THEN AND NOW: THE GREAT DEPRESSION AND THE CURRENT GREAT RECESSION

(*Apologies for no new postings for over a week – spending four days in the hospital threw my schedule all to hell*)

Both economic and social liberals, following 2008, expected greater political gains by the Democratic Party in the year 2010, and they were stunned when the Republicans made a dramatic political resurgence in the elections of 2010, gaining a dominant majority in the House of Representatives and a near majority in the U.S. Senate. 

Those who remembered the great Democratic Party victories that followed the onset of The Great Depression, generally tagged to Black Tuesday of October 29, 1929, were left scratching their heads, trying to understand exactly what happened to allow the return of The Republican Party to considerable power in the governance of our nation.  Why was the 2010 election not a repeat of the elections of 1930 and 1932, when The Republican Party was told by the American electorate to go sit in the corner?

After giving the matter considerable thought (while trying hard not to become bogged down in the mind-boggling details of economic theory) and again doing some historical research, the simple answer to the question is that the early 1930s and the time of 2008/2010 simply were different times.

How so?  Well, in the first place, there is the matter of TIMING.  When the Stock Market Crash of October 29, 1929 took place, Herbert Hoover, the Republican President of the time, would remain in office until January, 1933.  The importance of this is that the American public, which blames the party in power for economic setbacks, had better than two years to point the finger of blame at Herbert Hoover and the Republican Party.  With a full two years of devastating economic decline resulting in huge drops in manufacturing and the creation of massive unemployment (going as high as 25%), there was plenty of time for the American public to come to the view that it was time to “throw the bums out”, and the bums of the moment were Herbert Hoover and The Republican Party.

The impact of The Great Depression was so quick and so severe, that in the by-election of 1930 the Democratic Party, long a minority Party of no major consequence in opposition to the wants and desires of The Establishment backed Republican Party, picked up 52 seats in the House of Representatives, with the House then being split 217-217 and eight seats in the Senate, resulting in the Republicans holding onto a majority in the Senate by one seat.  For the Democrats of the time, this was a HUGE gain (consider that prior to the that election the Republicans had a 270-164 majority in the House and a 56-39 majority in the Senate). 

As economic conditions did not significantly improve in the next two years, the election of 1932 proved to be a disaster for the Republicans, with FDR being elected to the Presidency and the Democrats taking a 313-117 (with five seats to the Farmer-Labor Party) majority in the House, and a 59-36 majority in the Senate, gaining a super majority in the Senate. 

The Republicans and Herbert Hoover, utilizing the economic theories of the time (Classical Economics) moved (for them) heaven and earth to improve economic conditions, but they were handicapped by the special problem of Classical Economics – that it did not recognize economic depression as being possible – though history and study for years on the matter of depressions clearly showed that indeed, depressions were all too possible).  Classical Economics simply held that depressions were not possible, but did allow that certain steps could be taken to “lessen” economic downturn.  The thought essentially was that “the market would naturally return to good times – and ignored the problem as to how long it would take for “the market” to regain its feet.

(*Aside:  Herbert Hoover is by many unfairly blamed for The Great Depression – he had been in office only a year and a half when Black Tuesday happened;  he was an intelligent and caring man who happened to be President when the roof caved in – and he did what he could to alleviate the problem – the problem was that he did not have the economic theory tools to be able to do anything effective – this was compounded by the fact that the depth of The Great Depression was far greater than people, even “the smart guys”, were capable of realizing; they knew they had a disaster on their hands, but simply could not comprehend the depth of that disaster.  It simply did not occur to them that the disaster was so great that it would take a minimum of ten years (and WWII) to climb out of the hole they created.*)

In any event, the Republican Party and Herbert Hoover were stuck with three years of leadership (stewing in their own juices, so to speak) that to the voting public, was ineffective.  It was thus that the angry (and hungry) American Public turned out the Republicans in landslide numbers in 1932.  The brand of failure was to be visible on the political forehead of the Republican Party for over ten years (as to matters after the election of 1940, WWII made sure FDR would remain in office during war years – Americans traditionally had been disinclined to change Presidents in a time of war). 

Coming up to the years 2008 and 2010, we see that in 2008 the Republican ticket was double-handicapped – the current recession was clearly underway by the time of the elections of 2008 and up to that point it had been the Republicans in control of the White House (though the Dems gained control of both the House and the Senate in 2006) and the Republican ticket, featuring John McCain and Sarah Palin, was essentially sacrificial in nature – many Republicans did not like John McCain enough to actually vote for him.  Such being the case, the Democrats in 2008 not only won the White House with an unprecedented black candidate, but swept to majorities in both the House and the Senate by an American electorate angry with the economic hard-times brought upon the country (and the world) by both the policies of the Republican Party and the often fraudulent financial activities of The Establishment that is represented by The Republican Party.

 (*Aside:  the idea of a Democratic “Super majority” in the Senate is, in practical terms, a Republican created myth – Independent Lieberman, though caucusing with the Democrats, consistently voted with the Republicans, and there were always two or three “Blue-Dog Democrats” who would vote against Democratic leadership on major issues – in short, the Democrats lacked the means to shut down Republican filibusters in the Senate – which resulted in the rather odd situation where the Minority Party in the Senate actually called the shots – were able to block Democratic legislation and appointees – in the great majority of cases*).

The Great Recession of 2008, unlike The Great Depression, did not make itself known with a sudden bang like the shock of Black Tuesday; rather, economic problems which had been growing for some time (while the National Bureau of Economic Research declared that the recession actually began in December 2007 the impact of the recession was not strongly felt by the American populace – other than those who lost their homes through bank re-possessions) became more and more obvious over an extended period of time in 2008  even if, as always, the politicians in power and the gurus of finance denied any serious problems (this is standard operating procedure for the Party in power and the powers of Wall Street when economic problems loom large).  

The Great Depression became evident by a sudden shock (Black Tuesday) while The Great Recession slowly became evident to the American populace in a creeping manner, and did not have great visibility as nobody was jumping out of windows on Wall Street.  In the Great Recession, the poor remained poor, the Middle Class lost jobs, and the non-wealthy lost their homes while the wealthy suffered far less…. they simply did not buy a new yacht.

Finally by September, 2008 the obvious could no longer be denied and President Bush and Congress began to take serious action to stave off what was seen as a situation with all the potential of The Great Depression of the 1930s.   Bush, following the lead (quietly) of new Federal Reserve Chief Bernanke, allowed Federal Reserve Interest rates (for loans to banks) to be dropped and then dropped again, in an desperate attempt to shove more money into the economy.  The sad fact of the matter is that many Americans simply did not wake up to the fact of the presence of The Great Recession until mid-2008, right before a national Presidential and Congressional election.

Having finally woken up, the American voters did what they always do in times of economic hard times – they effectively voted one political power out of office and voted the other political party into power.

Now. Pay attention to the TIMING.  Most Americans did not wake up to the reality (trusting the politicians and Finance gurus for far too long) until mid-2008.  Less than five months later Obama, the first black Presidential Candidate in American History was elected President, along with the Democrats gaining a strong majority in the House of Representatives and a strong majority (but not Super-Majority) in the Senate.

The importance of this is that the sort period of time between the awareness of the recession and the election left the American little time to fully understand that Republican policies and agendas not only caused the recession, but that their economic policies (the same old and tawdry Classic Economics of Herbert Hoover, et al) were incapable of pulling us out of this recession in anything less that five to seven years (at a minimum).  In point, the Republican policies, while causing the recession, did not have time to be shown as being incapable of pulling us out of the recession, as had been abundantly clear under Herbert Hoover, who had three years to deal with The Great Depression before the election of 1932.  As I pointed out above, following Black Tuesday the Republicans had a full three years to stew in their own juices of their failures – but in 2008 they stewed in their own juices for less than four months (as Sarah Palin successfully diverted American attention from the economic disaster to alleged short-comings of the Democrats and Obama by outrageously ‘red-meat” rhetoric, which the MSM happily put on the Six O’clock news every evening).

Enough time had passed between 1929 and 2008 that the nation had time to forget the lessons of The Great Depression: how Republican economic policies caused that depression, and, more importantly, how Republican economic policies failed to pull us out of the depression, and to forget just how difficult it is to turn around a deep recession/depression. 

The Republicans, immediately following the election of 2008, told the American public:  (1) The Great Recession was now in the hands of Barack Obama and the Democratic Party, and (2) that Obama and the Democrats were doomed to failure as regards turning things around. 

This, of course, was a self-fulfilling prophesy, as the Republicans immediately used Senate Rules to block almost all Democratic programs to deal with The Great Recession.  The Republican Party aired a message 24/7 that if Obama and the Democrats did not pull us out of The Great Recession (always simply referred to as ‘the recession” by the GOP) by 2010, then this meant that Democratic economic theory was all wrong and doomed to failure – and more importantly, that any continuation of the recession past 2010 would be the fault of Obama and the Democrats.  The Republicans made every effort to play down the SEVERITY of the recession in order to give the impression that it could be turned around in a mere two years.

Alas, with malice and aforethought, the Republican Party elected to throw governance into gridlock rather than meaningfully deal with trying to turn around the recession.  They made it clear that they want power and are willing to have the majority of American citizens undergo misery in order to regain the power they had lost.

The Republican messaging prior to 2010, blared over the MSM, was effective (if dishonest – to the point of claiming they would promote a program for job creation – something they have completely ignored since the election of 2010) and Democrats, mostly those who had replaced Republicans in 2006 and 2008, took it on the chin.  The road to governmental gridlock was now paved in concrete.

Well, this particular commentary has now run long enough, so I will continue this matter in a day or two, bringing up such matters as MESSAGING, THE MEDIA YESTERDAY AND TODAY,  THE GOP EFFECTIVENESS OF PRESENTING WEDGE/DISTRACTION ISSUES, THE SOLID (REPUBLICAN) SOUTH, and yes, RACE AS A FACTOR,  and lastly, THE MATTER OF CONCERN ABOUT DEFICIT v. JOB CREATION.

Have a good day.

BILL AND BILL'S "TRUISM" - PART II

OK, having given you a picture (my previous post) of Bill (and yes, there may be a couple of unimportant errors of fact – but the general picture is accurate), let’s move on to Bill’s five “Truisms”.  It is not a bad idea if you take note that these “truism” are stated in both an absolutist and authoritarian manner – they are not to be questioned…. yet everything about these statements screams to be questioned.

Let me first take under consideration one (of two) apparently obvious (arguably) true statement that is part of Bill’s Truisms: 

3. The government cannot give to anybody anything that the government does not first take from somebody else.

Yep.  Governments cannot operate without revenue.  Yep, governments obtain their revenue via taxation of one form or another.  Yes, ultimately taxation is a “taking” and governments are quick to back up that “taking” with force, if need be.  Even in the United States if you don’t pay your taxes you are subject to arrest and then being thrown in jail; such has been the way of governments since they were created several thousand years ago when they began to keep written records (most them trade and tax records – heh). 

Now don’t for a moment make the mistake of thinking that Bill is so ignorant that he is unaware of this.  Of course he is – he is perfectly aware that government has duties and responsibilities that cannot be undertaken at no cost; for instance, I am sure Bill would quickly agree that a military for defense of the nation is necessary – and that does not come for free. 

But where Bill is going with this “Truism” is that in order to undertake social programs – and here Bill would most certainly refer to welfare programs or “entitlement programs” the government takes from one group of people (the wealthy) and gives to another group of people (the poor and the needy).  For Bill, such is a no-no. 

Boiled down, what Bill is saying is that the government has no business taking his money and giving it to some lazy bum on the street; a bum, he is convinced, is poor because he/she has opted to be poor, either out of a sense of a lack of personal responsibility or due to a set of values that are simply not operative in Bill’s “real world”.    Bill is willing to pay for military defense, paved streets, operating judicial system, etc., but he is not willing to pay for the social welfare of others, who, in his mind, do not deserve to get government financed hand-outs that he has to pay for.  Understandably, Bill feels that because he worked hard to hear his money to pay for his needs and wants, everybody else should work to earn money for their needs and wants.

While Bill’s thinking here is understandable, it is not reasonable; it is not reasonable for the several reasons.  First of all, there has never been a period in modern industrialized nations where full employment has been achievable, even in the best of times some five to six percent of the population of modern industrialized countries is considered normal.  Those five or six percent are the people, who, for a variety of reasons can’t work, due to lack of intellectual acuity, physical disability, emotional disabilities, etc.

Additionally, economic good times never last for long; they are broken up by cycles of economic recession and/or depression (reasons for this are the subject of another discussion).  In economic bad times you have more product than you have demand, and when that happens people are laid-off and/or fired.  The unemployment rolls swell hugely, filled with people that can work, but cannot find work.  It is silly to allege that those out-of-work people, who were working, are not working because they are lazy and irresponsible.  Believe me, having been out of work, I can assure you that the vast majority of folks out of work would far prefer to have a paying job and/or be in a position to operate a successful business.

There is another error in Bill’s thinking on this point.  Just as at some point it is more than likely that Bill had to borrow money to get his business up-and-running, so can the government borrow, in times of pressing need, to pay for what must be paid for immediately, or for what is wisely invested in (for instance, paying for WWII or for  Eisenhower’s fantastically successful Interstate Highway System.  Thus, the taking is deferred, not “first taken from someone else”.   It is hard to convince anyone that a nation should borrow money to prevent citizens from starving; most would agree that to spend money on such is a pressing and immediate need.  But ideologues like Bill would argue that such spending is beyond the business of the government.  Bill and his friends need to re-read the Preamble to the Constitution.  Additionally, Bill and his friends would be well advised to learn something about the concept of the Social Contract and how it applies to the United States (hint:  the U.S. Government is a government “of the people” by means of elected representatives – the people have the right and the need to tax themselves – thus it is that the people of the United States choose to tax themselves in order to have a working government for the benefit of the people). 

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

This and the multiple variations of this statement are rather typical of the feel-good faux authoritative sound-bites that are put under our noses on a daily basis by the massive conservative propaganda machine that has been put together over the past 30 years.  It makes Bill feel good, and because it does, he feels no need to look at the statement closely.  Closer inspection finds that this statement, and its numerous variations, is flatly untrue.  It is, in point of fact, a classic example of the straw man/straw man arguments that are made every day by economic and social conservatives. 

For those of you not familiar with the term “straw man” or “straw man argument”, let me explain.  A straw man/straw man argument is a statement that is an informal fallacy of an opponent’s position.  To "attack a straw man" is to create the illusion of having refuted a proposition by replacing it with a superficially similar yet unequivalent proposition (the "straw man"), and refuting it, without ever having actually refuted the original position.

So what is the “straw man” here?  Simple: nobody has made an effort to legislate the poor into prosperity.  The term “prosperity” is generally defined as the state of flourishing, thriving, success, or good fortune.  While it is true that there are examples of legislation that has been designed to relieve the misery of the poor (food stamps, for example), it is laughable to contend that there has been legislation designed to make the poor prosperous. 

Equally, Congress has never tried to legislate the wealthy out of prosperity.  Indeed, the other side of the coin is that there are countless examples of there being legislation designed to make the wealthy even more prosperous than they already are.   I will decline going into how the Bush/Cheney administration enriched Halliburton/KBR. 

2. What one person receives without working for, another person must work for without receiving.

This is a counter response to Karl Marx’s slogan of “from each according to his abilities to each according to his need”, but it really doesn’t work.  While on its face this is ostensibly a true statement, it boils down to being a “so what?”  If you are married and your wife does not work, it means that you give up some of the rewards of your work to support your wife – providing her with home, clothing, food, etc.  You give up even more if you and your stay-at-home wife have kids.  Societies since man formed tribes and clans have always made sacrifices for the welfare of those who are unable to work. For most of man’s history such has been called “charity”. 

Of course, what Bill is driving at is that charity (and paying for the wife and kids) is voluntary, and that government welfare and entitlement programs are paid for by non-voluntary taxation--that “taking” business.  And that brings us back to the Preamble of the Constitution and the Social Contract (see above). 

I might also bring to Bill’s attention what happens to charity organizations in economic bad times; they are overwhelmed by a flood of new people – who have lost their jobs -- asking for help and faced with reduced income as people that used to contribute to the charity have less (or no) money to give, so the charity stops operating due to a lack of funds to match the need.  Such happened again and again during The Great Depression…. but that was before Bill’s time.  It is thus that the government becomes the “charity” of last resort.  I find it difficult to believe that Bill would willingly stand by and let people who’s “bring the bacon home” guy/gal lost his/her job starve because the government would not lend a hand – on the ideological theory that the government should not lend a hand in reducing misery.

4. You cannot multiply wealth by dividing it.

This statement has the problem of mixing apples and pears.  If you are talking about a brick and you cut the brick in half, then yes, the brick is not going to get larger.  Or, more closer to where Bill is thinking, if you have a pie and cut a slice and give it to someone else, then no, the pie is not going to get larger.  But this statement does not speak of bricks and pies and the like; it is talking of wealth. 

How about this?  You BUY a pie for five dollars and cut the pie into seven equal slices, and you sell each slice for one dollar each.  You divided your wealth by buying the pie.  You then increased your wealth by selling pieces of the pie for more than you paid for it.  The pie did not get larger, but you wealth did – by $2.00, for a 40% gain.  You have thus increased wealth by dividing it.

Bill and those like him who love this statement clearly know nothing about economics. The term wealth is an economic term.  You would think that a guy who is successfully operating a business would see that when talking of wealth, the statement is utter nonsense.  If you are familiar with the academic study of economics I doubt you could find one economist from Adam Smith to the present who would not laugh out loud at this statement.  In point of fact, when you get right down to it, in the business world wealth is increased by dividing (investing) it. 

What Bill is focused on is the idea of dividing wealth by giving portions of that wealth away (via taxation).  Even here he is in murky waters, for the government does not spend all of its collected tax revenues on welfare programs.  Bill’s business, for instance, benefits by the fact that tax dollars are spent on such things as infrastructure, courts (where business disputes can be resolved), etc.  Much tax revenue is spent in the form of investments, which financially benefit those in business.  Consider if you will, the cost of shipping a case of wine from Marin County, California to New York City if there were no Interstate Highway System (here in Southern California we call those super highways freeways).  The increase in the gross cost of a case of Marin County wine in New York would be too great for customers – except the very rich -- to absorb the costs, and thus the California wine industry, a world leader, would be considerably more diminutive. 

Essentially the statement (sound-bite, actually) is concerned with the amount of money our government (or any government) spends on welfare expenses, and folks that hate the idea of spending tax dollars for welfare programs find this statement reassuring.  For some reason it never occurs to them that much of the money paid out by the government for welfare programs winds up in the hands of those who sell groceries, clothes, rent apartments, etc. and thus helps them stay in business.

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Here we are once again up against our old friend the straw man, and this statement (sound-bite) is really just a variation of the theme played in the other items of Bill’s list of truisms – that there is a determined drive by a significant portion of our population to mooch off the rich. 

While phrased as something of a hypothetical, the simple fact is that half of the people do not think in terms of not having to work for a living, or think that the “other half” (the hard-workers) are going to take care of them.  This is what I call a “bogyman sound bite”.  It sets up a scary scenario that hasn’t happened and isn’t going to happen.    “Half the people” – heh.  “The beginning of the end of any nation” – heh.   The average Joe on the street is well aware that when speaking of economic improvement, there is no free lunch.

To be sure, there are people around who have no desire to earn an honest living by actually working or producing.  Some of them are in business and make a living by lying, cheating and stealing while others are simply poor who often survive by lying, cheating, stealing and mooching off of relatives (mooching off of relatives while doing nothing useful is a game that is not limited to the poor, as many a wealthy person will tell you -- being poor is not a requirement for being worthless).

What is sad is that while Bill gets the emotional message of these sound-bites (and sound-bites are aimed at emotional response) but that he forgoes stopping and thinking about what is actually being said.  By failing to analyze what the message actually says  as opposed to the emotional message he accepts the fantasy of the emotional message – for the fact is that all of these “messages” are based on false assumptions, indicating an intellectual disconnect from the real world. 

In the real world the vast majority of people, wealthy, middle class, working class and poor, want to EARN a living; to support a family; to take pride in what they are doing, and thus have a sense of self-worth.  The assumption of these sound-bites, however, is just the opposite – that people are not wealthy because they are not willing to work hard enough and live their lives in a responsible manner.  And that simply is not true.

If my information about Bill coming from a middle class family in the San Fernando Valley of Los Angeles is correct, then Bill should know better.  It could be that my information as to Bill’s background is in error – possibly my error for misreading the information that was given to me.

One last thought.  One thing that is consistent about the wealthy is that they are terrified of the idea of the non-wealthy rising up and taking away their wealth.  This fear is well grounded, as history has shown that when the wealthy dominate the governance of a nation and when that governance involves economic oppression, the masses will rise up in revolt (they are usually bloodily suppressed).  But that “rising up” is a reaction – a reaction to oppression and abuse of power.  If the wealthy use their power wisely, then there is no need for the masses to rise up in anger and frustration.

Here is a truism for you:  Deal fairly with others and they will deal fairly with you.  This is not absolutely true, of course, but it works far more often than it does not work.