Are you aware that…the Obama stimulus is the 2009-10 version of Franklin Roosevelt’s “pump priming” of the 1930’s. Neither achieved the goal of pulling the nation out of its economic woes because they are carbon copies of each other. The failed policies of the past are the failed policies of the present administration. Here are comparisons to demonstrate how the Obama Administration has not learned from history.
Both Roosevelt and Obama campaigned for the presidency with speeches filled with how they would promote growth and achieve economic recovery. Each president upon assuming office gathered “experts” to formulate and initiate policies to revitalize the economy. FDR had his “Brain Trust” and Obama has his “Czars.”
Roosevelt’s “pump priming” has been replicated in the “stimulus plan” of Barack Obama because both are based on the Keynesian theory of deficit spending. Deficit spending is simply spending more money than the government collects through taxes. It is like accumulating a debt through a credit card that you intend to pay off in the future. The problem is that taxpayers must eventually pay the debt down and that means more taxes.
John Maynard Keynes was a British economist who believed that if a government puts more money into circulation when an economy is failing, it will encourage business investments and increase demand for jobs which will lead to renewed economic growth. Unfortunately, the theory did not match reality.
Under the Roosevelt and Obama Administrations, a good portion of the money never went into the private economic sector where most of the nation’s jobs are created. Both presidents poured money into the public sectors where the federal government basically became the employer. In both incidents, this only created temporary jobs.
Recently loans and bailouts went to banks and other financial institutions which helped cause the economic crisis; however, these institutions used the money to get their own houses in order first by paying off old debts before reinvesting a portion of the remaining money. Without the credit and/or loans given by these financial institutions, private sector businesses can not expand their businesses, which would push up the employment rate. In addition, businesses are cautious due to the uncertainty generated by the federal government’s new regulations which impact the cost of doing business. In the 1930’s, it was things like the minimum wage, social security, etc. which increased private sector costs. Today, it is the gradually emerging details of the expense of healthcare and additional regulations.
In both cases, the national debt increased astronomically. The national debt rose from $16 billion to $40 billion without any recovery under Roosevelt due to his administration’s heavy deficit spending. Under Obama, the national debt rose from $6.3 trillion dollars to over $8.8 trillion dollars and counting without any recovery. According to the Bureau of the Public Debt, a division of the U.S. Treasury Department, the Obama Administration added more to the national debt in the first 19 months of his administration than the accumulated total debt amassed by all U.S. presidents from George Washington to Ronald Reagan. Yet in both cases, many on the “left” felt that there was not enough money spent despite the lack of recovery.
Finally, as mentioned above, unemployment remained high during the Great Depression. The Roosevelt Era featured a number of federally funded government programs ranging from the Civilian Conservation Corp to the Works Progress Administration. They provided relief through temporary employment but no solution to creating permanent jobs. The money spent on all of these programs limited the amount of money that went into the private sector, which was the true source of permanent jobs.
Under the Obama Administration, the unemployment figures have consistently remained above 9.5% for months. This statistic doesn’t include the millions of people, like in the Great Depression, who have given up looking for permanent employment.
In 1933, Harry Hopkins, who was an aide to Roosevelt, said this, “Tax, tax, tax; spend, spend, spend; elect, elect, elect.” This was advice to keep the Democratic Party in power. Four years later, FDR’s Secretary of the Treasury Henry Morgenthau admitted before Congress, “We have tried spending money. We are spending more than we have ever spent before and it does not work.” If the Secretary of the Treasury realized the futility of deficit spending 73 years ago, you would think the present administration would learn that you cannot spend your way out of a financial crisis.