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!

The Weiner Component #81 – The Concept of National Wealth

Franklin Delano Roosevelt, 1933. Lietuvių: Fra...

Franklin Delano Roosevelt, 1933. Lietuvių: Franklinas Delanas Ruzveltas (Photo credit: Wikipedia)

The question of wealth is confusing. To an individual it appears to be the amount of money he or she possesses; but to a nation it would be the goods and services they produce in a given period of time, usually a fiscal year measured in terms of dollars and cents. This is the Gross Domestic product, the GDP. Which is the actual wealth? The productivity or the money?

Looking at a small area of United States’ history should answer this question.

On Tuesday, Black Tuesday, October 29, 1929 the New York Stock Market collapsed. Over a period of time the value of the Market dropped from 89 billion dollars to 18 billion dollars. (This was when a one ounce gold coin was a $20 gold piece and was officially worth $16.) That event was concurrent with downturns in all the other industrial nations. The rest of the U.S. economy would follow the stock market with massive unemployment, part time employment, and underemployment. Unemployment would drop to 25% of the working population. The President, Herbert Hoover, and his Secretary of the Treasury, Andrew Mellon, believed that the Market Mechanism would eventually bring the Market back to where it had been before the crash. It did not.

From October 1929 until the end of 1932 the country sank into deeper and deeper depression. The President and his Secretary of the Treasury kept stating that “Prosperity was just around the corner.” That corner was never reached.

John Maynard Keynes, an English economist, developed the theory of Keynesian Economics. Government, during times of recession and depression must spend more than they collect in taxes. During times of prosperity it can pay off its debt. Some of this was attempted on a small scale by President Hoover.

In 1933 Franklin Delano Roosevelt was elected President of the United States. He began, what he called, The New Deal; a process of massive spending that it was hoped would bring about recovery.

Roosevelt funded this in a very interesting way. Money at that time was gold and silver coins. All the gold coins in the country, with the exception of a small number held as souvenirs, were collected, melted down into gold bars, and stored in depositories like Fort Knox. Gold certificates, equaling the value of the gold coins, were issued to the Federal Reserve. The value of the gold was then by Act of Congress doubled from $16 an ounce to $32 an ounce. The ounce of gold had traditionally been the $20 gold piece. Each one was replaced by two $20 dollar paper bills marked Federal Reserve Notes. In one simple act the money supply of the United States had been doubled.

We were actually off the gold standard but the fiction of its continued existence remained. The money was as good as the gold that stood behind it. Roosevelt could now easily fund the early New Deal. All it took was a simple act of Congress and the money supply was doubled.

As the New Deal progressed, from 1933 to 1940 shortly after World War II broke out, Congress authorized spending by the Roosevelt Administration far beyond the amount of taxes that were collected or the extent of the money supply. The government followed the principles of Keynesian economics. This did not get the country out of the depression. In order to do that the money supply would have had to have been more than quadrupled. But it did allow recovery to begin. It took World War II for complete recovery to occur.

From the outbreak of W.W.II in 1939 to the end of 1941 when the U.S. became directly involved in the war the country could not meet the demands of Europe and Asia for goods. The depression ended; there was full employment. The Allied nations shipped their gold (money) to the U.S. to pay for their purchases of goods (food and assorted war materials) until they ran out of money, then purchases were made on credit until that became too large. At this point the Roosevelt Administration evolved the concept of Lend Lease, which was a fiction. From this point on the United States gave the necessary war materials to the Allied Powers.

World War II was a very expensive enterprise. How great was the cost to the United States? The best we can do is an approximate answer to this question. According to the Oxford Companion to WWII the cost to the U.S. was $306 billion. President Truman in an address to a joint session of Congress stated that the U.S. contributed $341 billion to World War II. This did not include the $50 billion given out in Lend Lease.

During WWII the United States became the “Arsenal of Democracy,” supplying all the allied nations with food and the materials of war. Within the country all efforts were aimed at fighting and winning the war. Practically all manufacturing was for the war effort. Farmers could not produce enough food. Many people set up “victory gardens,” growing vegetables on their lawns, while those in apartments used window boxes. Virtually everyone on the home front was involved in the war effort. Children collected scrap metal and old newspapers that could be reconstituted and used again. Housewives saved their used grease from cooking and turned it in to their butchers. It was used in the production of munitions.

With everyone on the home front employed, men, high school students after school, and women, and many people working double shifts money was readily available but there was little upon which to spend it. People could not freely spend money; most items were rationed or not produced; everything was focused upon the war effort.

The government, presumably to raise money for the military effort, sold war bonds. They could be bought in numerous denominations. The smallest was a $25 bond which cost $18.75 and was redeemable after ten years. School children bought 50 cent war stamps that they collected in books, until they saved $18.75, then turned them in for war bonds. All the resources in the country was focused upon the war effort.

Where did all this money come from? What was its effect upon the economy of the United States? Obviously Congress passed bills and the President signed them. And the money was created. Also all this currency that the country created was spent upon goods and services in the U.S. It was all this spending that took the country out of the depression and into a new level of economic prosperity. During the war people had money, many for the first time in their lives, but could not spend it.

In 1944 the Serviceman’s Readjustment Act (G.I. Bill) was passed by Congress and signed by the president. It was a law that provided a range of benefits for returning WWII veterans: low cost mortgages, low interest loans to start a business, cash payments of tuition and living expenses to attend college, high school, or vocational training, as well as up to one year of unemployment compensation. It was available to every veteran who had been on active duty during World War II for at least 90 days and had not been dishonorably discharged. Combat was not required.

By 1956 about 2.2 million veterans had used these benefits to attend colleges and universities. An additional 6.6 million had taken some kind of training program. This does not count the number who started small businesses with low government interest loans or who bought a house with a low interest VA loan.

In April 1948 Congress passed the European Recovery Program, generally called the Marshall Plan. In this bill the United States gave economic support to help rebuild European economies after the end of WWII in order to prevent the spread of communism. During the four years that the plan was operational the U.S. donated $13 billion in economic and technical assistance to help the recovery of the European nations.

If we consider the inflation factor in terms of the value of gold, then an ounce of gold was worth $32; today an ounce of gold is worth in the area of $1,300. If you divide $32 into $1,300 you get an idea of the level of inflation since 1948.

How was all this paid for? The answer is by an acts of Congress. The government legislated the funds into being. What then is the real wealth of the United States? The goods and services it produces.

What happened to all this debt that Congress generated? How did the U.S. pay for the depression, WWII, the GI Bill, and the Marshall Plan? Of course the answer is obvious. Congress approved the expenditures and the government printed and issued the money.

Before we consider the National Debt there are some other factors to consider. First the population of the U.S. in 1930, several months before the census was taken, was 122,775,046. By 1940 it had gone up approximately by ten million people; and by 1940 by another eighteen million. By 1960, the year of the next census the population was 179,323,175 Americans, an increase of over twenty-five million. While the executive in each introduction to the official census has apologized for the sloppy enumeration, this number of individuals was actually counted.

With the constantly increasing population the economy needs an ever growing amount of money in the National Cash Flow. In no year, from the beginning of the Great Depression on, did the economy increase by less than one million people, generally the number was larger. If money had not been added to the economy there would have been mad inflation and total economic collapse.

What the Federal Government did was to add by acts of fiat multi-billions of dollars to the national economy. The initial cost of the New Deal was covered by doubling the money supply and creating the fiction of gold being behind every dollar. Later paper money was simply created for the latter part of the New Deal, Lend Lease and W.W.II, the G.I. Bill and the Marshall Plan. There was never any real gold behind the dollar. In fact, there was never enough gold in existence to make up an adequate gold supply for money.

What was the advantage of using this token money? It allowed full productivity to occur within the United States and the industrial world. World War II, forgetting for the moment its horrors, put everyone back to work. The G.I. Bill made this country into a middle-class nation by educating millions of people with college and providing for them to start their lives on a more secure level than their parents had lived. The Marshall Plan, in addition to allowing European nations to recover from the devastation of war, was also a six plus billion dollar checkbook of funds to be spent in the U.S. creating an endless number of well-paying jobs.

 

The wealth all this paper money produced was the production of goods and services that allowed America and a good part of the world to emerge after the Second Great War.