast majority who are wage earners.   

There are many parallels between where we as a nation economically are today and where we "were" as the Great Depression gathered steam throughout the 1930's.    "Trickle down" was tried in the 1930's so why did we try it again?  

In the 1930's Corporate Titans like Pierre S. DuPont schemed to repeal prohibition and place a tax on beer that would enable dramatic tax cuts for affluent individuals and corporations.    

Mr. Dupont opined that "the rich should not bear the burden of taxation. -Taxes, Du Pont reasoned, ought to be paid by the working class, not the "productive class (which he defined as large employers).

Throughout his tenure, Hoover cut public works  (reducing jobs) while extending government assistance to his banking friends.    Hoover scoffed at relief efforts for the people, but eagerly provided "Corporate Welfare" to the most powerful individuals and corporations.   Again, does this sound familiar?

A contemporary example of this is the Florida Legislature's mandate to Florida consumers to "fund" the construction of Progress Energy Corporation's proposed Levy County Nuclear Power Plant through additional fees added to monthly electric bills.  This IS corporatism in 2008!

Just as today, the DNC was little different in economic policy issues than the Republicans except that in the 1920's and 1930's, Democrats were "wet" and Republicans were "dry."   In fact, Andrew Mellon--one of the richest men in America at that time and Secretary of the Treasury from 1921-1932, and whose primary goal was to cut taxes for the rich throughout his tenure--offered the prevalent conservative dogma we see repeated ad nauseum over the past twenty years.

The primary mechanism of fulfilling his dream of lifting the tax burden from the rich was a national sales tax.  Such a change in federal tax policy would according to Mellon, "shift the majority of the tax burden from the rich to the poor."   Sounds familiar doesn't it?"- Can we say "FairTax?" 

Our economic future is poised upon a precipice.   What will our next president and the congress do?  Will they ignore history only to repeat it? Will they take to heart the lessons of history, ignored by all but a few (including this writer), and do the correct thing?   

I have confidence in the intellect first and foremost, and quite possibly the determination of President-Elect Obama.  I have much less in the congress, many of whom from both sides of the aisle have been--and remain--bought and paid-for lackies of the first order.  

Many of our elected officials (not surprisingly with the way in which our political system exists) are grossly deficient in knowledge, foresight and character and are consequently much less inclined to do the right thing for the people, when it involves compromising their "promise" to the lobbyists who paid their way.

While the incumbent state and federal representatives locally either said nothing or defended their advocacy for the status quo through rose colored glasses, they remain responsible for their complete oblivion or purposeful ignorance of the growing wave of financial disintegration.   At the federal level, banking and corporate deregulation, as well as lax and diminished oversight allowed to evolve over the past twenty years or so have helped dig this hole as well.

While the perpetually distracted voter bears some accountability, it is difficult to imagine that most people would be sharp enough to see through the media propaganda so supportive of incumbents and outrageously critical of challengers and still hold elected officials accountable at the ballot box.

Today, the Rush Limbaughs of print, radio and TV roundly criticize "any" effort to inject Keynesian stimulus into the overall economy as socialism, while government largesse extended to any corporate entity is permitted no questions asked.    Can we say AIG?  Goldman Sachs? Et al?

To note that what is true now was true then, is instructive to those interested enough to look. To the many whose heads remain in the sand, we can only say, "those who ignore history are doomed to repeat it."   The problem is, as I have stated previously, people "influenced by the media" were and are, "programmed" to ignore the facts.  As we are (as the future transitions to the present in what may well be increasingly dramatic and destructive fashion) facts do matter!

As a group in 2008 (incumbent congressional representatives), there was no debate this past election cycle because they all knew they had no leg to stand on against their challengers  on the issues.   Meanwhile our intrepid media (bearing full responsibility) gave no quarter in virtually defending said incumbents collective absence in failing to uphold their civic responsibility to debate in their shared effort to defend the status quo.  The propaganda-propagating ,establishment-defending corporatist media IS one of America's major problems going forward, is worse than ever and must be exposed.  

Likewise, the Florida Democratic Party and certain of its county components and in particular its state leadership, bear culpability in its many years of purposeful ineptitude which has left Florida taxpayers "holding the bag" financially and otherwise directly resulting from a completely out of balance legislature. Can we say Sansom?

The worst performing schools in the country, 41st in funding nationally (Florida), are now scheduled to be cut again and seniors (many of whom voted for that "nice" little old lady that I ran against) are scheduled to have Medicaid funding slashed--leading to cuts in nursing home staffing and home health services. All due to an economy developed for and by "the corporation" through its lobbyist connection to the entrenched political class--who do the bidding "wink and a nod" in return for those $2,300 dollar contributions by the boatload.   

Working America and what remains of a shrinking middle class must now stand ready in whatever way we can- to pay the price.  

For more information on America's First Great Depression in order that one may prepare for what may well be America's SECOND Great Depression please read:

 "The Great Depression, America 1921-1941"  By Robert S.  McElvaine

*Extending credit to Mr. McElvaine for historical excerpts taken from his book as noted above.

This Looks Like the Start of a Second Great Depression

By Paul Krugman, The New York Times. Posted January 7, 2009.

Will we act swiftly and boldly enough to stop it from happening?

"If we don't act swiftly and boldly," declared President-elect Barack Obama in his latest weekly address, "we could see a much deeper economic downturn that could lead to double-digit unemployment." If you ask me, he was understating the case.

The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren't lending; businesses and consumers aren't spending. Let's not mince words: This looks an awful lot like the beginning of a second Great Depression.

So will we "act swiftly and boldly" enough to stop that from happening? We'll soon find out.

We weren't supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy. In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the "central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades."

Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply. Ben Bernanke, the Federal Reserve chairman, famously apologized to Friedman on his institution's behalf: "You're right. We did it. We're very sorry. But thanks to you, we won't do it again."

It turns out, however, that preventing depressions isn't that easy after all. Under Mr. Bernanke's leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five-alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall.

Friedman's claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy--large-scale deficit spending by the government--is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama's plans to rescue the economy.

But these plans may turn out to be a hard sell.

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation--which is pretty rich considering their party's behavior over the past eight years.

More broadly, after decades of declaring that government is the problem and not the solution--not to mention reviling both Keynesian economics and the New Deal--most Republicans aren't going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs--a burden of proof never imposed on proposals for tax cuts.

This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment "which, because they are not wholly wasteful, tend to be judged on strict 'business' principles." What gets lost in such discussions is the key argument for economic stimulus--namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

All of this leaves me concerned about the prospects for the Obama plan. I'm sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action.

Here's my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it's only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy--well, you can see where this is going.

So this is our moment of truth. Will we in fact do what's necessary to prevent Great Depression II?

 

Take action -- click here to contact your local newspaper or congress people:
This IS not the time to go light on Keynesian Stimulus, Advise your Representative!

Click here to see the most recent messages sent to congressional reps and local newspapers

http://www.johnrussellforcongress.com

I am a Nationally Certified Acute Care Nurse Practitioner/ARNP with an MBA in Health Systems Management and a former financial advisor Series 7 and 63. I was the Democratic Nominee in both 2006 and 2008 for Florida's 5th District U.S House seat in (more...)
 

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The present economic system is based on false prem... by Vijayaraghavan Padmanabhan on Thursday, Jan 15, 2009 at 11:14:49 AM
You read it constantly on this site, some unknown ... by virginius "gin" arnold on Thursday, Jan 15, 2009 at 11:49:34 AM
" I cannot believe that Obama, a total o... by William Whitten on Thursday, Jan 15, 2009 at 2:07:26 PM
Obama's millions in contributions are evidence... by UncleSim on Thursday, Jan 15, 2009 at 2:38:59 PM
"We really do need swift, bold action"..... by William Whitten on Thursday, Jan 15, 2009 at 2:11:41 PM
Yeah, apparently John's economic history exten... by UncleSim on Thursday, Jan 15, 2009 at 3:23:14 PM
Well, if government 'investment' of taxes ... by UncleSim on Thursday, Jan 15, 2009 at 2:27:32 PM