The Weiner Component V.2 #19 – The Trump Budget

Not too long ago President Trump came out with his proposed budget for the year 2018.  It was heavy with a ten percent increase for the military, had draconian cuts for Social Services cutting some programs and illuminating a large number of others.  It also cut out programs for the arts and for scientific research.  It contained what Trump calls Tax Reform.  This is actually a massive cut for the top Two percent of earners and large corporation decreases in taxes.

 

Looking at his Cabinet the indication is that Trump wants a government of the rich, by the rich, and for the rich.  The groups really harmed by his proposal would be the poor who are totally dependent upon the Federal Government for numerous services and the elderly living upon a fixed income like Social Security or a set retirement that decreases year by year as prices slowly rise due to inflation or otherwise.  Their medical insurance would rise significantly but their coverage or protection by the state would decrease significantly.

 

One can suppose a rapid rise in their death rate of the elderly would benefit the government as their producing days are over and they are only consuming.

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In a recent article on the internet a staunch conservative congratulated President Trump for his stance on the budget but then stated that he did not go far enough.  He apparently felt that Trump’s proposed massive cuts to the United States social programs would still be costing too much money.

 

Trump’s Treasury Secretary, Steven T. Mnuchin, was originally a Wall Street financier.  According to his and several other people who are involved in finance and working for Trump have stated and may well believe that following Trump’s budget will raise the Gross Domestic Product (GDP) to 3%.  It was .075 in 2015.

 

These people come from the world of finance.  They are not economists.  To many economists this is wishful thinking nonsense; it’s not about to happen.  In fact with all the Trump cuts, increases in spending, and lowering of taxes for the wealthy the deficit will increase considerably in 2017 and 2018.  Thus significantly upping the National Debt which is currently 19 trillion plus dollars.

 

The National Debt is currently approaching 20 trillion dollars but what it actually is is misunderstood by most people in the country.  Most people consider that this is money owed to countries like China and Japan for the uneven trade that goes on with them.  But this is only partly true.

 

The National Debt consists of two parts: one public and one private.  The public part is the money that the government owns.  It is money that it has lent itself.  The question here is can an entity owe itself money?  In terms of the Federal Government obviously it can.  Several times a year the Federal Reserve transfers billions of dollar in interest to the Treasury.

 

Entities within the government transfer their surplus funds to the general fund.  The government then gives them credit for the transferred funds.  The largest entity to do this is Social Security.  In the 1980s, when Ronald Reagan was President, Social Security was in trouble.  It could conceivably run out of money in the near future.  Congress raised the amounts paid into Social Security by both the individuals and their employers.  And in 1989 Medicare was separated from Social Security.  Additional separate amounts were paid into it by both employers and employees from then on.  Also at this time people who did not pay into Social Security could make payments into Medicare and have it when they retired.

 

From that time on Social Security has had a relatively large surplus.  It is today the largest debt holder of part of the National Debt.  Interestingly Al Gore, when he ran against George W. Bush, has as part of his platform, a lockbox, which would have been banking surplus Social Security funds rather than putting them into the General Fund and spending them.  However with George W. Bush as President the surplus went into the General Fund and was spent.

 

China, Japan and other nations have many individuals and companies within their countries that hold U.S. Government loan papers.  That and loan bonds held by individuals within the United States and other countries would make up the privately held National Debt.

 

The Federal Reserve admits to owning about 50% of the National Debt.  I would estimate it to be more like 60% to 70% of the actual National Debt.

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The FED sells these bonds continually, increasing or decreasing the amount of currency in circulation.  Money is not only cash; it is also credit and debit cards and checks.  The FED regulates the amount of currency in order to control value and limit inflation.  Too much money in circulation decreases the value of the money and too little money being available creates deflation.  The FED has to maintain a balance between the amount of money in circulation and the population of the country.

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In the minds of most people money is an object of value.  It allows people to have what they need and want.  In fact for most of its history money itself was an object of value acceptable all over the world.  Eventually the amount of gold and silver, which was money in the form of coins, was insufficient in terms of all the business that went on in a country.  There wasn’t enough gold and silver available to conduct the necessary business for the country to function properly.  As a result of this the government of each individual nation withdrew the precious metal and began printing its own currency which functioned within its borders..

 

This began at about the first third of the 20th Century and has continued since then.  Money today in the U.S. is a Federal Reserve Note.  It has no real intrinsic value.  It is merely a means of exchange for goods or services.

 

Adam Smith in 1776 published “An Inquiry into the Wealth of Nations.” In this work, which was strongly influenced by French economists called the physiocrats, Smith developed the basis of the modern capitalistic economics.  The true wealth of a nation is what it produces; its goods and services.  These are it Gross Domestic Product.  They are defined as all the goods and services the nation produces in terms of dollars and cents within a given period of time, a fiscal year.

 

This brings us to the basic concept.  What is the actual wealth of a nation?  Today the United States is the wealthiest nation that has ever existed.  Yet according to our current President we cannot afford to take care of our overall population.  I sometimes think that all modern day Republicans would be much happier if they had lived hundreds of years ago when every individual was responsible for himself and for his family and government merely existed to protect him from foreign invasion.  Looking back historically I wonder if such a time ever really existed.

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By following Trump’s budget the government will massively reduce its spending.  The military will have much more to spend.  Trump has indicated that he will massively increase U.S. presence and involvement in the Middle East.  Much of the military funding will be spent overseas and a large percentage of the tax decrease will go to the upper two percent of the population.  They have not noticeably increased their expenditures when their incomes have increased in the past and the probability is that they will not do so in the present.

 

What will happen with his tax cut, if it comes into existence, is that there will be far less money available in the economy for the purchase of goods and services.  The probability is that because of a lack of funds less money will be spent and less goods and services demanded.  The GDP will actually decrease and it could achieve 0 growth or possibly .01% actual growth or even hit a minus figure,

 

There is also the fact that there is a velocity to money spent in the National Cash Flow.  Money when spent is usually spent three to twelve times.  For example a person shops in a supermarket.  He or she spends twenty dollars.  That money may be used to pay the salary of an employee.  The employee spends that money on dinner in a restaurant.  It can again pay an employee’s salary.  The money keeps getting spent until it becomes part of the Natural Cash Flow that can be three to twelve times.  The $20 can generate $60 to $240 worth of increased productivity.  Conversely if the money is not spent that amount of productivity is cut from the GDP.  All of Trump’s cuts will subtract trillions of dollars from the economy.

 

In addition to bringing a tremendous amount of misery Trump could also bring about a tremendous recession of depression.  We are still working our way out of the Great Recession of 2008.  Trump also wants to get rid of the laws that were passed to avoid that situation from ever occurring again.  Concievably the country could be brought back to the point we had reached in 2008 that almost brought the nation to a worse situation than occurred in 1929, with the Great Depression, which was also brought about by a Republican run government,.  This can be done by following what today could be called Trumponomics.

The Weiner Component Vol.2 #6 – Part 3: The Purpose of the Federal Reserve

The title page to Keynes' General Theory.

Unemployment rate in the US 1910–1960, with th...

Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted. (Photo credit: Wikipedia)

The Federal Reserve was established on December 23, 1913. Its major mission was to avoid panics or major recessions in the future. It would at that time do this by being able to move money quickly anywhere throughout the National Economy. In essence since the nation functioned through its banking system the new Fed would protect its financial institutions from runs or panics where the depositors could all withdraw their funds, generally following a rumor that the bank was on the edge of failing.

 

In addition the United States economy had/has systematically gone through regular business cycles of recession, slump or depression, recovery, and boom. Invariably each of these stages of the economy leads to the next stage. During a boom period overproduction is invariably reached, workers are laid off, there is less income available, which accelerates the recession. This, in turn leads to a trough or low economic point which can be a depression with high unemployment. Eventually there is a shortage of goods and the amount of money being spent in the National Cash Flow increases; people are hired; there is more and more money available and recovery begins, continuing until a peak or production boom is reached again. The duration of the cycles can and do vary, going from less than a year to over ten years as the Great Depression did from 1929 to 1940. It was ended by World War II. These depressions can be regional or they can cover the entire nation, if not the world, as it did in 1929. They generally last between the two periods given above.

 

In simple terms this is the economic pattern of every industrial nation. Does it have to continue? That’s an interesting question. The probability is that it can be controlled by the Central Government’s actions.

 

In 1929 the science of economics was generally not understood well enough to determine exactly or why the depression was happening. In 2008 when the country had what is now called the Great Recession, enough was understood to avoid a greater depression than that of 1929. This depression was avoided by actions of the Federal Government.

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Even today economists disagree as to what caused the Great Depression and how it should have been dealt with. There are numerous theories. Probably The Keynesian theory is the most accepted. Keynesian economics deal with the various theories about how in the short run, mainly during recessions, economic output is strongly influence by aggregate demand or total spending. Aggregate demand does not necessarily equal the productive capacity of the economy. Instead it is influenced by a host of factors that can behave erratically, affecting production, employment, and inflation.

 

Keynes theories were first presented during the Great Depression in his 1936 book, The General Theory of Employment, Interest, and Money. Keynes’ approach contrasted with classical economics. Keynesian economists believe that the private sector’s decisions sometimes lead to inefficient economic outcomes which require active policy responses by the public sector (government). It is a combination of the two that stabilize output with the government exercising control over the private sector. Monetary policy actions are needed at times by the Central Bank and fiscal policy actions (Government spending.) in order to stabilize output over the business cycle. Consequently Keynesian economics requires a mixed economy, predominantly private sector with a strong role for government interventions during recessions and depressions.

 

Traditional or classical economics as developed by Adam Smith in his 1776 book, An Enquiry Into The Wealth of Nations, set the Market making all the societal decisions. The motivating force, according to Smith was the “invisible hand,” the profit system. Adam Smith was responding to an economic system called mercantilism, where gold was considered the basic wealth of the nation and the economic decisions were being made by the kings of the various countries.

 

John Maynard Keynes during the world economic disaster called the Great Depression was questioning the validity of this system, saying what was needed to solve this problem was a combination of private enterprise balanced by state control of the marketplace. To him unfettered classical economics had brought about the Great Depression.

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The actual causes of the 1929 Great Depression have been extensively discussed by economists and remains a matter of intense debate. In fact they are part of the larger debate about economic causes. The economic events that took place at that time have been studied thoroughly: a deflation in assets and commodity prices, dramatic drops in demand and credit, disruption of trade, widespread unemployment, over 13 million by 1932 the lowest point of the economic decline, and hectic poverty.

 

There is no consensus as to overall causes other than it started with the initial stock market crash that began on Black Tuesday, October 29, 1929 when panic selling of securities led to a continued dropping of value of the securities until the end of 1932 when it reached its lowest point. The Crash triggered the depression which had reached a high level of deteriorating economic conditions such as rising unemployment, over production, a totally unequal distribution of incomes, under consumption, and extremely high debt.

 

Both the stock market and the economy would slowly improve after 1933 with the new President, Franklin D. Roosevelt. It would rise to new heights after 1939 with the outbreak of World War II in Europe. The stock market and the economy would rise to new heights with a massive infusion of money for goods and services within the United States. War will have brought about its end within the U.S. It is interesting to note that it was the money spent during the war, first by European and Asian nations, then after December 7, 1941 also by the United States that specifically ended the Great Depression.

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Once the Great Depression had started there were massive mistakes made by the Federal Reserve. The Fed actually caused a shrinkage of the money supply and greatly exacerbated the economic situation. Deflation caused people and businesses to owe ever increasing amounts upon money they borrowed actually shrinking the money supply in the U.S. by about 1/3.

 

With the election of Franklin D. Roosevelt to the presidency in 1932 a form of Keynesian economics became the policy of the President from 1933 on when he assumed power. Roosevelt’s policy was the “3 R’s: Relief, Recovery and Reform.” This comprised Roosevelt’s “New Deal;” his attack upon the Great Depression, which essentially lasted from 1933 to about 1938. The Federal Government put itself in a position to help turn the country around. It brought about great improvement but not a complete end to the Great Depression.

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Toward the end of 2007 in the last year of the George W. Bush’s Presidency what is generally called the Great Recession began. The Housing Market in the United States collapsed. A great many people had been using their home as bank or checking accounts generally from the 1980s on, constantly refinancing their home and taking their equity out as property values continually increased. People bought the toys they always wanted: new cars, fancy trucks, boats, expensive vacations; just about anything they felt was desirable.

 

This had been going on for about thirty years, the entire career of many people in banking had taken place during this period. Housing loans or second mortgages were divided into miniscule fractions, put into a multitude of different Hedge Funds and sold to the general public as safe interest paying loans. The process brought the value of the home loans up millions, if not billions of dollars. The banks were earning large amounts in fees as the demand for loans actually forced up the value of the homes. By 2007 the end had been reached, property values had been raised beyond the point of sanity. The bankers were in denial that conditions could possibly change. Some banks were lending out 125% of the appraised value of the properties, working on the premise the housing values would rise endlessly.

 

The economic collapse began during the second week of March, 2008. It tended to be worldwide. In the United States, on Tuesday, with the encouragement of the President, George W. Bush and the Secretary of the Treasury, Hank Paulson, the Chairman of the Federal Reserve, Ben Bernanke injected $236 billion dollars into the American banking system. Citigroup, the world’s largest bank spent one billion dollars bailing out six of its hedge funds. Lehman Brothers, America’s fourth largest bank went under. AIG, the world’s largest insurance company, had moved into the business of insuring leveraged debt right at the time when the financial system was at the point of collapse. When the Housing Bubble burst Ben Bernanke, as chairman of the Fed, announced an $85 billion loan for them. Hank Paulson, the Secretary of the Treasury proposed buying up hundreds of billions of dollars’ worth of toxic assets.

 

With the accession of Barack Obama on January 20, 2009 as President of the United States that country and the rest of the Industrial Nations continued to hover on the point of economic collapse. This would have occurred if the governments had not interceded with masses of cash. They prevented, using taxpayer money, a depression that would have made the Great Depression of 1929 look like a weekend holiday. It would have been the total collapse of the banking systems which, in essence, run the economies of all those nations.

 

(Interestingly Donald Trump’s administration wants to do away with all the regulation in the U.S. which came about to avoid a repeat of this situation. Memories are short!)

 

President Barack Obama continued the bailout, saving the banks from their own stupidities, and he added the American automobile industry which was also on the point of total collapse. The governments of the various countries spent a lot of money saving their economies and returning the world to economic sanity.

 

Recently President Donald Trump commented in one of his speeches that President Barack Obama increased the National Debt more than any other prior President. He did so cleaning up the financial messes that they had helped to create.

 

We have passed beyond Keynesian economics to the point where the Free Market is today a farce. The governments of the United States and of the other industrial nations have assumed responsibility for the welfare of both the rich and the poor within their societies. How long will it take for the populations to understand this?

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In the United States and in most industrial nation there are groups that want to return to the good old days. Whatever they were. Everything is changing. The 21st Century will be completely different from the 20th Century.

 

It should also be noted that it was the Federal Reserve, under Chairman Ben Bernanke, who used creative Monetary Policy in a period of a little over 24 months, with strong encouragement from President Obama, to buy up the toxic mortgage pieces throughout the United States at the rate of 45 billion dollars’ worth a month and also he added another 40 billion dollars a month directly to the National Cash Flow.

 

The Republican dominated House of Representatives from 2011 on did nothing to help the situation. They should have applied Fiscal Policy, creating jobs by spending money on infrastructure modernization. Instead they tended to cut government spending and worsen the Great Recession. Mitch McConnell, the Republican majority leader in the Senate, announced that they would make Obama a one term president by not cooperating with him on anything. To them no price was too high in order to make Obama a one term president. Somehow the needs of the American people were lost.

 

It was the Federal Reserve and the President who saved the country from falling into the worst depression in its history. The Republicans, once they got control of the House of Representatives, refused to pass anything that would make President Obama look good. This was true even if it had a negative effect on the country and hurt the majority of its citizens. President Obama offered a Bill that would engender spending on our decaying infrastructure. It did not even come up for discussion in the House of Representatives.

The Weiner Component Vol.2 #3 – The Purpose of Government

English: Citizens registered as an Independent...

English: Citizens registered as an Independent, Democrat or Republican. Derived from :Image:Party affiliation USA.jpg. (Photo credit: Wikipedia)

If the question of what is the primary purpose of government in the 21st Century is raised then depending upon which major political party you adhere to you get different answers. 

 

Historically people have always been social animals, always functioning in groups with some form of social organization.  Traditionally governments have functioned to provide a framework in which people have lived.  They have provided rules or laws that have allowed them to live together, kept them safe within the society and from foreign invaders, provided the necessities for reasonable living conditions and protected their property.  These governments have provided a currency and regulated trade within and with other nations.  Other than that people have provided for their individual needs for themselves.  This, in essence, is the Republican concept of the function of government.

 

In 1929, through following these concepts and unlimited growth on the stock market, the United States economy crashed and billions of dollars were lost almost overnight in the 1929 Great Depression.  From 1929 through 1932 feeble attempts were made by the Republican dominated government to allow the Stock Market to adjust itself.  Instead it kept dropping lower.  This occurred from 1929 through 1932, when it and the rest of the economy reached its lowest level.  The Market Model was unable to adjust itself; it had been abused too much.

 

In 1933, the Democrat, Franklin D. Roosevelt became President, replacing the Republican, Herbert Hoover.  Roosevelt, in dealing with the massive unemployment problem, extended the purpose of the Federal Government, by having the Federal Government assume responsibility for those people who could no longer function successfully within the broken society.  He created mechanisms whereby these people could again function with a measure of success within the economy.  The Federal Government had now assumed responsibility for the people in the country who could no longer provide for themselves.  This now became the new additional function of the Central Government. 

 

While conditions improved considerably the Great Depression did not end until about 1940 with the outbreak of World War II when first European and Asian nations bought unlimited goods from America and at the end of 1941 when the Federal Government began unlimited spending in fighting the war. 

 

The government had dedicated itself to a new purpose which would continue on after the war had ended, more or less, depending upon which political party controlled the Central Government.  The Republicans tended to favor business and the wealthy, limiting social spending as much as possible, while the Democrats favored the middle and lower class extending this practice as much as they could.

 

Currently with the Republicans in control of Congress and the Presidency they are moving to get rid of Obamacare (Affordable Health Care).  They are presumably going to replace it with Trumpcare, whatever that is.  Probably it will be a voucher system that will be cheaper for the government to operate, but will gradually become more and more expensive for its recipients as medical costs increase but government vouchers do not.

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Two events occurred: one began in the 1970s, an increasing need for more money to be available in the National Cash Flow; and the other in the 1980s with the election of Ronald Reagan to the presidency.  In the earlier decade the major banking houses in the country began packaging mortgages in small fractions and selling them.  They did this gradually on a larger and larger scale.  The process took off in the 1980s with the Reagan White House.  This, in turn, increased the value of the homes.  In essence a percentage of the population began mortgaging and refinancing the ever increasing value of their houses over and over again.  At no time during the 30 years of this period was there any real inflation in the country.  For the first 10 years the country was in an inflationary cycle that began with the Viet Nam War.  This was ended at the beginning of the 1980s.

 

Reagan was the first of the really Conservative Presidents.  Forty-five years earlier he had majored in economics as an undergraduate in college.  Since that point in history economics had developed far from where it had been when Reagan was a college senior.  Much more about its functioning was understood in the 1980s.

 

Adam Smith began modern economics with the publication of his work,  “An Inquiry into the Wealth of Nations,” in 1776.  In this work, among other things, he developed the Market Model, which functioned through the use of the “invisible hand.”  The invisible hand is the profit motive.  Smith believed that the profit motive would best make all the Market decisions of what to produce and how to produce it. 

 

President Ronald Reagan and a good percentage of Republicans in Congress also believed this.  During his presidency hey did away with all bank regulatory laws that had been developed during the 1930s and beyond to avoid another Great Depression.

 

In the period before the 1929 Stock Market Crash many bank executives had taken depositors monies and invested them in stocks.  Shortly thereafter when the price went up they had sold the stocks and pocketed the profits.  People could also buy stocks on margin; all an investor needed was 10% of the value of the stock he/she bought, the banks would lend the remaining 90%.   The problem here was that many people were in love with the concept of the stocks, not with their true value, and they kept forcing up the value of all the stocks by continually buying and selling them.  This created a bubble that had to burst at some time.  When it did, from 1929 on, it not only bankrupted innumerable stockholders but also innumerable banks with unbelievable negative effects upon the overall economy.

 

The result of what Reagan considered reforms was that a multitude of banking organizations began an almost limitless level of refinancing homes, allowing people to take their ever increasing equity out of their properties to buy whatever, and countless billions of dollars were created in the National Cash Flow allowing almost endless spending.  All of this occurred until 2008 when the bubble burst.  Interestingly some of these companies insured the bank loans, charging generous premiums.  These companies and many banks faced immediate bankruptcy with the crash.

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In the year 2008 the Housing Bubble, that had been developing over the last forty years, burst, bringing about an almost instant and complete drop in home property values.  People’s home values virtually dropped overnight hundreds of thousands of dollars per single unit leaving a percentage of homeowners underwater, suddenly owing more on their home properties than they were worth.

 

This process had been slowly building since the 1970s, with it massively accelerating during the Reagan administration in the 1980s, when virtually all banking laws, many of which came into being during The Great Depression in the 1930s, were done away with and the country followed the administration’s mantra of letting the Free Market make all the economic decisions.  A good percentage of the population, with strong encouragement from the banks, had gone through a wild period of spending.

 

Specifically what happened was that the country did not have enough money in the National Cash Flow to meet its needs.  There was a shortage of money in the overall society.  The banks, among the many services they perform for the general society, also can increase or decrease the amount of cash available within their specific regions.  They do this through their lending or non-lending practices.  Most exchanges of cash at this time was through the transfer of funds by writing checks, bringing about an exchange of numbers in different columns of different bank ledgers.

 

People discovered the advantages of their equity in their home loans by taking out First, Second, and Third mortgages based upon their equity.  Over the forty year period as people borrowed upon their homes the value of their homes went up continually.  It seems the continual borrowing created a desire in people who rented living space to attempt to buy homes, forcing up the value of the homes even more for this forty year period.  Properties that were purchased for well under one hundred thousand dollars, because of the sudden great demand, were worth hundreds of thousands of dollars. 

 

For the forty year period, well into the year 2008 home values kept rising.  People refinanced their properties over and over again buying whatever they wanted.  The overall economy prospered.  People bought all the toys they ever wanted: boats, mobile homes for traveling, whatever.  There was no real inflation.

 

By the year 2007 the indications of a collapse were present for those in a position to understand what was going on.  But the bankers, who had taken home millions in compensation, were in total denial.  They were incapable of understanding that conditions could change.  To encourage further refinancing many banks raised the level of refinancing homes to 125% of the appraised value of the property.

 

Toward the end of the year 2008 the bubble burst or the crash came.  Many homeowners suddenly discovered that they were underwater, owing more on their home than they were then worth.  Some just walked away from their properties, leaving a deserted house behind them.  Others just stopped making payments they could no longer afford.  Unemployment rose significantly. 

 

Hedge Funds that had been developed from some of this mortgage paper were suddenly worthless.  Banks foreclosed upon properties that they both owned or had owned and sold to hedge funds.  The entire situation was a total mess.  Hedge funds were suddenly worthless, many banks were on the point of bankruptcy.  It looked like the entire economy was on the point of collapse.

 

At this point President George W. Bush and his Treasury Secretary, Hank Paulson, arranged for bank loans to keep many financial institutions from going bankrupt.  Then Bush was replaced by President Barack Obama who continued the bank loans and also bailed out the American auto industry which was also at the point of bankruptcy at that time.  With President Obama’s massive spending efforts what could have been a greater depression than the Great Depression of 1929 turned into what has been called the Great Recession, from which the country is still on its way out of.  By January of 2017 unemployment in the United States had dropped to 4.8%. 

 

The problem that existed here is that from the 1970s on more money was needed in the economy that should have been supplied by the Federal Reserve on a more gradual level.  A controlled increase of funds for the nation would have allowed for a slow healthy economic growth with no crash in 2008.  Allowing the banks to do this with just the profit motive led to unlimited and reckless greed as the major factor controlling the economy.

     

English: Franklin Delano Roosevelt and Herbert...

English: Franklin Delano Roosevelt and Herbert Hoover in convertible automobile on way to U.S. Capitol for Roosevelt’s inauguration, March 4, 1933 (Photo credit: Wikipedia)

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Th

e Great Depression was caused by the Republican’s legislating after World War I.  This was from the election of Warren Harding to the presidency through Herbert Hoover.  They created the necessary laws and general milieu that allowed it to come about.  The Housing Crash of 2008 was set forth by the policies of President Ronald Reagan.  He inspired and brought about the environment that allowed the financial institutions to go berserk through the unhampered use of the profit motive.  Now, with the election of Donald J. Trump to the presidency an equally horrible situation exists with the Republican legislature and Trump promising to do away with Affordable Health Care and the distinct possibility of taking medical care away from about 30 million citizens.

 

During his first year as President in 1993 William Jefferson Clinton, among other things, attempted to set up a system of Universal Health Care for all the people in the United States.  He placed his wife, Hillary, in charge of a task force that was supposed to develop a plan for this.  The Republicans were strongly against it.  They tried everything they could to kill this plan.  Finally they succeeded when they came up with a slogan: “There has to be a better way.”  The “better way” ended up being: No way.  With this mantra they successfully ended the plan for universal health care in 1993.

 

During President Barack Obama’s first two years in office he had a Democratic majority in Congress.  Together, they came up with a plan for the majority of people in the country to achieve health care.  The plan had been developed by a Republican think tank for Mitt Romney, when he was governor of Massachusetts.  I imagine that President Obama assumed that a Republican Plan would gain some Republican support in both Houses of Congress.  But by that time the Republican members of Congress had in a caucus and taken an oath to make Obama a one term President by not supporting anything he supported or for which he could take credit.  As a consequence they have vigorously opposed and continually denounced Obamacare (Affordable Health Care), which was in actuality their plan.  Affordable Health Care was passed in Congress strictly on a party basis, not one Republican Congressman voted for it.

 

In 2011 the Republicans gained a majority in the House of Representatives.  From then on the House passed bills to do away with Affordable Health Care; this was over fifty times.  While the Democrats controlled the Senate the bill was not even taken up there.  In 2014 the Republicans also gained the majority in the Senate.  In 2016 they gained Donald J. Trump as the new Republican President.  They are promising to replace Obamacare with a new and better policy.  But no specific plan seems to be on the horizon.  Meanwhile the first steps have been taken to begin the process dismantling Affordable Health Care.

 

Interestingly even the Republicans are now stating their sense of responsibility for the medical welfare of the general public.  But Affordable Health Care was their plan for universal health care.  It entails using private enterprise to bring universal medical care into existence. 

 

What is interesting or strange is that in 2012 when President Barack Obama ran for reelection, his Republican adversary, Mitt Romney and his fellow Republicans seem to have totally forgotten the Crash or Great Recession of 2008.  When elected they were going to do away with the laws passed in 2009 and 2010 to avoid that situation from occurring again.  And the same is true about the Presidential Election of 2016.  It would seem that the Republicans have some sort of collective amnesia about their own past.  The difference is that in 2016 the Republican candidate, Donald Trump and his fellow Republicans won the election, not only the presidency but also both Houses of Congress.  What will they do?  It seems that the Republicans themselves are not sure

The Weiner Component #173 – A Short History of Political Parties

The Republican Party came into existence with the election of Abraham Lincoln as President of the United States in 1860.  It was a combination of different political groups that didn’t agree with the Democratic Party, which was the major political party that existed throughout the entire United States. The other political parties were all reginal.  It should be noted that in this election the Republicans were not on the ballet of any one Southern state.  The election in the Southern States dealt only with the Northern and Southern Democratic Parties.

 

With the exception of the issue of slavery the Republican Party supported business and its growth.  In fact largely so did that of the Democrats with a slight emphasis on agriculture.  This period was the era of business growth in the country.  The Industrial Revolution had begun in Great Britain at the turn of the 19th Century; it spread to Europe by the 1830s; and thereafter moved to the United States where it began slowly speeding-up during the Civil War and then growing even more rapidly in the post war period.

 

Politically the Republicans would stay in power for most of the balance of the 19th Century.  With the death of Lincoln, Andrew Johnson, the Vice-President, would become President.  He was a former Southerner and Democrat who had been elected during Lincoln’s second term when the Republicans had run under the National Union Ticket.  During his presidency the Congress was almost totally Radical Republican and did what they wanted even to the point of unsuccessfully impeaching Johnson.

 

Johnson served out his term, 1865-1869, and was followed by the Republican Union General, Ulysses S. Grant who served two terms, from March 4, 1869 – March 4 1877.  In 1876 the Republican Rutherford B. Hayes stole the Presidential Election from the Democrat Samuel J. Tilden.  Tilden won the popular vote but there were two sets of electoral votes from several states and the Republicans were the ones who prevailed.

 

In 1880 the Republican James A. Garfield was elected President.  He served 200 days in that office and was shot by a dissatisfied office seeker.  His Vice- President, Chester A. Arthur, then became President.  In 1884 the Democrat Grover Cleveland won and four years later in 1888 he lost to the Republican, Benjamin Harrison.  In that election Cleveland won the popular vote but Harrison won the Electoral College vote.  But in 1892 the Democrat Grover Cleveland won his second term.  In 1896 the Republican William McKinley was elected to the presidency. 

 

It was during this post-Civil-War period that the United States began turning into an industrial giant.  And it was during this time that the country underwent the rise of a new class, the plutocrats.  These were essentially the “robber barons” who owned most of the new industries that arose.  They had largely bribed their way through the State and Federal legislatures.  It was a time of intense corruption in all levels of government.  Shortly after this period that the people would get the right to directly elect senators through their votes and the Progressive Movement would take off in an attempt to return the country to its people.

 

As we’ve seen the Republicans, more or less, stayed in power during this time.  But the nation was going through intense growing pains.  It didn’t matter which political party was in charge the country was changing on almost a daily basis and it was impossible to keep up with everything that was going on.  These Presidents did their best; but, I suspect, no one totally understood or could have done what was really necessary with the speed of change.  In many respects the corrupt political machines, both Democratic and Republican, that existed then in the cities served the poor in return for their votes.  There were no government or other services.

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In 1900 the Republican William McKinley was elected to a second term.  His new Vice-President, Theodore Roosevelt, was put into that position to get him out of New York.  Jokingly it was stated that “Teddy,” the former governor of New York, “had taken the veil;” he could no longer bother anyone in government.  At that time the most nonfunctional job in Washington was that of Vice-President.  In the musical satire “Of Thee I Sing,” there is a scene with the Vice-President taking a tour of the White House so he could see what it looked like since he’d never been their otherwise.

 

On September 6, 1901, less than a year after he had begun his second term, William McKinley was shot by an anarchist.  Theodore Roosevelt became the 26th President of the United States.  To the Republican leadership it was “that damn cowboy in the White House.”

 

From the 1890s on until shortly after America’s entrance into World War I the United States went through the Progressive Movement.  It was a time of reform on all levels of society.  Its goals were to eliminate city political machines and their bosses, to bring direct democracy to the people, and to regulate monopolies and corporations through anti-trust laws.  Theodore Roosevelt became known to his admiring public as the Trust-Busting President.

 

The Progressive Movement brought about prohibition, women suffrage, the direct election of senators, and the Federal Reserve Act.  The three presidents who were directly involved with this movement were the Republicans, Theodore Roosevelt and William Howard Taft and the Democrat, Woodrow Wilson. 

 

Roosevelt was President from 1901 to 1908; then he choose Taft to replace him from 1909 to 1912.  In 1912 Roosevelt dissatisfied with Taft decided to run again for the office.  The Republican Party supported Taft.  Roosevelt ran as a third party candidate in the Bull Moose Party.  In this Presidential Contest Roosevelt came in second, Taft was third, and the winner with a little over 40% of the vote was the Democrat, Woodrow Wilson.

 

The Progressive Movement, with these three presidents, ended shortly after the Great War (World War I), with woman suffrage and prohibition, the 18th and 19th Amendments to the Constitution in 1919.

 

At the end of the war the Senate had a Republican majority which refused to ratify the Treaty of Versailles, which ended World War I.  The Republican, Warren Harding, was elected President in 1920.  He signed a separate peace treaty with Germany.  The following two administrations that of Calvin Coolidge and Herbert Hoover were also Republican.  The Secretary of the Treasury for all three administrations was Andrew Mellon, the millionaire industrialist and banker.

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In 1776, Adam Smith, a professor at the University of Edinburgh published a book based upon his lectures entitled, “An Enquiry of the Wealth of nations,” that defined the functions of capitalism.  The work and its theories are still the basis of modern capitalism.  The study was a vigorous attack upon an earlier economic system called mercantilism which defines national wealth as gold and the amount of gold a nation possessed as its wealth.  Smith defined national wealth as the amount of goods and services a nation produced in a set amount of time, a fiscal year.  The motivating force that caused the economy to work was, according to Smith, the invisible hand, the profit motive.

 

The Republicans not only accepted this idea they have been utilizing it ever since.  The only problem is that the unregulated profit motive has continually led to economic disaster.

 

From 1920 to 1929, under three Republican presidents, allowing the market system, the profit motive, to freely function, brought about the country’s collapse into the Great Depression.  Hoover and his Treasury Secretary, Andrew Mellon, the multi-millionaire industrialist and banker, didn’t know what to do.  For over three years of economic decline they kept talking about “prosperity being around the corner.”  They expected the Market to balance itself and prosperity to return.  It didn’t happen.  Conditions went from bad to worse and continued to stay there.  The industrial world foundered in misery.  Some countries like Italy, Germany, and Japan ended up in dictatorships.

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As in had happened in the 1920s, under President Ronald Reagan in the 1980s, the Federal Government did away with all banking regulations.  The Free Market would determine which way the economy would go.  The motivating force for the Free Market was Adam Smith’s “invisible hand;” this was the profit motive.  In 2008 the Housing Market crashed and the major banking houses were on the point of bankruptcy after about 30 years of constant growth.

 

In the 1920s the Stock Market became crazier and crazier.  On Black Tuesday, October 23, 1929 the Stock Market, after a decade of intense growth, collapsed. 

 

The collapse continued.  By 1932 the Gross National Product had dropped 15%, unemployment was down 25%, and farm prices were down 80%.  In many cases it cost the farmer more to raise the crop than the amount for which it could be sold.  The Hoover administration and the Secretary of the Treasury’s constant response was that prosperity was just around the corner.  Hoover did make some attempts to deal with the situation but they were totally inadequate.  Neither he nor Andrew Mellon, the Secretary of the Treasury, were capable of dealing with this situation, the country and its people floundered.

 

What happened, happened on a world basis.  All the industrial nations were affected by the Great Depression.  It was far worse outside of the United States.  In some countries unemployment was far lower than 25% and the level of misery was far greater than in the United States.

 

The various governments, including that of the United States, put high tariff walls around themselves in order to protect what jobs still existed.  This, in turn, made many prices far higher than they should have been.  Living standards hit an all-time low, with many people dying of malnutrition.  People wandered over the country looking for work.  We had the age of the hobo.  Many, and that included those in the government, did not understand what was happening.

 

In 1932, four years after the Great Depression began, the former Democratic governor of New York, Franklin D. Roosevelt (FDR), ran for the Presidency of the United States.  The Republicans ran Hoover for a second term.

 

 During this period many of the veterans of the First World War descended upon Washington, D.C.  They had been promised a bonus in the future for serving in the war.  This was the Bonus March.  They demanded it at that time.  The veterans set up a massive camp at the outskirts of the city.  The Federal Government felt it was in no position to pay the bonus early.  President Hoover ordered the commanding general, Douglas MacArthur, to break up the camp but to not harm any of the veterans.  Two men were killed.  This move absolutely destroyed most Republican support that may have still existed in the country.  Roosevelt was overwhelmingly elected President of the United States. He received 57% of the popular vote and carried all but six of the forty-eight states.

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As President Roosevelt offered the country a New Deal.  The term came from poker.  His program consisted of the 3Rs: Relief, Recovery, & Reform.  Relief for the unemployed and the poor, Recovery of the economy to normal levels, and Reform of the financial system to prevent future depressions. 

 

Money at that time was gold and silver.  The Federal Government would pay for this by collecting all the gold coins in circulation, melting them down into bricks of golds, storing the gold in depositories like Fort Knox, and then issuing paper money.  In 1932 a gold coin that weighed an ounce was a twenty dollar gold piece.  The Federal Government bought all the gold mined in the United States at $16 an ounce.  In 1933, after the gold was collected and replaced with paper money its value was legally increased to $32 an ounce.  The Roosevelt administration doubled the money supply.  This would pay for the New Deal.

 

They issued paper money, called Federal Reserve Notes which were then theoretically backed by the gold bricks stored in the government depositories.  No one ever checked to see that the amount of Federal Reserve Notes (paper money) matched the amount of gold in the underground depositories.  The Federal Government could print and issue money as needed, which it did during the New Deal and later during World War II.  In essence the country went off the gold standard in 1933.

 

FDR changed the function of government.  Up to that point, historically, it had run the nation and the people were responsible for themselves.  From 1933 on the Federal Government officially assumed responsibility for the people where they could no longer care for themselves.  Actually the change had been begun during the Progressive Movement, but it was under FDR made into official government policy. 

 

In addition the Federal Government passed laws to regulate industry.  The basic concept was to have a level paying-field for all participants.  It also encouraged unionization of labor.

 

These, in essence, became the major issues between the Democratic and Republican Parties with the Republicans slowly giving in to the Democrats.  After the death of Roosevelt President Harry S. Truman would continue this policy with his Fair Deal.  The next President Dwight David Eisenhower would be a middle-of-the-road Republican building, among other things, a national highway system.

 

Eisenhower was followed by the Democrat, John F. Kennedy, who would serve as President from January 1961 to November 22, 1963 when he was assassinated.  Kennedy was succeeded by his Vice President Lyndon B. Johnson who was elected in his own right in 1964.  These two presidents were responsible for bringing the Federal Government into the Civil Rights Movement, which, in turn, legally enabled Blacks to vote throughout the South and integrated society making all the nation’s citizens equal.  It also turned the South into Republican voting states.

 

Johnson was followed by, Richard M. Nixon, who was also a moderate Republican.  During the middle of his second term he was forced to resign over the Watergate Scandal and was replaced by his Vice-President Gerald Ford.  Ford officially ended the Viet Nam War.  He was replaced by the Democrat, Jimmy Carter.

 

After one term Carter was succeeded in 1981 by the Republican, Ronald Reagan, who would serve for two terms and leave a definite imprint on American politics.  President Reagan implemented sweeping political and economic changes, bringing supply side economics (Reagonomics), lowering taxes in order to spur growth while actually increasing government spending.  He brought about government deregulation of industry and banking and reduced government spending in social programs for the poor and needy.  He massively increased military spending, starting an arms race with the Soviet Union and raised the deficit to over one trillion dollars for the first time.

 

Reagan brought into government the conservative Republican prospective that had first been demonstrated when ultra-conservative Barry Goldwater ran against Lyndon B. Johnson in 1964.  Reagan’s supply side economics was a large tax cut for the wealthy and small tax cuts for everyone else.  The theory being that the rich would invest the new monies into new economic expansion and all sorts of new jobs would be created.  Thus the monies would trickle down to all parts of society.  It never happened. The money was actually invested in old productivity, like the stock market, and produced no new employment.  However to Republicans this was the Conservative Revolution. 

 

Reagan’s military spending brought the National deficit up to over a trillion dollars for the first time.  It also began an arms race with the Soviet Union that would bankrupt them.

 

Reagan was followed by his Vice-President, George H. W. Bush, who had to deal with a Democratic Congress, and ended fighting an unnecessary war against Iraq, Operation Desert Storm, which more than doubled the national deficit.

 

Bush, after one term, was followed by the Democratic President Bill Clinton, who served two terms, from 1993-2001.  Clinton as President reversed or ignored the Reagan economic changes.  During his third year in office, 1994, the House of Representatives acquired for the first time in 40 years a Republican majority.  From 1998 to 2000, the last three years of the Clinton presidency the United States government had a budget surplus and was able to reduce the deficit.

 

Clinton was followed into office by the Republican George W. Bush, who won the electoral vote but not the popular vote.  Like Clinton he served two terms.  He was initially elected in a controversial election, receiving less votes than the Democratic candidate, Al Gore.

 

The September 11, 2001 terrorist attack on the Twin Towers in New York City occurred eight months in his first term as President.  George W. Bush’s response to this was to declare War on Terror and send a military force to Afghanistan in 2001 to take control away from the terrorist organization, Al-Qaeda.  He was successful in doing this but he was not successful in setting up a Democratic government that could maintain control of the country.  After 15 years in Afghanistan we are still there.  Bush also later decided, for personal reasons, to set up a Democracy in Iraq.  Saddam Hussein, the ruler of Iraq, had tried to have his father assassinated.  We are also still in Iraq.  

 

Following Republican policy Bush lowered taxes for the well-to-do and somewhat for the middle class while he massively fought two wars and destabilized the Middle East.  Under Bush the National Debt rose from six trillion dollars to ten trillion dollars.

 

During his presidency he signed into law the Patriot Act, a Partial Abortion Ban Act, and Medicare Prescription Drug Benefits for seniors.  In 2008, his last year as President, the Housing Market crashed and Bush and his Treasury Secretary loaned billions to some banking houses to keep them from going bankrupt. 

 

His presidency has been ranked among the worst by historians in the entire history of the United States.

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In the Election of 2008 the Democrats took both the presidency and both Houses of Congress.  In 2008 the country was on the brink of a Depression that would have made the Great Depression of 1929, which lasted for a little over a decade, look like a weekend affair in comparison.  The new President, Barack Obama, through massive government spending was able to turn it into what has been called The Great Recession.  And, as of early December 2016, unemployment fell to the level it had been at prior to 2007, 4 ½%.

 

During his first two years in office President Obama with the cooperation of a Democratic controlled Congress was able to avoid a massive depression.  He also passed the Affordable Health Care Bill.  From 2011 on he had to deal with a Republican dominated House of Representatives and thereafter was able to gradually continue his economic reform through the use of creative Monetary Policy with the Federal Reserve.  The House forced through some legislation which actually exacerbated what then became called The Great Recession.

 

Barack Obama has been President for two terms.  He will end his tenure on January 20, 2017, when Donald J. Trump becomes the 45th President of the United States.  What the new President-Elect will or will not do is unknown, outside of the fact that he is erratic in his behavior.  His current appointments to his staff and cabinet would indicate that he is moving far to the right.  The appointments indicate also that he is doing the opposite of what he initially proposed, bringing Wall Street and the military into his Cabinet. 

 

As of January 20th the three main parts of the Federal Government will all be Republican dominated, the Presidency and both Houses of Congress.  The Republicans in Congress have been talking about doing away with Obamacare (Affordable Health Care) but if they do that 20 million people would lose their health coverage and numerous millions more would have their young adult children removed from their policies.  In addition those individuals with a prior condition, who the insurance companies were forced to accept, would be dropped from their insurance policies.  The effect of these changes would no doubt cause the Republicans to lose control of both Houses of Congress in 2018. 

 

As I understand the current issue the Republican dominated Congress will do away with Obamacare immediately but the plan will not go into action for three years, not until after the next Congressional Election in 2018.  The Republicans in Congress feel that they can come up with a better replacement over that period of time.

 

Unfortunately the current universal medical plan is an expanded Republican Plan that was developed by a Republican Think-Tank and was first successfully used in Massachusetts when Mitt Romney was governor.  The only alternate plan, which would successfully lower costs, would be a single payer plan run by the government covering everybody in the United States.  In fact it could be successfully financed by an increase in income taxes and no premiums being paid by anyone.    This plan would be unacceptable to the Republicans.  The only basic one that they could in principle support would be Affordable Health Care, which was the Republican plan.  They have opposed it for the last seven years.  2019 should be an interesting year. 

 

And also there is what Donald Trump has promised and will do or try to do.  It is interesting to note that the current Republican dominated Congress does not really trust Donald Trump.  They have only partially funded the Federal Government for a second time this year.  It will have to be funded again in four months during Trump’s presidency.  This action can be used to force him to cooperate with them.

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What should emerge from this article is that the political parties were close together around the 19th Century.  The Democrats emphasized the rural or agricultural areas and the Republicans the urban or business cities.  Other than that the two parties tended to, more or less, cooperate.  The Progressive or Reform Movements that came about from the 1880s to 1920 was a function of men from both political parties.

 

From 1921 on, with the assentation of President Warren Harding we have the modern Republican Party.  Presumably because of scandal Harding died in office and was replaced by his Vice-President, Calvin Coolidge, who was then reelected to serve another term.  It was under these two men that modern Republican principles were developed and continued under the next President, Herbert Hoover.  The forms of government regulation that had been brought about by the Progressive Movement were done away with.  The Free Market was allowed to function unhindered.  This brought about the Great Depression of 1929.

 

Four years later, in 1933, the Democrat FDR became President.  He brought about the New Deal, experimenting with all forms of socialism to put the country back on its feet.  He kept was worked and discarded what didn’t.

 

FDR changed the function of government, making it responsible for the welfare of its people.  This was a new concept excepted in the 20th Century by virtually all the industrial nations.  This concept was actually carried on by both political parties in the United States until the election of Donald Trump as President of the United States.  Will it continue?  There are many who feel strong doubts.  We are at an interesting or frightening point in our history.

 

Trump’s election seems to indicate a return to the policies of the 1920s.  Could we be facing the possibility of a return to the Depression of 1929 or to the Housing Debacle of 2008, to the potential of a far greater depression than that of 1929?  It is a distinct possibility considering Republican control of the Presidency and the Congress.  And, of course, there are Trump’s attitudes and his appointment to important government jobs.  Republicans seem to have a short historic memory!