Post-Post-9/11 Looks Just Like Pre-World War II

I read an interesting article and comment that I wanted to share from the Wall Street Journal.

Deregulation and the Financial Panic

Loose money and politicized mortgages are the real villains.

By PHIL GRAMM

The debate about the cause of the current crisis in our financial markets is important because the reforms implemented by Congress will be profoundly affected by what people believe caused the crisis.

Getty Images

President Bill Clinton signs the Financial Services Modernization Act of 1999.

The Return of Welfare As We Knew It

Ah…

We sure do live in interesting times. Honestly I prefer the boring times where things boringly work the way they’re meant to work.

It looks like we are about to have massive government spending in order to ’stimulate’ our economy. Never mind the fact that the things they (the Democrats) want to spend money on has nothing to do with the economy. They claim that there are no earmarks in this new legislation but that is only because they don’t need to earmark their pork and sneaky legislation.

I just found out one new item that they are putting in. The return of unlimited welfare. Back when Newt Gingrich and the Republican’s finally took control of the congress, after 50 some years of Democrat control, they created the Contract with America. One of the most important pieces of that legislation was welfare reform. It put a limit on how long people could recieve federal dollars. Bill Clinton often took all the credit for this and it’s subsequent increase in employment, but it was the Repulican’s that fought for this.

Now I read this under reported story.

The House stimulus bill endangers Clinton’s biggest reform.

By BENJAMIN E. SASSE and KERRY N. WEEMS

Twelve years ago, President Bill Clinton signed a law that he correctly proclaimed would end “welfare as we know it.” That sweeping legislation, the Personal Responsibility and Work Opportunity Act, eliminated the open-ended entitlement that had existed since 1965, replacing it with a finite, block grant approach called the Temporary Assistance to Needy Families (TANF) program.

TANF has been a remarkable success. Welfare caseloads nationally fell from 12.6 million in 1997 to fewer than five million in 2007. And yet despite this achievement, House Democrats are seeking to undo Mr. Clinton’s reforms under the cover of the stimulus bill.

President Obama’s First News Conference

I just wanted to point out an interesting tid-bit from President Obama’s first news conference he held two days ago.

President Obama in 2009

Some of the criticisms really are with the basic idea that government should intervene at all in this moment of crisis. Now, you have some people, very sincere, who philosophically just think the government has no business interfering in the marketplace. And, in fact, there are several who’ve suggested that FDR was wrong to interfere back in the New Deal. They’re fighting battles that I thought were resolved a pretty long time ago.

James K. Glassman 2009

Despite Franklin Roosevelt’s aggressive spending, unemployment reached 25 percent in 1933, fell only to 14 percent by 1937, and was back up to 19 percent in 1939.1 In the end, the New Deal did little or nothing to resuscitate the economy. Certainly, inept monetary policies helped prolong the Great Depression, as did tax increases, constant interventions in the conduct of business, and the erection of global trade barriers, beginning with the Smoot-Hawley Tariff in 1930, more than two years before Roosevelt took office. There was a stretch of twelve years from the stock-market crash to Pearl Harbor, and, during that time, fiscal stimulus simply did not jump-start the economy (or, in Keynes’s own metaphor, awaken Sleeping Beauty).

Ben S. Bernanke in 2000

Finding an explanation for the worldwide economic collapse of the 1930’s remains a fascinating intellectual challenge.

Wikipedia 2009 – Causes of the Great Depression

The causes of the Great Depression are still a matter of active debate among economists. The specific economic events that took place during the Great Depression have been studied thoroughly: a deflation in asset and commodity prices, dramatic drops in demand and credit, and disruption of trade, ultimately resulting in widespread poverty and unemployment. However, historians lack consensus in describing the causal relationship between various events and the role of government economic policy in causing or ameliorating the Depression.

Wikipedia 2009 – The New Deal

A number of economists believe the New Deal delayed economic recovery. A 1995 survey of economic historians asked whether “Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression.” Of those in economics departments 27% agreed, 22% agreed ‘with provisos’ (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed.

UCLA economists Harold L. Cole and Lee E. Ohanian are among those who believe the New Deal caused the Depression to persist longer than it would otherwise have, concluding in a study that the “New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped,” but that the “New Deal policies are an important contributing factor to the persistence of the Great Depression.” They claim that the New Deal “cartelization policies are a key factor behind the weak recovery.” They say that the “abandonment of these policies coincided with the strong economic recovery of the 1940s.” Cole and Ohanian claimed that FDR’s policies prolonged the Depression by 7 years.

Perhaps President Obama would like to set the record strait for us about the Great Depression. He could start by updating the Wikipedia article.

SPECIAL PREVIEW Stimulus: A History of Folly

James K. Glassman

March 2009

Before he was sworn in as President, Barack Obama began to lay out his plans for reviving an American economy that, it would later be discovered, had declined 3.8 percent in the fourth quarter of 2008, its worst performance in 26 years. About the first part of his project, “stimulating” businesses to invest and consumers to consume through government spending and tax remittances, he was forthcoming and enthusiastic. About the second, stabilizing the financial system, he wished to reserve judgment.

He anointed the stimulus proposal with a convenient and vivid metaphor. “We’re going to have to jump start this economy with my economic recovery plan,” he said on January 3. According to the image, one can jolt a dormant economy into action just as one can hook up polarized cables to a car battery, clamp a defibrillator to the chest, or breathe into the ear of a reluctant lover. Suddenly, the object of our attention will be back in action, aroused.

Alas, the questions raised by a proposed stimulus—whether to apply it, what sort it should be, how much it should cost, and when it should begin and end—are far trickier to answer than problems involving dead batteries. And, remarkably enough, history and economic research offer no conclusive answers. The recession that began in 2008 could turn out to be the worst slowdown since the Great Depression of the 1930’s. For three-quarters of a century, economists have been studying it diligently. And even now they cannot come to a definitive conclusion about the cause of that depression, the reasons for its severity and duration, or what cured it. In an introduction to a book of essays on the Great Depression he compiled in 2000, Ben S. Bernanke, then a Princeton professor and now chairman of the Federal Reserve Board, wrote, “Finding an explanation for the worldwide economic collapse of the 1930’s remains a fascinating intellectual challenge.”

Today, of course, the challenge is more than intellectual.