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Pat Buchanan
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Obama's Choice: FDR or Reagan

Comment

Barack Obama, it is said, will inherit the worst times since the Great Depression. Not to minimize the crisis we are in, but we need a little perspective here.

The Great Depression began with the Great Crash of 1929. By 1931, unemployment had reached 16 percent.

By 1933, 89 percent of stock value had been wiped out, the economy had shrunk by one-third, thousands of banks had closed, a third of the money supply had vanished, and unemployment had reached 25 percent — among heads of households. And in those days, there was no unemployment insurance, no Medicare, no Medicaid, no Social Security, no welfare.

FDR's answer: vast federal spending, tough new regulations on business and higher taxes — like Herbert Hoover before him, only more so.

The Depression lasted until war orders from the Allies brought U.S. industry back to life. Before 1940, not once did unemployment fall below 14 percent. In May 1939, Treasury Secretary Henry Morgenthau testified:

"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."

Politically, the New Deal was a smashing success, with FDR's landslides in 1932, 1934 and 1936 virtually wiping out the GOP.

Yet, economically, the New Deal was a bust, failing utterly to restore prosperity. Despite the indoctrination of generations of schoolchildren in New Deal propaganda, that is the hard truth.

Consider, now, how Ronald Reagan responded to the economic crisis of 1980, the worst since the Depression. In the "stagflation" of that Jimmy Carter era, interest rates had reached 21 percent and inflation 13 percent.

Reagan's answer was the tight money policy of Fed Chairman Paul Volcker and across-the-board tax cuts of 25 percent, while slashing the highest rates from 70 percent to 28 percent.

While unemployment hit 10 percent in 1982 and Reagan lost 26 House seats, in 1983 the tax cuts kicked in.

From there on out, it was boom times until Reagan rode off into the sunset, having created 20 million new jobs. "The Seven Fat Years," author Robert Bartley called them.

Reagan had followed the lead of Warren Harding and Cal Coolidge, who had cut Woodrow Wilson's wartime tax rates of near 70 percent to 25 percent, resulting in "The Roaring '20s," a time of unrivaled prosperity.

The JFK tax cuts of the 1960s, also a Reagan model, were equally successful.

Harding, Coolidge, JFK and Reagan all bet on the private sector as the engine of prosperity.

All succeeded. Franklin Roosevelt bet on government. And the New Deal failed. It was World War II that pulled the United States out of the Depression ditch of the 1930s.

Comes now the financial collapse and economic crisis of 2008, inherited by Obama, with 40 percent of all stock values wiped out in a year, foreclosures pandemic, and unemployment near 7 percent and surging.

In crafting his solutions, Obama seems to be brushing aside the Reagan, JFK and Harding-Coolidge models, and channeling FDR and the New Deal Democrats.

Already staring at a $1.2 trillion dollar deficit for the year ending Sept. 30, about 8 percent of the entire U.S. economy, Obama intends to add a stimulus package of $700 billion to $1 trillion, yet another 5 percent to 7 percent of gross domestic product. The resulting deficit would be twice as large as Reagan's largest, 6 percent of GDP, which was the largest since World War II.

And how is this Niagara of money to be spent?

Hundreds of billions will go out in checks of $500 to $1,000 to wage-earners and individuals who do not even pay taxes. This is much like the George McGovern "demogrant" program of 1972, where every man, woman and child, if memory serves, was to get a $1,000 check from the U.S. government.

Other hundreds of billions will go to shore up state and municipal spending. Other hundreds of billions will go for "infrastructure" projects, another name for earmarks, which is a synonym for pork.

Now, as Obama does not intend to raise taxes, at least now, he is going to have to borrow this near $2 trillion from foreigners or U.S. taxpayers, or the Fed will have to create the money. Undeniably, this will have an impact upon the economy. But what will that impact be?

Where in history, other than World War II, is there evidence that such a mass infusion of spending restored prosperity?

Obama and the Democrats are taking a historic gamble, not only with their careers but with the country. If this monstrous stimulus package, plus the trillions in hot money, do not work; if the two ignite rampant inflation, rather than real growth, we are all out of options. The toolbox is empty.

And what will follow may truly resemble the 1930s.

Patrick Buchanan is the author of the new book "Churchill, Hitler and 'The Unnecessary War." To find out more about Patrick Buchanan, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2009 CREATORS SYNDICATE INC.



Comments

2 Comments | Post Comment
Sir;... Recreating the past is no way to secure the future... My bet is on Mr. Obama playing his own hand with the cards he has been dealt... No one ever gets to be great acting like some one who was great... Everyone who would be great has to be great, -think big, think clearly, achieve what is possible, ride public opinion one day, and guide it the next; and if Mr. Obama can do that, and avoid being killed by the nuts, then he will fit well in a history book... One thing is clear... He understands how near this society is to a meltdown...He understands a lot of the long term, under lying frustration of this people... Put these two facts together and you have a powder keg and a burning fuse... Those republicans who want more of the problem, -of the rich getting richer, of more same old same old are tying knots in the fire hose... The question is not what Mr. Obama will be or can be...The true question before us is whether this whole government has the power to reform itself under the stress of patent failure, or whether it is doomed by its inability to deliver the goods as promised in the constitution... If it can do what it set out to do, this country is saved...The people have the right to expect that their government will act on their behalf, and protect them from pain, from stupidity, from exploitation, from excess, and from enemies domestic -with equal alacrity as it would defend them from enemies abroad.. The government is dead...It can take, but not deliver.. It does not, -and can only in the barest terms, be said to function... We have seen the inability of the govenment to respond to national disasters .. We have seen the inability of the congress to prevent mindless adventurism abroad.. We have seen the government make countless enemies in the face of limited resources.. And we have seen the government invite and allow a national and international financial meltdown that any clown could see coming.. What ever Mr. Obama can do, and what ever the democrats can do, they must certainly do better than the past government has done... Will it be enough... Will it be too late... And is it worth the effort when reformation might serve us all better???....Thanks...Sweeney
Comment: #1
Posted by: James A, Sweeney
Fri Jan 9, 2009 5:41 AM

“Make it lean and mean”! Many cuts must take place,
immediately, in order for America to get out and stay out of debt! Taxpayers know
Government must run like a business, if not, our children and grandchildren have
no future!

Never has America witnessed such dire, financial times starting with trillions of
dollars, and counting, due foreign countries, borrowed by politicians without
getting approval from honest, hard-working Taxpayers they're trying to stick the
bill to! What happens to America when interest isn't paid?

While Beverly Perdue, like others, flies to Washington, or anywhere these
politicians want to go to ‘chase federal money', instead of trying to cut programs
and spending from all budgets, I'm sure doesn't care about spending; after all,
they've been handed blank checks with no accountibility, right? Shouldn't this be
grounds for padlocking, these ‘public servants' office doors everywhere?

Fair Tax, to include property taxes, stopping Bailouts, handouts, social and
welfare programs should be top priorities! Everyone should contribute to living in
America! Government's out of control, spending billions for infrastructures,
which we don't have, is only creating bigger government. Until we bring textile
and manufacturing jobs back to America, there's no need for infrastructures!

Cutting local, state and federal politicians' salaries and retirements to $12,000.00
yearly is an absolute must. Even with government cuts, it'll be year 2025 before
America begins to dig out from under some of the financial disasters created by
politicians and their greed!

When Taxpayers think of all the Committees being used by politicians on local,
state, and federal levels, several comes to mind! ‘Ways and Means,
Appropriations, Government Reform, Economics, Financial Services, Pensions,
Ethics, Rules, Finance, Education', and I think you're getting the message! For
the past five decades, wouldn't you think that with all these committees someone
honest with intregrity would have stepped up to the plate and put an end to ‘tax &
spend'! Want to know why? This is how the politicians are enlarging the
government payrolls, and taking Taxpayers money and jobs away! This is why
Ronald Reagan made his proven fact statement and I'm quoting “Government is
not the solution to our problem. Government is the problem!”

While I'm on a roll, Inaugurations are like huge, glamourous, Hollywood parties!
Politicians, not being Royalty, should foot their own parties, bills and causes?
After all, it is what it is ‘A HUGE HOLLYWOOD PARTY'!

Comment: #2
Posted by: Shirley deLong
Thu Jan 15, 2009 1:07 PM
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