The Weiner Component V.2 #29 – The Pattern of United States History & the Evolving Purpose of Government: Part 2

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)

Herbert Hoover was elected President of the United States in 1928.  He

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

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

was the third Republican elected to the presidency since the end of World War I, taking office in March 4, 1929.  The Great Depression began on September 4, 1929, with a fall in stock prices.  The stock market crashed on October 29, 1929, Black Tuesday.  It would continue to drop thereafter, losing billions of dollars in value.

English: Real National Product in the Great De...

English: Real National Product in the Great Depression (Photo credit: Wikipedia)

 

Hoover was President about seven months before the crash came.  He spent the next three and some years contending unsuccessfully with the Great Depression and waiting for the Stock Market to reverse itself into positive territory.  It never did.

 

From October 29th on the Great Depression became a world phenomenon.   It had devastating effects.  Personal incomes, tax revenues, profits and prices dropped.  International trade plunged more than 50%.  Countries had set up tariff barriers against all other nations.

 

Both poor and rich suffered.  Personal income tax revenues, profits and prices fell.  Unemployment in the United States dropped to 25%.  It was higher in some other countries, reaching 33%.  Farming areas suffered as crop-prices fell 60%.  All this began eight months after Hoover became President of the United States and continued to get worse during his presidency.

 

Once the Depression hit, Hoover, as President attempted to combat the economic decline with large scale government public work projects such as the Hoover Dam.  He urged industry to keep wages high.  Reluctantly he approved the Smoot-Hawley Tariff of 1930 which set up international trade barriers.  Because he believed in a balanced budget as government income from taxes fell, he raised the rate.   The economy kept falling and unemployment gradually rose to 25%.

 

What had happened was that the economy fell like a bolder off the roof of a high building.  On the one hand President Hoover tried to continually add money to the economy but on the other hand he massively decreased the amount of money available to the public by continually trying to balance the National budget.  The basic problem was that no one really understood what was happening.  By continually decreasing the money available Hoover exacerbated the depths of the depression.  In 2008, when a similar situation occurred the President increased government spending by trillions of dollars and did not raise taxes.  What should have been a greater depression than that of 1929 became instead a Great Recession from which the country recovered in a few years.  Economic downturns are generally understood today; their causes and effects weren’t in 1929.

***************************************

The Great Depression of 1929 was mainly caused by the unregulated banks.  They allowed stock to be purchased with a margin of 10 percent of the actual cost of the stock, the bank funding the remaining 90 percent with interest.  This allowed innumerable people to invest in the Stock Market.  The banks held the stock.  If its cost went down the so-called owner had to quickly come up with the difference raising the bank’s holding to 90 percent or they would sell the stock.  This was buying on margin.

 

The system created high false values on the stocks, producing a bubble which would at some point collapse.  Stocks that never paid a dividend were selling for ever rising costs.  Sooner or later a crash had to come.

 

When the Crash came on October 29, 1929, Black Tuesday, the majority of stocks dropped quickly far lower than 10 percent in one day and continued dropping on succeeding days.  A large number of stockholders were suddenly bankrupt and a lot of banks went out of business.

 

Overnight the amount of money in circulation decreased by a massive percentage and the country was in a deeper depression than it had ever been in before.  This was the Great Depression that would last until shortly after the outbreak of World War II.  What pulled the United States and other countries out of the Great Depression was the unlimited war spending.

***********************************

On March 4, 1933 Franklin Delano Roosevelt took office as the first elected Democratic President since the end of World War I.  In the preceding campaign he had promised the country a “New Deal.”  It was a term that came from poker; the player gave up his five cards and received five new ones with which to play.  It was to the American people a promise of a complete change.  What the change would be, no one knew at the time.  I suspect that included the President; but he would experiment and find a way through the economic crisis.

 

The New Deal consisted of what Roosevelt called the 3Rs: Relief, Recovery, and Reform.  Relief was to create jobs for the unemployed, Recovery was to bring the economy back to a state of health, and Reform was to pass laws that regulated the banks and other enterprises that brought about the Great Depression.  It was felt that the overall economy had to be changed so that this condition could never happen again.

 

Initially Roosevelt closed all the banks and quickly began a process of auditing them.  He began his fireside chats over the new invention, radio, stating in one of his early talks that “We have nothing to fear but fear itself.”  He talked the nation through its fears.  During the first hundred days Congress passed bills that were largely blank, just having a title.  They were filled in by what was needed as they went into operation.

 

Roosevelt doubled the money supply by collecting all the gold coins, with the exception of a few held back as souvenirs.  People objected to having to turn in their gold coins for paper money.  The Federal Government sued them and won every case.  The gold was melted down and made into blocks which were then put into depositories like Fort Knox.  Gold paper certificates were then issued and kept by the Federal Reserve that denoted the amount of gold that was stored.

 

Ones and five dollar bills were silver certificates.  Ten dollar bills and up were gold certificates, actually Federal Reserve Notes.  Once this was completed the government had doubled its money supply.  Actually once this was done the country was off the gold standard.  It solved one major problem.  There had never been enough gold available to meet the monetary needs of the economy.  From this point on we were off the gold standard.  The theoretical fact that we, as a nation, were on one was a fiction.  Paper money could not be exchanged for gold.

 

What emerged as the New Deal developed was a series of Federal programs, public work projects, financial reforms and regulations enacted by the Roosevelt administration in response to the Great Depression.  These programs included support to the farmers, the unemployed, youth and the elderly.  It also included bank reform and changes to the monetary system.  They included both laws passed by Congress, and Presidential executive orders.  These programs focused on Relief, Recovery, and Reform.

 

In essence what Roosevelt did was to change the focus of the Federal Government.  From this point on it assumed responsibility for the welfare of its population.  It didn’t matter up until 2017 which political party was in control the new focus was kept up and added to by both political parties.  The Federal Government’s responsibility was to the people of the nation, to their welfare.  With the election of Donald J. Trump on January 20th on the government seemed to be attempting to move back in time to before 1929.  To date it hasn’t succeeded.

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Harry S. Truman, who became President with the death of Roosevelt, and then won the next election for the Presidency introduced the “Fair Deal.”  It was a liberal extension of the New Deal.  Unfortunately, during his early presidency both houses of Congress were controlled by the Republicans.  What was achieved were those aspects of which the Republicans approved.

 

The Fair Deal included federal aid to education, a large tax cut for low income earners, abolition of the poll tax, an anti-lynching law, a farm aid program, increased public housing, an immigration bill, new TVA style public works projects, a new Department of Welfare, an increase in the minimum wage from 40 cents to 75 cents an hour, national health insurance, expanded Social Security coverage, and a $4 billion tax increase to reduce the national debt and pay for these programs.

 

A very small number of these items were passed by the Republican Congress.  In 1949 to 1950 there was a Democratic Congress and some more of these items were passed.

 

President Lyndon B. Johnson got a number of these reforms passed in his Great Society plan.  Medicare came into existence for senior citizens, with former President Harry S Truman getting the first card issued with the number 1.  Medicaid for the poor who could not afford proper medical care.  A number of civil rights and voter laws were passed desegregating the Southern States.  Johnson declared “War on poverty,” but was hampered in his domestic program by the Viet Nam War.  George W. Bush, the Republican President, added a 400 million dollar prescription drug bill to Medicare.

 

Finally under President Barack Obama in the early 21st Century Affordable Health Care came into existence.  Currently under President Donald J. Trump the country seems to be attempting to move backwards to a time before the New Deal.

++++++++++++++++++++++++++++++++++++++

To sum up: President Herbert Hoover spent millions on public works trying to help the nation quickly work itself through the Great Depression.  He didn’t want the government to directly give charity because that would destroy individual initiative.  President Franklin D. Roosevelt spent billions.  He doubled the money supply.  His policy was Relief, Recovery, and Reform: the three R’s.  There was some of each but the Great Depression did not completely end until the 1940s with World War II where spending was endless.  In 2008 the Real Estate Bubble, brought about by the banks over a 28 year period, burst and the value of the dollar dropped to about ten cents.  President George W. Bush initially bailed out the banks and then Barack Obama became President in 2009.  The country faced a potential for a depression far worse than the Great Depression.  President Obama spent trillions and the country faced a Great Recession which mainly ended a few years later.  We had learned how to limit depressions.

The Weiner Component V.2 #29 – The Pattern of United States History & the Evolving Purpose of Government: Part 2

 

Herbert Hoover was elected President of the United States in 1928.  He was the third Republican elected to the presidency since the end of World War I, taking office in March 4, 1929.  The Great Depression began on September 4, 1929, with a fall in stock prices.  The stock market crashed on October 29, 1929, Black Tuesday.  It would continue to drop thereafter, losing billions of dollars in value.

 

Hoover was President about seven months before the crash came.  He spent the next three and some years contending unsuccessfully with the Great Depression and waiting for the Stock Market to reverse itself into positive territory.  It never did.

 

From October 29th on the Great Depression became a world phenomenon.   It had devastating effects.  Personal incomes, tax revenues, profits and prices dropped.  International trade plunged more than 50%.  Countries had set up tariff barriers against all other nations.

 

Both poor and rich suffered.  Personal income tax revenues, profits and prices fell.  Unemployment in the United States dropped to 25%.  It was higher in some other countries, reaching 33%.  Farming areas suffered as crop-prices fell 60%.  All this began eight months after Hoover became President of the United States and continued to get worse during his presidency.

 

Once the Depression hit, Hoover, as President attempted to combat the economic decline with large scale government public work projects such as the Hoover Dam.  He urged industry to keep wages high.  Reluctantly he approved the Smoot-Hawley Tariff of 1930 which set up international trade barriers.  Because he believed in a balanced budget as government income from taxes fell, he raised the rate.   The economy kept falling and unemployment gradually rose to 25%.

 

What had happened was that the economy fell like a bolder off the roof of a high building.  On the one hand President Hoover tried to continually add money to the economy but on the other hand he massively decreased the amount of money available to the public by continually trying to balance the National budget.  The basic problem was that no one really understood what was happening.  By continually decreasing the money available Hoover exacerbated the depths of the depression.  In 2008, when a similar situation occurred the President increased government spending by trillions of dollars and did not raise taxes.  What should have been a greater depression than that of 1929 became instead a Great Recession from which the country recovered in a few years.  Economic downturns are generally understood today; their causes and effects weren’t in 1929.

***************************************

The Great Depression of 1929 was mainly caused by the unregulated banks.  They allowed stock to be purchased with a margin of 10 percent of the actual cost of the stock, the bank funding the remaining 90 percent with interest.  This allowed innumerable people to invest in the Stock Market.  The banks held the stock.  If its cost went down the so-called owner had to quickly come up with the difference raising the bank’s holding to 90 percent or they would sell the stock.  This was buying on margin.

 

The system created high false values on the stocks, producing a bubble which would at some point collapse.  Stocks that never paid a dividend were selling for ever rising costs.  Sooner or later a crash had to come.

 

When the Crash came on October 29, 1929, Black Tuesday, the majority of stocks dropped quickly far lower than 10 percent in one day and continued dropping on succeeding days.  A large number of stockholders were suddenly bankrupt and a lot of banks went out of business.

 

Overnight the amount of money in circulation decreased by a massive percentage and the country was in a deeper depression than it had ever been in before.  This was the Great Depression that would last until shortly after the outbreak of World War II.  What pulled the United States and other countries out of the Great Depression was the unlimited war spending.

***********************************

On March 4, 1933 Franklin Delano Roosevelt took office as the first elected Democratic President since the end of World War I.  In the preceding campaign he had promised the country a “New Deal.”  It was a term that came from poker; the player gave up his five cards and received five new ones with which to play.  It was to the American people a promise of a complete change.  What the change would be, no one knew at the time.  I suspect that included the President; but he would experiment and find a way through the economic crisis.

 

The New Deal consisted of what Roosevelt called the 3Rs: Relief, Recovery, and Reform.  Relief was to create jobs for the unemployed, Recovery was to bring the economy back to a state of health, and Reform was to pass laws that regulated the banks and other enterprises that brought about the Great Depression.  It was felt that the overall economy had to be changed so that this condition could never happen again.

 

Initially Roosevelt closed all the banks and quickly began a process of auditing them.  He began his fireside chats over the new invention, radio, stating in one of his early talks that “We have nothing to fear but fear itself.”  He talked the nation through its fears.  During the first hundred days Congress passed bills that were largely blank, just having a title.  They were filled in by what was needed as they went into operation.

 

Roosevelt doubled the money supply by collecting all the gold coins, with the exception of a few held back as souvenirs.  People objected to having to turn in their gold coins for paper money.  The Federal Government sued them and won every case.  The gold was melted down and made into blocks which were then put into depositories like Fort Knox.  Gold paper certificates were then issued and kept by the Federal Reserve that denoted the amount of gold that was stored.

 

Ones and five dollar bills were silver certificates.  Ten dollar bills and up were gold certificates, actually Federal Reserve Notes.  Once this was completed the government had doubled its money supply.  Actually once this was done the country was off the gold standard.  It solved one major problem.  There had never been enough gold available to meet the monetary needs of the economy.  From this point on we were off the gold standard.  The theoretical fact that we, as a nation, were on one was a fiction.  Paper money could not be exchanged for gold.

 

What emerged as the New Deal developed was a series of Federal programs, public work projects, financial reforms and regulations enacted by the Roosevelt administration in response to the Great Depression.  These programs included support to the farmers, the unemployed, youth and the elderly.  It also included bank reform and changes to the monetary system.  They included both laws passed by Congress, and Presidential executive orders.  These programs focused on Relief, Recovery, and Reform.

 

In essence what Roosevelt did was to change the focus of the Federal Government.  From this point on it assumed responsibility for the welfare of its population.  It didn’t matter up until 2017 which political party was in control the new focus was kept up and added to by both political parties.  The Federal Government’s responsibility was to the people of the nation, to their welfare.  With the election of Donald J. Trump on January 20th on the government seemed to be attempting to move back in time to before 1929.  To date it hasn’t succeeded.

************************************

Harry S. Truman, who became President with the death of Roosevelt, and then won the next election for the Presidency introduced the “Fair Deal.”  It was a liberal extension of the New Deal.  Unfortunately, during his early presidency both houses of Congress were controlled by the Republicans.  What was achieved were those aspects of which the Republicans approved.

 

The Fair Deal included federal aid to education, a large tax cut for low income earners, abolition of the poll tax, an anti-lynching law, a farm aid program, increased public housing, an immigration bill, new TVA style public works projects, a new Department of Welfare, an increase in the minimum wage from 40 cents to 75 cents an hour, national health insurance, expanded Social Security coverage, and a $4 billion tax increase to reduce the national debt and pay for these programs.

 

A very small number of these items were passed by the Republican Congress.  In 1949 to 1950 there was a Democratic Congress and some more of these items were passed.

 

President Lyndon B. Johnson got a number of these reforms passed in his Great Society plan.  Medicare came into existence for senior citizens, with former President Harry S Truman getting the first card issued with the number 1.  Medicaid for the poor who could not afford proper medical care.  A number of civil rights and voter laws were passed desegregating the Southern States.  Johnson declared “War on poverty,” but was hampered in his domestic program by the Viet Nam War.  George W. Bush, the Republican President, added a 400 million dollar prescription drug bill to Medicare.

 

Finally under President Barack Obama in the early 21st Century Affordable Health Care came into existence.  Currently under President Donald J. Trump the country seems to be attempting to move backwards to a time before the New Deal.

++++++++++++++++++++++++++++++++++++++

To sum up: President Herbert Hoover spent millions on public works trying to help the nation quickly work itself through the Great Depression.  He didn’t want the government to directly give charity because that would destroy individual initiative.  President Franklin D. Roosevelt spent billions.  He doubled the money supply.  His policy was Relief, Recovery, and Reform: the three R’s.  There was some of each but the Great Depression did not completely end until the 1940s with World War II where spending was endless.  In 2008 the Real Estate Bubble, brought about by the banks over a 28 year period, burst and the value of the dollar dropped to about ten cents.  President George W. Bush initially bailed out the banks and then Barack Obama became President in 2009.  The country faced a potential for a depression far worse than the Great Depression.  President Obama spent trillions and the country faced a Great Recession which mainly ended a few years later.  We had learned how to limit depressions.

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.

      **************************************

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 #122 – Jobs: A Successful United States

n the United States today we have about 5.5% known unemployment plus, at least, if not more than 5 percent hidden unemployment. That is much too much in a country as wealthy as the U.S.  The known unemployed, register and are actively looking for work; the unknown unemployed have given up, feeling ultimate defeat they are no longer looking for jobs.

 

The existence of both these groups is a sad comment upon this country.  For a nation as rich as ours, with all the needs it has for constantly improved infrastructure there is no excuse for this situation.  We are a modern nation that is still living largely in the last century when most of our infrastructure was created.  In a manner of speaking we are like the young man who has just acquired his first automobile and expects it to last forever without any real care or maintenance.

**************************************

In late 2008, under a Republican Administration, after thirty some years of at first gradual and then accelerated economic growth in the Housing Market, the Real Estate Bubble burst and the entire economy of the United States was about to crash, beginning with the major banking houses within the country.  The Treasury Department, under a Republican Administration, extended hundreds of billions of dollars in loans to these banks to keep them solvent and functioning.

In Europe and Asia, on a smaller scale, the nations there underwent the same crisis with similar solutions.  Some of the nations of Europe like Greece and Spain, had lived richer than others on this new wealth that the banking houses had created and were far more in the red than others countries.  This was particularly true in the Eurozone.  Some of those nations underwent extreme austerity measures in order to be bailed out by the European Central Bank or the other nations in the Eurozone.  This was done in 2009. They are still in extreme economic troubles.

In the United States we went from at least 12% unemployment in 2009 to 5.5% by 2015. What saved the country from falling into a deep depression, deeper than that of 1929, was the Federal Government bailouts of the banks and the auto industries, plus innovative use of Monetary Policy by the Obama Administration.

Unemployment today, in early 2015, is still a problem in the U.S., particularly for the young and unskilled.  Another problem tends to be rates of pay.  The Federal minimum wage in the U.S. is $7.25 per hour before social security, assorted taxes, and unemployment insurance are taken out.  While many states have a higher minimum wage the Republicans in Congress refuse to raise the National minimum wage.  It has existed for several years now while prices have gradually increased.

What’s interesting or odd here is that Scott Walker, the governor of Wisconsin, is attempting to gain the Republican presidential nomination on a platform of “right to work” laws.  These laws mean that no business can have a closed union shop; no worker has to join a union where ever he works.  The object of these laws is to break the power of the unions across the U.S. and he probably would like to get rid of the minimum wage, as was suggested during the Reagan Administration.

Henry Ford, in his early factories, discovered or realized that if you pay your workers enough they will buy the product they are producing.  The same premise holds true today: if workers earn more they will spend more.  In essence increased spending equals increased production, and consequently more profit for everybody. Growing productivity creates jobs and raises the standards of living within the country.  And conversely the lower the national income distribution the lower the productivity and the higher the unemployment.

No one can buy goods and services with money they don’t have.  Somehow the Republican understanding of the situation throughout the country is backward; their goal, regardless of what they say or believe, is actually to reduce productivity throughout the nation and increase unemployment.  This they have very effectively done since 2011 when they achieved dominance in the House of Representatives.

If we look at their current goal of keeping the minimum wage at $7.25 an hour.  Working at that rate for 40 hours a week allows an individual to earn $290.00 a week, which works out to about $1,160 a month, and $15,080.00 for a 52 week year before assorted government withholdings.  This puts this person living alone slightly above the poverty line, which is $12,300 for one adult, $15,853 for two adults is slightly below the poverty line, $19,055 for two adults and one child is well below the poverty line, and $24,008 for two adults and two children.  If that amount is doubled by both adults working full time at that rate of pay then their condition improves but who will take care of the child or children.  It’s a sad comment upon a society that will not pay a goodly percentage of its workers enough to not live in poverty or to live just above the poverty level when they are fully employed.  We are a nation with a good percentage of employed being working poor.

There is an interesting note of irony here.  The working poor person earning the $7.25 an hour is almost below the legal poverty level.  In most states this person qualifies for food stamps and government medical aid, as well as other programs.  All these aid programs are paid for by tax dollars.  Ultimately, then, the tax payers in the country are subsidizing those businesses or industries that pay the minimum legal wage.  Consequently a good percentage of these companies’ profits are being paid indirectly by the American taxpayer.

In the April 16, 2015 issue of the L.A. Times there was an article dealing with this subject which cited a UC Berkeley Center for Labor Research study.  They reported that 56% of all state and public assistance in the United States now goes to working families.  That adds up to 153 billion a year, including 25 billion in state funding.  Individually California spends 3.7 billion, New York 3.3 billion, and Texas 2 billion on public assistance programs.  These go to, among others, fast food employees, child and home care workers, and part-time college faculty.

To quote the L.A. Times: “Last week the Colorado Fiscal Institute said 600,000 Colorado employees, or a quarter of the state’s working force earned less than $12 an hour. As a result taxpayers ante up about 304 million a year to cover their healthcare costs… It’s clear these big employers are shifting their costs to the taxpayers.”

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George W. Bush’s presidency ended in 2008 and Barak Obama became president in 2009.  Most of his early efforts were aimed at keeping a deep depression from happening.  Unemployment still increased but it was minor compared to what it might have been.

Today are there enough jobs in the society to keep everyone who wants to work fully employed?  There were jobs for everyone up until the end of 2008 before the Real Estate Bubble burst.  At that time the banking houses in the United States were encouraging people to use their homes as bank accounts and constantly withdraw their equity from their homes and spend it.  The society was flowing with money.  Once the Bubble Burst there was an intense shortage of funds and unemployment was well over 12% overnight.

There has been a large percentage of recovery since 2009 but the bulk of the National Income has gone to the upper echelon of society with very little going to the middle class and even less than that going to the bottom of society.  The distribution of the National Income is completely out of kilter.  It is encouraging, with Republican help, a shrinkage of economic prosperity.  If it were not for the creative Monetary Policy the Federal Reserve used this country would now be in the doldrums with everyone, all Republicans and Democrats, currently well off and otherwise, suffering considerably.

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The odd part of all this is that the country could easily be well off with full employment and everybody having at least a decent standard of living.  The key here is expending money in Fiscal Policy which Congress controls.  The Republicans are loath to spend money on things other than the military.  They are very conscious of the National Debt that they have mushroomed since Reagan took office but for which they claim no credit.

Interestingly the Federal Government currently owns well over 50% of its own debt. Legally, it seems, no one, with the exception of the Federal Government, can owe itself money.

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The infrastructure of the United States is still in the 20th Century.  Some of it was installed over a hundred years ago.  Underground pipes and sewers are continually breaking down and being repaired to the level where they are just usable again.  It’s currently a Band-Aid approach; barely maintaining but no really improving anything.

President Obama had a plan in 2011 to drop unemployment that the Republican House of Representatives chose to ignore for two reasons: one, He presented it and two, it cost money, which they are loath to spend on anything except the military and business expansion like the Keystone project.

The prime example of Fiscal Policy is the New Deal that Franklin D. Roosevelt inaugurated in 1933 when he became President during the Great Depression.  While the Republican, Herbert Hoover was President when the Great Depression broke in 1929, he was incapable of such massive spending Roosevelt began in 1933.

Roosevelt was able to fund the New Deal by doubling the money supply in the nation.  He had government officials collect all the gold coins in circulation and replace them with paper money. The value of the gold was then doubled from $18 an ounce to $36. And suddenly the money supply doubled; there was twice as much money in circulation.

While this did not get the country out of the depression it did significantly improve economic conditions.  In order to end the Great Depression the Roosevelt Administration would have had to, at least, quadruple the money supply beyond that level. That situation occurred during the 1940s when World War II broke out.

The New Deal was a series of domestic programs encompassing Relief, Recovery, and Reform and enacted from 1933 on.  It included laws passed by Congress and executive orders issued by the President.  Programs like the Works Progress Administration (WPA), the Civilian Conservation Core (CCC) made the government the largest employer in the nation.  Others like Social Security, the Fair Labor Standards Act that set maximum hours and minimum wages for most categories of workers and the Tennessee Valley Authority (TVA) are with us today.  Banking reform was reconstituted after the 2008 Banking Debacle.  There were a myriad of other agencies mostly denoted by the letters; all of which created jobs, upgraded whole sections of the nation, and brought about

Did the government have to do this?  Obviously not; but in so doing the Federal Government took on the responsibility of providing for the common man (forgotten man) where he could not then provide for himself.  It was in the mind of Roosevelt and his administration necessary in order to save our free capitalistic society.

This is what the current Republican Congress seems to be incapable of doing. They feel this country cannot afford this luxury today.  I suspect they also feel that the unemployed are really themselves responsible for being in that condition.  Whether there are jobs available or not is immaterial.

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Fiscal Policy is something the Federal Government is going to have to get involved with sooner or later whether they want to or not.  The infrastructure of the United States was built during our period of urbanization and industrial development, from the late 19th Century through the 20th Century.  Our growing needs then were a lot smaller than they are now.  We grew then from a country of 140 plus million to over 350 million people today.  Some of the sewerage pipes in many cities are over 100 years old.  Roads, freeways, and interstate highways have to be maintained and improved.  The electric grid that runs throughout the nation has to be upgraded.  Many schools are antiquated and should be replaced or upgraded.

All of this is mentioning only a small portion of what needs to be done.  We can take a piece-meal approach, fixing things as they break down and wait until a point comes when much of the infrastructure can no longer be repaired or the Congress can begin a process of bringing the infrastructure into the 21st Century, rebuilding for today’s population..

Money is not really the problem for the Federal Government since it owns most of its own debt.  Actually spending money would increase government tax receipts.  In fact it would significantly increase the amount of taxes received on all levels of government, city, state, and federal.

What the Republican Congress is doing by refusing to even consider fiscal policy is exacerbating unemployment, encouraging the growing wealth of the upper ten percent, working to shrink the middle class, and radically increase the lower classes.  They are working to bring back the conditions of the 1880s and 1890s when there were massive divisions between the different classes within society.

Interestingly Grover Norquist, the president of Americans for Tax Reform, who has successfully gotten the Republican members of Congress to sign a pledge that they will, under no circumstances, raise taxes, has stated that his favorite period in U.S. history was the last two decades before the 20th Century.  It would seem he has been working very hard to bring us back to that period of inequality.

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More jobs are needed.  The current Congress will do nothing to alleviate the problem; instead they will by their actions increase it.  What will determine our future direction will be decided by the 2016 Presidential Election.  If we reelect a Republican Congress and also vote for a Republican President then conditions will continue as they are now, probably getting far worse.  If, on the other hand, both Houses of Congress are Democratic, then fiscal policy should bring about a radical lowering of unemployment and an overall return of prosperity for all levels of society.

It will be all in the hands of the voting public.  If they all vote their interests then the problem can be solved or, at least, move in the direction of a solution.  If enough people vote their beliefs or prejudices or stay at home and refuse to vote then the country will continue as we are now and probably go downhill economically.

To me the unemployment problem is ridiculous.  It can so easily be solved.  We can have full scale employment and solve our infrastructure problems at the same time.