Obama's New Deal

[bailaviborita]

Anyone catch his pick for Economic Council Chair- UC Berkley econ prof who is an "expert" on FDR's New Deal? http://online.wsj.com/article/SB1227...googlenews_wsj (Christina Romer)? What scares me is that I think both she and he think that FDR got the country out of the Great Depression by spending his way out of it.

Am not enough of an historian or economist to understand the Great Depression, but thought these myths of the Depression were interesting:

http://online.wsj.com/article/SB1225...googlenews_wsj

Excerpt:

- Enlightened government pulled the nation out of the worst downturn in its history and came to the rescue of capitalism through rigorous regulation and government oversight. To the contrary, the Hoover and Roosevelt administrations -- in disregarding market signals at every turn -- were jointly responsible for turning a panic into the worst depression of modern times. As late as 1938, after almost a decade of governmental "pump priming," almost one out of five workers remained unemployed. What the government gave with one hand, through increased spending, it took away with the other, through increased taxation. But that was not an even trade-off. As the root cause of a great deal of mismanagement and inefficiency, government was responsible for a lost decade of economic growth.

[nmap]

Very interesting point, Sir.

What really pulled us out of the depression was WWII.

On the one hand, I expect to see a period of war over the next decade or so. I hasten to add that I do not desire such an outcome. It will be over resources - although exactly who will be involved is an open question.

Wars give government extensive opportunities to control the population, the economy - in fact, every part of society. B0 appears to be avid in his pursuit of power.

I wonder just how far he will tread on FDR's path.

[bailaviborita]

Not sure I agree that WWII got us out of the depression. The way I understand it, most government programs (even war) take money away from the most productive parts of our society and allocate it to the least productive (in terms of building wealth)- unless you would use that war to further one's imperial holdings. As we are not in to milking places for their resources once we've defeated them- that isn't applicable to our situation. So- in essence, as I understand it, the Supreme Court eventually ruled many of FDR's programs were unconstitutional, people adjusted their lives to the reality of tight living and worked their asses off both at work and education. Time and hard work got us out, not government spending on war or spending on programs. Now, I would think you could make the case that after WWII we seemed to grow the worldwide free market system to many of our allies and enemies- that that helped too. But, I would argue that WWII was the enabler- and not the direct cause- that it was our post-war plan and policy that got us out.

[nmap]

You make some good points, Sir.

One view seems to be that WWII combined massive deficit spending, mass conscription, and a war economy. Whether through increased job opportunities (building war material) or conscription, the U.S. entered a period of full employment. In addition, acquisition of consumer goods was deferred due to the priority of war production, which increased savings.

And, too, weapons weren't as expensive - a WWII jeep, as I understand it, was much less expensive than a modern HUMVEE. One could employ more people per dollar of hardware than presently, and the skills needed were (perhaps) simpler.

In support of your position, I notice that down markets tend to last 1/4 to 1/3 as long as the associated up markets - which is time enough to instill new habits and correct old problems. If that's true, we may face at least 5 years of difficult times to correct the present excesses.

You're probably right. In which case, there will be a lot of distress...

[Richard]

IMO, WW2 did stimulate the US economy and allow us to overcome the Great Depression by-

• placing a large part of the healthiest of the work force out of the production arena and into the military, thus allowing a resurgence of jobs and technical training for everyone else
  
• massive investing in the means of production for the war effort which carried through into the post-war period
  
• destroying the major means of production of most of the world's economic powers and allowing the US to readily dominate the post-WW2 market because it was virtually new and untouched by war
  
• bringing the servicemen back and giving them the GI Bill and housing loans, setting up a situation which further kept many from immediately competing for spaces in the job market while allowing them to receive a college education and various levels of technical training to support the new economy and growth of our industrial base

FWIW, I don't see that happening now or in the near future. Different day, some similarities but different circumstances.

Richard's $.02

[ZonieDiver]

Originally Posted by Richard

IMO, WW2 did stimulate the US economy and allow us to overcome the Great Depression by-

• placing a large part of the healthiest of the work force out of the production arena and into the military, thus allowing a resurgence of jobs and technical training for everyone else
  
• massive investing in the means of production for the war effort which carried through into the post-war period
  
  
• destroying the major means of production of most of the world's economic powers and allowing the US to readily dominate the post-WW2 market because it was virtually new and untouched by war
  
• bringing the servicemen back and giving them the GI Bill and housing loans, setting up a situation which further kept many from immediately competing for spaces in the job market while allowing them to receive a college education and various levels of technical training to support the new economy and growth of our industrial base

FWIW, I don't see that happening now or in the near future. Different day, some similarities but different circumstances.

Richard's $.02

I always get resistance when I mention this, but the situation stated above also helped sow the seeds of our eventual loss of manufacturing power. As we helped rebuild and re-tool Germany and Japan in the post WW2 era, we failed to do the same in the USA. (Here's the part that gets me flak.) Members of the so-called "Greatest Generation" (so-named by "Blinky" Brokaw) who had survived the Great Depression and won WW2 became busy "feathering their own nests." Labor and management of our major industries, especially the steel industry, failed to engage in capital deepening, Instead, they gave themselves great pensions, high wages and salaries, outstanding benefits, large bonuses and changes to the social security program that would boost their retirement incomes. By the 1960's this helped cause us to be less able to compete on the global economic playing field.

Watching the CEOs of the auto industry beg before Congress, while refusing to accept the fact that what is needed is the ability to restructure their bloated, out-dated industry that bankruptcy would provide, demonstrates how the attitude that began after WW2 has become ingrained in our old-time business psyche. They cling to the past and the things that got them into the trouble they are in at this time, instead of looking ahead to how they can make themselves competitive in the future.

About a nickel's worth...

[nmap]

I've been doing a lot of thinking about Bailaviborita's point - that WWII didn't bring us out of the depression. Elsewhere, I've read that stimulus and other efforts by government cannot end or shorten a bear market. The two positions seem to mesh well.

As a thought experiment, suppose we are in a depression. We decide we don't like it, so we wish to end it. If we suppose that wars end depressions, we could start a major war. The other side might even agree that it was a good idea, if war helps the economy. So, for example, our government could contact China, and we could have a war. Perhaps we would arrange for it to last 5 years, with an option to go another five. If wars improve the economy, then the concept above should have both the U.S. and China in great shape a decade hence. Is that valid? I have to question it.

So, let's modify the experiment. Instead of a real war, let's recreate the conditions without actually engaging in conflict. First, let's draft everyone between 18 and 35. We'll then march them from the East coast to the West coast and back again. We'll also have the factories produce large quantities of WWII-era equipment - other factories will dispose of the equipment. Would this create a strong economy? Again, I would doubt it.

But if the above concepts are fatally flawed, what is it about a war that ends depressions?

If a bear market must play out to its end, perhaps economies do exactly the same thing.

Let's suppose (again) that we see some thunderclouds. We go outside, and we proceed to run in circles, scream, and shout. Rain begins. So, have we caused rain? Of course not! But the two events give the appearance of a connection - there is a correlation.

Perhaps we are confusing correlation with causality. Maybe WWII just happened to start about the same time the 1929 depression had worked out the previous excesses. And if that's true...then all the stimulus efforts by the Treasury will do no good whatsoever.

[mcarey]

Originally Posted by ZonieDiver

I always get resistance when I mention this, but the situation stated above also helped sow the seeds of our eventual loss of manufacturing power. As we helped rebuild and re-tool Germany and Japan in the post WW2 era, we failed to do the same in the USA. (Here's the part that gets me flak.) Members of the so-called "Greatest Generation" (so-named by "Blinky" Brokaw) who had survived the Great Depression and won WW2 became busy "feathering their own nests." Labor and management of our major industries, especially the steel industry, failed to engage in capital deepening, Instead, they gave themselves great pensions, high wages and salaries, outstanding benefits, large bonuses and changes to the social security program that would boost their retirement incomes. By the 1960's this helped cause us to be less able to compete on the global economic playing field.

Watching the CEOs of the auto industry beg before Congress, while refusing to accept the fact that what is needed is the ability to restructure their bloated, out-dated industry that bankruptcy would provide, demonstrates how the attitude that began after WW2 has become ingrained in our old-time business psyche. They cling to the past and the things that got them into the trouble they are in at this time, instead of looking ahead to how they can make themselves competitive in the future.

About a nickel's worth...

I totally agree that the "greatest generation" and would add their "baby boomer" offspring lived in excess and are responsible for the credit crunch and deficit in investment / savings. They failed to continued to innovate as a whole. We continue to enjoy entrepenurial innovation in pockets of our economy, but the vast majority Americans sit back and just put in their time. This puts our country at a competitive disadvantage. The culture of our society has had the pendulum of motivation swung by circumstance. We have failed to rapidly adapt and apply, the carrot and stick in government policy (regulations and tax code) to the ever changing situation. Our companies and corporations have on the whole become complacent in their markets until competition either killed them or forced them to innovate (produce better products).

The new deal, WWII, Cold War, Space Race, etc... were just motivating opportunites that set the tone or woke leadership up to spend our countries (a companies) resouces to innovate rapidly and outpace the competion (either by intent or accident).

Investment in innovation is the key to outpacing our global competitors and maintaining our lifestyle; the richest people and the richest "poor" in the world.

I also agree that resources, natural and human, will be the cause of many expeditions (little or big wars) by those countries that want the "American dream" in the near future.

If we as a people want to invest, then I say instead of bailouts for failed businesses, we should invest in innovative sustainable energy and reprocessing / recycling to feed the supply chain.

We also need to stop spending (or set a limit) on what we spend on health care to prolong life. No government or business should pay the full burden (or even a substantial portion) of prolonging life. We should fund public health and prevention, but if someone wants to get a new heart, let them pay!

Just my quick thoughts!

[grog18b]

I think the extent of WW2 did help the US get out of the depression; reason being, the extent of the war. We have not since, had a war the size and scope of WW1 and WW2. During WW2, a majority of the male population of the US was serving in the armed forces. People at home were recycling, put on rations, and experienced the hardship of the war itself. When you have people raiding trash dumps for rubber, copper, and whatever else... things are bad. The people as a whole were put to work, for the war effort. Women were taken into industry, in jobs they had never been "permitted" to do before. When a Nation has that great a war effort, it has a big impact on the economy. Spending is increased, but productivity is through the roof, and unemployment is nill. You don't have millions on welfare, not paying taxes, and adding to the societies problems.

All wars we have been involved in since, did not require such sacrifices of the masses... Never have so many, owed so much, to so few.

Personally... and my .02... I heard about the CCC camps in Obama's proposals, and I, for one, think it's a fantastic idea (one of his first), as long as it's done to the extent it was in WW2. Take the unemployed and give them work, instead of giving them handouts. Take the WELFARE people, and give them work too, instead of welfare. We taxpayers make out, because now we have all those people employed, making our parks better, and cleaning our roadways... and paying taxes too, instead of living off Uncle Sugar.

What will bring us out of this, is letting those companies that have multi-million a year CEOs and top heavy management fail. Let those multi-millionaires be without a job, or the prospect of one. New companies will form, and prosper, and the dollar will be worth more. We need to stop looking to the taxpayer to bail out companies that should fail and go under. (DeLorian anyone?) CEOs that make stupid decisions, and think of their own well being over that of their companies, and workers, should be allowed to fail. The only thing bailing them out will do is prolong the inevitable and cost US taxpayers a LOT of money. Same with the banks and credit mortgage lenders. The bailout was the dumbest thing our "elected officials" have done in the history of government. All the stimulus checks... Another financial blunder that will go a long way in devaluing the dollar. Take the bailout money, add the stimulus checks to it and USE that money to develop new technologies to free us from foreign oil, or use them to fund CCC programs, EMPLOYING people.

A good example of how screwed up our economy is can e found in old Joe Biden's hometown, Scranton PA. For those that don't know, Scranton is filled with shopping malls, retail stores, coffee shops, ski slopes, and many other places to SPEND money. Those places employ a minimum of people. They do NOTHING but drain the economy. When you have a thousand places to spend money, and very few places to work and EARN money, it is a recipe for disaster. Add to that, credit card companies that issue credit cards to people like they are in a candy jar outside the mall... I mean, are people THAT stupid? Yup. They are.

The only answer to get us out of the place we are in, is to make more places to EARN money, and fewer places to SPEND money and to put the unemployed and welfare people to work. We have the technology to produce a car that would last forever. Same with a light bulb. Do we do it? Nope. It's bad business to make a product that does not require replacing every few years (ask any computer maker...) but, apparently good business to make a piece of crap that breaks or wears out easily. The only flaw in this logic is that, other Nations are making the same thing, making it better, and the American people don't like buying cheaply made pieces of crap. So... the CEOs can sit back and ask why, but they KNOW why. They produce crap. Used to be, American made meant something else. It meant quality, and the pieces of crap had made in Japan on the bottom. Not anymore. The Japanese are the ones producing products people are buying. We CAN make cars that run like their Japanese counterparts, we just choose not to. Why? Ask the same people that are in Washington begging for money. They make a piss poor product, overprice everything about it, and make it crappier than anything available from other Nations, then sit back and wonder in amazement when their business goes tits up???? ...and they want OUR tax money to help them? I say hell no. Fail, go bankrupt, and a better company will form and do it better. The Japanese are building better cars, here, charging less for them, have happy workers, and how are they doing it? I'd be interested in seeing what Nissan's upper management and CEOs make per year, and how much work they do.

[AngelsSix]

I always get resistance when I mention this, but the situation stated above also helped sow the seeds of our eventual loss of manufacturing power. As we helped rebuild and re-tool Germany and Japan in the post WW2 era, we failed to do the same in the USA. (Here's the part that gets me flak.) Members of the so-called "Greatest Generation" (so-named by "Blinky" Brokaw) who had survived the Great Depression and won WW2 became busy "feathering their own nests." Labor and management of our major industries, especially the steel industry, failed to engage in capital deepening, Instead, they gave themselves great pensions, high wages and salaries, outstanding benefits, large bonuses and changes to the social security program that would boost their retirement incomes. By the 1960's this helped cause us to be less able to compete on the global economic playing field.

Watching the CEOs of the auto industry beg before Congress, while refusing to accept the fact that what is needed is the ability to restructure their bloated, out-dated industry that bankruptcy would provide, demonstrates how the attitude that began after WW2 has become ingrained in our old-time business psyche. They cling to the past and the things that got them into the trouble they are in at this time, instead of looking ahead to how they can make themselves competitive in the future.

About a nickel's worth...

And I agree 100%, I was just discussing this exact thing with the guy who pays the bills. It seems to me that we forgot the values of hard work, everyone wants to be on easy street these days but no one wants to work for it. Look at these day traders. I wonder where they are these days?? How about some of those dot com millionaires? I personally think all the folks getting those fat salaries that are in charge of companies should cut their pay in half and put that money back into the company. I also think that Congress and Senate need to include themselves, because essentially they are the CEO's of the government.

[frostfire]

Originally Posted by mcarey

We also need to stop spending (or set a limit) on what we spend on health care to prolong life. No government or business should pay the full burden (or even a substantial portion) of prolonging life. We should fund public health and prevention, but if someone wants to get a new heart, let them pay!

I've been contemplating this for so long. With all the medical advances, we are saving (prolonging) lives at both end of the spectrum now more than ever: The newborn and the oldest old. Newborns with all kinds of congenital conditions can now be saved. However, at $$$/day in the NICU with potentially a life requiring total care, is it really wise to do? CF patients life expectancy has gone up tremendously. What used to be cases only seen in peds are now also treated at adult medsurg. So that's an increase in adult patients. Similarly, when one requires total care at 80+ years old and there's no DNR, then what...It's an ethical dilemma of course. Life is precious (or so I'm told in the west), but at what cost and who's paying the bill?

[Pete]

Originally Posted by frostfire

...It's an ethical dilemma of course. Life is precious (or so I'm told in the west), but at what cost and who's paying the bill?

The big question to your thought is "Who draws the line and where is it?"

[Richard]

Originally Posted by Pete

The big question to your thought is "Who draws the line and where is it?"

Well...here's how it used to go.

Richard's $.02

[Richard]

OK......however, I wouldn't hold my breath if I was this caller.

http://www.youtube.com/watch?v=dLsNOEt0EX8

Richard's $.02

[stuW]

Originally Posted by Richard

IMO, WW2 did stimulate the US economy and allow us to overcome the Great Depression by-

• placing a large part of the healthiest of the work force out of the production arena and into the military, thus allowing a resurgence of jobs and technical training for everyone else
  
• massive investing in the means of production for the war effort which carried through into the post-war period
  
• destroying the major means of production of most of the world's economic powers and allowing the US to readily dominate the post-WW2 market because it was virtually new and untouched by war
  
• bringing the servicemen back and giving them the GI Bill and housing loans, setting up a situation which further kept many from immediately competing for spaces in the job market while allowing them to receive a college education and various levels of technical training to support the new economy and growth of our industrial base

FWIW, I don't see that happening now or in the near future. Different day, some similarities but different circumstances.

Richard's $.02

I'd add to Richard's points one more and an extension to the return of soldiers. Both deal with higher consumption demand.

1. After the war, we saw the the baby boomer generation started, resulting in increased consumer demand for goods and services.

2. Demand for goods and services increased as a result of rebuilding Europe/the world.

stu