Watch out for the new New Deal
This WSJ article by economics professors Harold L. Cole and Le E. Ohanian is a good summary of the reasons some have come to feel that FDR’s New Deal actually prolonged the Depression rather than helping the situation. It’s a cautionary tale of government intervention, in which the right sort (to all except strict air market libertarians) mingled with the wrong:
Some New Deal policies certainly benefited the economy by establishing a basic social safety net through Social Security and unemployment benefits, and by stabilizing the financial system through deposit insurance and the Securities Exchange Commission. But others violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels. All told, these antimarket policies choked off powerful recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.
Another factor was the growing power of labor to set artificially high wages. This is one of my biggest concerns with Obama. The labor movement most definitely helped elect him, and he owes them something. High wages sound good to workers, of course. But if they are higher than the company can bear, it will go belly-up and wages will become exactly nothing as unemployment soars and drives the economy down further.
This sort of thing is hardly encouraging, either:
Rep. John Campbell, who owned a slew of automobile dealerships before coming to Congress from Southern California, has been told by a senior executive of Toyota’s American operations that if Toyota were not making substantial profits from its SUVs and pickups, it could not continue making the Prius, which it sells at a loss. The federal government, which is in a position to dictate to mendicants, wants Detroit to make more cars like the Prius and fewer profitable vehicles. This is a novel business model.
The Communist countries taught us the dangers of a managed economy. No one (well, almost no one) is suggesting management of that magnitude and scope. But how much—and what type—is too much? And how much—and what type—is just enough?
“Inside the cottage a fire was burning brightly and a table was laid for breakfast with three bowls of steaming porridge. It smelled delicious and Goldilocks realised how hungry she was. ‘I’ll just try a little bit to see how it tastes,’ she said. First she tried the biggest bowl but the porridge was too salty. Then she tried the middle bowl but the porridge was too sweet. Then she tried the little bowl and the porridge was just right so she ate it all up.”
But then the three Bear Markets came home and ate her all up saying, “That fool was …. just right.”
Moral: No double dipping at the salad bar.
I used to live in Berlin and remember the Trabant, an automobile designed and built in East Germany. The car was a joke. Today, however, they are valuable to car collectors, like the Edsel.
Our founding fathers wrote our Constitution understanding the necessary symbiotic relationship between government and the governed. Social democrats and career politicians in general lose sight of the vulnerability of the host and the need to contain the parasite. As in nature, an uncontrolled parasite often kills its host. Our nation’s competitive high achievers who are motivated by freedom already are very discouraged by the confiscation of over 50% of their incomes and wealth. Intellectual and financial capital are in disarray soon it will flee.
The “New Deal” that we need is an expansion of our Constitution’s Bill of Rights to more clearly define the limits of government and the responsibilities of individual freedom.
Term limits on elected government service at all levels should be set at 10 years per individual to eliminate the growing elected career politician phenomenon.
Taxation, spending, and mandates throughout all levels of government need to be limited through Cap-and Trade approach. This would insure that we do not continue to slide from just being share croppers to governmental masters to becoming full fledged slaves to the state without the right to own any property or have any liberty.
Charitable support of the needy is a responsibility that should be returned to the people. The government should have no hand in taking property (including money) under duress from one citizen to give to another. That “tyranny of democracy” usurps individual rights and destroys the foundations of freedom even though the purpose is well intentioned.
The spirit and language of our Constitution are being breached by our elected officials from both parties. FDR just got the ball rolling by institutionalizing the idea of entitlement and the politics of envy.
Is it too early to name this “deal” yet?
Since FDR had his “New Deal”, and since historically the current democrat congress seems intent on repeating history’s mistakes, can we begin referring to the current fiasco as Obanga’s “Raw Deal”?
Payola for party activists and supporters, deficit spending as far as the eye can see, national debt that cannot be paid off in our children’s lifetimes, and apparently the creation of a permanent underclass that can’t find jobs due to the evaporation of the job market…..yep, “Raw Deal” is about the size of it.
Starks comment seems a lonely voice in the wilderness, doesn’t it? The words in the Constitution are as clear and as unambiguous as can be had in the English language, unless you exist within an ever-growing group that puts their own narrow interests ahead of their country. In their minds, we, the keepers of the 230 year old flame, should step aside with our archaic beliefs to make way for progress.
I am still looking for someone to articulate how it is we emerge from this set-spin without disintegrating. It is almost as though the left wants it to happen with their behavior and proposals.
Bogey,
???
We could also regulate that there is no unwed mothers, illigitimate children and nobody spending their cash on lowering their cars, buying 21″ wheels, and suping up their cars….
Is this your proposal that we were asking for all this time???
Whew!
I don’t want any part of it.
It isn’t good for the environment and it isn’t good for my pocket book.
I’ll keep my 1999 minivan for as long as it runs. It has 130K miles and it’ll be 200K before I turn it in. No gobmnt regulation is going to change that because …
… I am free !!!
What Stark said! (… though I could quibble with term limits.)
But how much–and what type–is too much? And how much–and what type–is just enough?
See “Constitution, US”. Just enough? Protect us from enemies without and within — and the property of every citizen. Too much? Everything else.
But then, I’m one of those strict air market libertarians …
Bogey man: I am still driving my 94 Chevy S10 with 243,000 + miles on it. Original engine, original transmission. Clutch replaced once.
I cannot say what I am thinking right now about your suggestion the government force us to retire an old car every few years whether we want to or not.
Some of us at work have talked about how the main obstacle to starting a new car company in this country is government regs. I have a rough idea for a vehicle I think would be great. But it is all the testing I would have to submit to that keeps me from even trying to push the issue with my car enthusiast/ metal working/ boss. We do make parts at our shop for a company that is converting motor cycles into three wheeled on road vehicles. Seems there are less regs for a three wheeled vehicle than a four wheeld one.
Wow, some day the Prius might be as valuable a collectible as an Edsel or Trabant, especially if it a Prius once owned and driven two hundred meters for demo purposes — to show he is among the Elect and will ascend to heaven — by Leonard Decaprio.
“… But how much–and what type–is too much? And how much–and what type–is just enough?”
Why, isn’t it obvious, it is of course, whatever it takes to get (or stay) elected! Excellent zhombre, my best laugh of the day….
For Scottie 3:45pm:
Burton Folsom beat you to it. His new book on FDR is titled “New Deal or Raw Deal?” I’ve ordered it, anticipating its conclusions from the title.
Obama=Chavez
This is sort of off-topic, but not completely.
I just discovered an essay written by “Red Square” of The People’s Cube entitled, “Cracking the Obama Code: Don Quixote vs. the Windmill Owners”.
It is absolutely brilliant and I urge everyone to go check it out.
The People’s Cube is normally a humorous, satirical website but this essay is pretty serious and is a must-read. I’ve been linking it on several of the blogs I regularly visit.
rickl,
It is absolutely brilliant. But unfortunately the knowledge will never reach the kids who have been taught that socialism is achievable. Sadly, for them to learn the lesson will perhaps mean the near-destruction of the nation.
I finished “New Deal or Raw Deal?” several weeks ago, it’s well worth the read, “Franklin” was very much the personality predecessor of Obama. One might suggest that, still, as a result of the crisis of the time, some profoundly important and positive things grew out of that era, ie. Social Security. But that discounts the possibility and probability that these problems would have been addressed anyway, though perhaps in a little different, maybe even better way. If the TVA hadn’t been constructed, it hardly infers that we would have lost WWII, and that today the lights would still be out in those parts of America, something the Democrats would like us to believe…
Ha ha ha, what I was saying earlier, just ran across the following at Little Green Footballs:
DailyKos: “Not Enough Stimuli Could Be Worse Than None (It Could Affect Obama’s Re-Election, so let’s go Big and Bold)”
dailykos.com (clicks: 23)
1 SavannahWinslow 1 hour, 6 minutes ago”
“No one (well, almost no one) is suggesting management of that magnitude and scope.”
Actually, they are just wanting to do it in a different manner.
Few are looking to truly regulate in the full sense of the word, however many seek the same level of control (while heavier on the Democrats side the Republicans have a heavy does of it too). The preferred method is through taxes – high on things that they would like to remove and lower (and even in a few cases they pay you) for the things they like.
Heck, in a few cases when they sought to pass the legislation they were quite open about it. One can not outlaw cigarettes or firearms yet there has been a strong push (that nearly passed at one time) to tax them out of existence.
Sadly in most cases it is only different from what happens in a command economy in execution, not outcome. It “feels” more market freedom in that if you *really* want to still get the thing there is nothing preventing you from it. However in the end it means no one can afford to either purchase or produce the items and, therefore, they might as well have been regulated in the full sense of the word. Indeed – it isn’t *that* hard to adjust taxes to get the production and consumption rate where one wants it, no different that in a command economy except that it is done through taxes instead of simply declaring it to be so (and make no mistake – right now the main argument in congress is where the regulation needs to be, not if to regulate or not).
I remember catching a Cardinal when i was about 8 years old. I took the beautiful bright red bird and stuck him in a bird cage i had. I come back maybe an hour later and he was dead. He killed himself trying to get out.
That was one of my earliest lessons about life and how much regulation is too much. Pretty simple actually. Its any regulation where the thing you desire to control ceases to be the thing it was.
To Tom @ 10:30PM – I now have to go hit the bookstore, thanks much! I didn’t know there was a book out by that name.
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Regarding the conversation about taxation vs regulation, just remember that the power to tax is the power to destroy.
While I’m sure the democrats have a nice list of things they’d love to tax out of existence, there will always be unintended consequences of their actions.
For instance, with cigarettes being taxed out of existence you will have numerous countereffects.
First, if the tax were raised to the point that smokers quit smoking then the “sin taxes” that are derived from commodities such as cigarettes will disappear and thereby hurt state economies that rely at least partially on those “sin taxes” for budget purposes.
Result – loss of tax revenue that will have to be made up elsewhere by raising taxes on something else.
Additionally, you will always have people that will smoke in spite of the attempt to tax cigarettes out of existence – even if they have to hide in the basement to do it.
If publicly successful in such an effort, you’d still have people engaged in black market activities to provide cigarettes at vastly inflated prices and for which government would derive no income at all.
Result – organized crime gets a boost in revenue, previously law abiding citizens become criminals engaged in now illegal activities, public acceptance of criminal behaviour becomes more acceptable to a wider variety of average citizens, loss of respect for law and government….well, think prohibition.
As to how far regulations should go, my own view is that the government should remain limited to the powers enumerated in the federal charter and any regulations should be based upon an overwhelming need that can’t be satisfied otherwise.
Unfortunately that’s a view I don’t believe is shared by the current regime.
Even though there are hearings all over C-Span we still have no idea what deals are being made in the back rooms (remember that reporter in Denver at the Dem Convention who was accosted/arrested by the police just because he was trying to take pictures of all the big money people and Obama’s top aides?).
My true fear is that congress and the administration will cajole (read “force”) the automakers into retooling to make more hybrid cars based on the current technology – this will cost billions. The current hybrid technology in this country doesn’t even give the kind of mileage that diesel does (and diesel is very clean now thanks in large part to President Bush’s administration mandating a 95% reduction in sulfur for highway diesel). Not only is the mileage less but there is the problem of disposing / recycling the batteries – a process potentially much more dangerous to the environment than the carbon emissions.
Take a look at some of the electric and hybrid technology currently being developed in Europe and Asia – it’s amazing.
Within four to eight years that technology will make the current obsolete so about the time the US automakers start rolling out the big numbers of vehicles based on the current technology no one will want them because the Asian and European manufacturers will be delivering cars based on the new technology.
If the past 20 years of the computer era has taught us anything it should be that profitability depends on continuing innovation. Business and individuals are capable of such innovation – government is not.
sorry for the long post
The economic stimulus package currently under discussion is a Trojan Horse filled with every pet project and entitlement guarantee boosted by the left for the past 20 years. Most of the money will be spent later, probably after the natural course of the recession will have self corrected. So Obama gets a two-fer: credit for having rescued the economy from a repeat of the Great Depression and a hammerlock on the freedoms of Americans who don’t want to construct a European style social democracy/welfare state.
I’m still trying to figure out what exactly it is that America’s largest corporations, NGO’s, and financial institutions want with remaking the U.S. into the Euro-socialist model.
Why would the people want this kind of model? Take a country like France, for example. High structural unemployment. High taxes and thick regulations. Entrepreneurship is discouraged because of this. Young people have a hard time finding jobs because it’s difficult for employers to fire people. The high taxes and the welfare state sap the life out of the economy. On top of it all, that country is being destroyed by a hostile Muslim element that is vastly out reproducing the native French.
On top of it all, a vastly bulked up welfare state is going to mean dramatic reductions in our military budget and the size of the military at a time in history when the strategic threats are growing, not diminishing.
I think the largest corporations and wealthiest individuals are in favor of competition until they clamber to the top of the heap; then they want to pull the ladder up behind them and cement themselves permanently into position.
I view socialism as a modern version of feudalism. We are already starting to see elective offices becoming hereditary fiefdoms. This is occurring in both parties and at the federal, state, and local levels.
To make matters worse, the inexperience of the junior from IL become president is rearing its ugly head even sooner than expected. The Pelosi – Reid coalition is playing him like a cheap piano. The rest of the world, while saying it is great we elected him, has no respect for him.
I’ll bet he already longs for the day he could just vote “present” and let it go at that.
Again, perhaps Rush had it right. He calls Obama the “president select”.
I second what rickl said….!
rickl,
Agree totally with your post above. Lately, the socialism-as-revival of feudalism meme is gaining traction, because it unmasks the rhetoric of Marx, Lenin, Mao, and the Frankfurt School thinkers to reveal behind it the monopolization of power and the state as an allegedly benevolent feudal lord who takes care of his serfs. There is patronage and monopoly. The Western European socialists and the upstart American socialists do it via the tax code.
Many years ago during my decade on the Left (1977-1987) I was trying to see if theoretically there was a way around this trap of totalitarian failure. I could not find it, and when I could not I gave up my academic Marxist quest. Socialism failed, fails, and ever will fail. No amount of “this time we’ll get it right!” will obviate the epistemological nonsense of its claims.