Advice for President Obama: be Warren Harding, not Franklin Roosevelt

July 12, 2011

Never did I think I’d favorably mention President Harding twice in a blog, but here you go. The first was a quote from Harding, while what follows is a quote about Harding:

I know, the thought Obama could be half the president Harding was is too much to ask.

Considering Harding is one of the most reviled 20th-century presidents (among those who even remember him), that statement could be easily taken as an insult to Obama by ironic comparison to (another) president who was truly awful.

Far from it. Historian Steven Hayward looks at the misperceptions regarding Harding that have become commonplace thanks to liberal academia and argues that our 29th president is someone Obama should seek to emulate, at least in economic policy. Faced with a genuine economic depression, runaway inflation, and a huge government debt after World War One, Harding did things that would give statists nightmares:

So what did Harding do?  A “stimulus”?  A jobs program?  “Targeted” tax cuts?  Government bailouts for ailing companies?  Nope—he cut government spending sharply and rapidly (by almost 50 percent), began cutting tax rates across the board, and allowed asset values and wages to adjust freely as fast as possible.  Harding’s administration, Paul Johnson observed, “was the last time a major industrial power treated a recession by classic laissez-faire methods, allowing wages to fall to their natural level . . .  By July 1921 it was all over and the economy was booming again.”  The Cato Institute’s Jim Powell offers a more complete summary of Harding’s soundness on economic policy, but suffice it to say that Harding’s traditional approach prevented the depression of 1920-21 from becoming a Great Depression, and in fact set he stage for the roaring twenties.

Of course, what would give Keynesians and other statists those nightmares is that —The Horror!!— it worked, while the interventionist, centrally directed policies of Hoover and FDR (1) failed miserably.

So, come on Mr. President, I dare you: Be like Warren.

Just don’t let Michelle catch you in the closet.

Footnote:
(1) Yes, Hoover has been unfairly slagged by FDR hagiographers who needed a whipping boy to make their guy look good. The fact is, Hoover was a bad president in the early years of the Great Depression, but not for being the anti-FDR. Check out Hayward’s post for a revealing quote from Rex Tugwell, one of FDR key early aides, about how the New Deal was an amplification of Hoover’s policies.

(Crossposted at Sister Toldjah)

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If this is a recovery, where are the jobs??

October 31, 2010

President Obama (and especially his fawning sycophants in the media) likes to compare himself to Franklin Delano Roosevelt, who lead the nation during the Great Depression. In this brief video essay from Reason.TV, Ted Balaker looks at the current jobless recovery and see other similarities to FDR that Obama might not enjoy:

Balaker and Professor Ohanian blame the uncertainty caused by the raft of new regulations and laws coming from Washington, as well as uncertainty about the effects the progressives’ spend-and-borrow binge may have. Businesses hate uncertainty, because it leaves them with no way to forecast what conditions will be like, hence making them less willing to risk capital on new employees. It is, in fact, a rational response, something FDR never quite got: he wanted to tax retained earnings, solely to punish businesses that wouldn’t spend. The Obama administration has broached a similar idea.

While I agree about the uncertainty created by government intervention in the market, I’d add another factor: policies that are just plain bad, because they make the economic situation worse. In the video, we see one good example: the CEO of Nationwide Support Services wait anxiously to hear the details of a new FTC regulation; depending on how it goes, she may not be able to hire the new people she’d like to hire – or she may have to go out of business altogether.

Really, is this any way to run an economy?

Of course it isn’t. As is becoming increasingly clear as new research is done into the New Deal, the statist, interventionist policies of the Roosevelt administration (and Hoover’s) did not help. Indeed, they prevented a job-creating recovery.

The best thing the government could do would be to quit intervening in the marketplace and stop trying to engineer it. It’s simply much too complex to be controlled by a relatively small number of policy-makers. With minimal intervention and a lightened burden of spending, taxation, and regulation, the market economy will heal itself and create jobs.

Sadly, that’s a wise course we can’t expect from the current crowd, so this Tuesday we take step one in a two-step process of firing and replacing them with people who get it.

Step two comes in 2012.

PS: Yeah, I’ve been tapping Reason.TV a lot today, but, what can I say? They do good stuff. 

(Crossposted at Sister Toldjah)


I love my hometown…

November 1, 2009

…But there are times I want to nuke Sacramento from orbit. Usually (and in this case) it’s because of some boneheaded move by the State government.  What did they do this time? Oh, nothing, really, except decide to take an extra ten-percent from our paychecks in the middle of a recession:

Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.

Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

But with rising gas costs, depressed home prices and double-digit unemployment, the state’s added reach into residents’ regular paycheck isn’t sitting well with many.

“The state’s suddenly slapping people upside the head,” said Mack Reed, 50, of Silver Lake. “It’s appalling how brash that is.”

Brittney McKaig, 23, of Santa Ana said she expects the additional withholding to affect her holiday spending.

“Coming into the holidays, we’re getting squeezed anyway,” she said. “We’re not getting Christmas bonuses and other perks we used to get. So it all falls back on spending. The $40 gift will become a $20 gift.”

Sheer genius. We’re now over a year into a severe recession, and this Christmas is when the stores will really feel the pinch. The money the state takes will be unavailable to retailers big and small, who will thus have less money with which to pay for new employees or keep current ones. California’s real unemployment rate tops 17% at least, and many people rely on part-time seasonal retail jobs to help them make it, so every job counts. The last thing you want to do is divert money to non-productive expenses, such as a blueberry commission.

“But at least it’s not a tax!”

What a farce. In California, all tax increases have to be approved by a two-thirds majority of both chambers of the legislature, something that’s hard to get since the Republicans have just enough votes to hold the line.  We are already one of the most highly-taxed states in the Union, so any increases are very unpopular right now.  So the legislature and the Franchise Tax Board get around this by calling it a “loan.”

When Tiquon and Little Dog take a forced “loan” from a South-Central liquor store, it’s called “robbery” or “extortion.” But when Sacramento does it to the whole state, it’s okay, it’s just a loan.

You can call it what you want, Governor, but a tax is a tax.

But wait,” you say, “they promise to pay it back!”

Would you like to buy the Golden Gate Bridge, too? First, this is an interest-free loan. Whatever money you “loan” to California will be worth less when you get it back, because inflation isn’t accounted for. You are permanently losing money. The state gets the benefit of the current value, you have less when you get it back, ergo that forced exaction of value from our money is a tax.

Oh, and remember those IOUs from earlier this year when the state was running out of money? For years now, the government has not been able to accurately project revenues, consistently overestimating them. What makes anyone think they can get it right this time? How will you feel if (more likely “when”) your involuntary loan is repaid with an interest-free IOU?

Sacramento’s irresponsibility and unwillingness to face reality is appalling. These are people we elected to run the state for the best interests of all, yet they continually mortgage our future and dig an ever deeper fiscal hole, refusing to make the admittedly harsh spending and tax cuts needed to begin to restore California to financial health. Instead they pander to the public employees unions ( the prison guards, for example) and other left-wing single-interest groups that live off the taxpayer and in turn are big donors to legislators’ election campaigns. So they kick the can down the road, pretend that “this time, we’ve fixed the problem” and hope that no one remembers the next time it happens.

California’s political culture is sick, and its public servants instead constitute a ruling class. This is not a democratic republic: thanks to safe seats and special-interest donors, our state government is instead a self-perpetuating oligarchy of professional politicians. This farce with accelerated withholding is just another example of how out of touch with the average Californians the Mandarins of the Golden Dome have become.

If California is to have any Hope, it’s time for a major Change.

(hat tip: Hot Air)

LINKS: Gaius at Blue Crab Boulevard calls it outright theft. McQ puts it this way: “California – ‘We Need The Money More Than You.'” Sister Toldjah and Right Wing News.


He wants to be the next FDR…

September 1, 2009

…But maybe President Obama is instead the next Herbert Hoover? Studying the policies pursued by the Hoover Administration in the wake of the 1929 crash, UCLA economist Lee Ohanian found that a strong recession became the Great Depression because of Hoover’s pro-labor, statist interventions:

Pro-labor policies pushed by President Herbert Hoover after the stock market crash of 1929 accounted for close to two-thirds of the drop in the nation’s gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression, a UCLA economist concludes in a new study.

“These findings suggest that the recession was three times worse — at a minimum — than it would otherwise have been, because of Hoover,” said Lee E. Ohanian, a UCLA professor of economics.

The policies, which included both propping up wages and encouraging job-sharing, also accounted for more than two-thirds of the precipitous decline in hours worked in the manufacturing sector, which was much harder hit initially than the agricultural sector, according to Ohanian.

“By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been, and that act drove down the overall gross national product,” Ohanian said. “His policy was the single most important event in precipitating the Great Depression.”

The findings are slated to appear in the December issue of the peer-reviewed Journal of Economic Theory and were posted today on the website of the National Bureau of Economic Research (www.nber.org) as a working paper.

The article goes on to point out that Hoover’s exact solutions are not likely to be followed by President Obama. However, Ohanian argues, the disastrous results of Hoover’s interventions illustrate what can happen when government pursues hasty, ill-advised policies. Everything Hoover tried only made things worse.

And while Obama may not follow Hoover’s exact policies, we are seeing the same hasty, ill-considered rush to “do something:” the trillion-dollar pork fiesta stimulus bill; the Waxman-Markey cap-and-trade “greenhouse gas” bill; and now the health-care bill aimed at nationalizing 1/6th of the US economy. Anyone of these is bad enough; in combination, the effects on the US economy would almost certainly be horrific.
I’d go a little farther than Ohanian in his article and argue that these kind of large-scale statist interventions, whether in terms of wage control and job-sharing like Hoover or massive Keynesian deficit spending like Obama, are doomed to fail because a free market economy is too complex and has too many factors to successfully control, manage, or direct. In fact, if one looks at Hoover’s predecessors, Presidents Harding and Coolidge, one sees the right way to handle a sharp recession. Treasury Secretary Mellon advised cutting government spending and lowering taxes to free up capital in order to stimulate business, and then let the natural forces of the market economy heal itself. Which it did, bringing the US out of the sharp recession of 1919-1920 and laying the groundwork for a decade of prosperity. (And which was repeated with greater success by Ronald Reagan in the early 80s.)
Articles like this one and Ohanian’s earlier research showing that FDR’s corporatism lengthened the Depression by seven years, as well as longer works of history such as Amity Shlaes’ The Forgotten Man, are important revisionist works for two reasons. First, they dispel forever the notion implanted in popular consciousness by liberal historians and economists, that Hoover was a laissez-faire president with a do-nothing attitude toward the economy, a view used to justify the interventionist approach. Far from it, in fact: Hoover was very much an interventionist, and FDR continued and expanded several of his policies.
The second reason is that these researches present convincing evidence that the received wisdom about the Great Depression, that FDR’s policies pulled us out of it and that government intervention can fix an economy in crisis, is just plain wrong. Indeed, by 1939 the New Deal was clearly a failure and Treasury Secertary Morgenthau said (quoted in an article by Mark Levey):
By 1939 Roosevelt’s own Treasury secretary, Henry Morgenthau, had realized that the New Deal economic policies had failed. “We have tried spending money,” Morgenthau wrote in his diary. “We are spending more than we have ever spent before and it does not work. . . . After eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!”
In fact, only the military draft in the face of World War II broke the back of unemployment in the US, by pulling five million men off the streets.
Obama’s an educated man: maybe he should look more closely at his predecessors’ experiences before following further in their footsteps.
(via Jonah Goldberg)
LINKS: More at Hot Air.
PS. Sorry for the bad formatting, but something in this post is killing the spaces between paragraphs. Angry