The Obama Economy: History Repeats Itself


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The Great Depression that began in 1929, just as the Great Recession we have today, needlessly rotted our economic core.

In those early days, tragically misguided federal policies, adopted to diminish what was thought to be unruly capitalism, prevented the economy from fully recovering for a decade. Today, just as in the 1930s, expansive government is the culprit, prolonging the lack of economic recovery.

The Great Depression created a widespread misconception that market economies are inherently unstable and must be managed by the government.

Keynesian economics, the economic theory of “priming the pump” through spending and economic policies during the Great Depression, failed, just as the Obama Administration spending spree and the creation of money by the Federal Reserve have failed to resuscitate the U.S. economy.

The economic policies of the 1930s are “a continuing source of myth and confusion,” according to Chris Edwards, Cato Institute Director of Tax Policy. Many still believe capitalism caused the Great Depression and that President Roosevelt helped end it. These “claims are incorrect.”

It is valuable to look back to the years just preceding the Great Depression. In the early 1920s, unemployment was low and the economy rolled along smoothly. The government got out of the way and let the market alone. Resources shifted to market-guided areas. Optimism radiated from the business community, and investment grew.

In the early 1920s, Warren Harding’s brilliant Treasury Secretary Andrew Mellon led an economic boom. He had found that taxes from the wealthy had fallen with each new rate increase. Mellon concluded that lowering the rates on everyone—especially the wealthiest—would actually result in their paying increased taxes.

From 1921 to 1926, Congress cut tax rates from 73 percent on the top income earners and 4 percent on the lowest earners to 25 percent and 1.5 percent, respectively. The taxes were cut even further in 1929. The tax take from the wealthy nearly tripled, while others also saw their taxes drop. The national debt fell by a third in five years.

Federal spending under both Harding and his successor, Coolidge, was held low. American entrepreneurs produced the most vibrant eight-year burst of innovation and manufacturing in the country’s history.

Many politically wise economists believe benefits somewhat similar could happen again as occurred in the administrations of Presidents Reagan, Kennedy and George W. Bush.

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  • alexander

    idiots, liars and commies at the wheel – what do you expect?
    Proof: unempl. is well above 20%, but official number is 8 point "something"…….what a sad joke!

  • itfitzme

    Wow, that almost makes sense, except it has no bearing on reality and the fact that the recession began in 2008.

    The recession finally ended in in June of 2009, six months into the Obama presidency. So far, over the remainder of the Obama presidency, the GDP has seen continuous positive growth.

    The US Fiscal Year begins on October of the previous year, ending on September 30th of the budget year. The 2009 budget was submitted by Bush in 2008, running from Oct 1, 2008 through Sept 30th, 2009. The first budget submitted by Obama was submitted in 2009 for the 2009-2010 fiscal year.

    Obviously, the first order of business for a president is to work on the budget for the next year. Every president lives with the budget that his predecessor submitted in the previous year. A presidents greatest impact is in the second year of his presidency, when his first budget takes effect.

    Of course, the Emergency Economic Stabilization Act of 2008 was one response to the recession, signed into law by President Bush in October of 2008. Also The American Recovery and Reinvestment Act of 2009 was signed into law in February of 2009 by Obama.

    Unemployment remains sticky. Under the Bush administration budget for 2009, it was 9.3%. It peaked at 10.1% in October of 2009. It fell to 9.6% in 2010 and then falling to 9.0% for 2011. It seems it isn't going to reach the level of 14% seen during the Great Depression.

    It is notable that revolving consumer credit peaked in September of 2008, falling continuously through February of 2011. It appears to have stabilized as of October of 2011.

    The housing bubble prices peaked in early 2006, started to decline in 2006 and 2007. They continued to fall through the recession of 2008-09. They may be hitting bottom now, in 2011.

    There is some indication that the housing crisis began as early as 2005, along with the burden of rising medical costs, which resulted in a rise of bankruptcy filings. This was met with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, signed into law by president Bush. This merely delayed the inevitable and in 2008, there were 1,117,771 bankruptcy filings in the United States courts. In 2008, over 96% of all bankruptcy filings were non-business filings. The largest bankruptcy in U.S. history occurred on September 15, 2008, when Lehman Brothers Holdings Inc. filed for Chapter 11

    Earlier US history is, of course important, but more important is paying attention to the present and recent history. The easiest way to relieve uncertainty, it to pay attention to the present. When your not paying attention, it is very hard to be certain of anything.

    The single greatest factor that every business responds to is demand. If someone wants to purchase their product, they are certain they will sell it. If they have more demand than they can keep up with, they are certain that they will produce more.

    Another important thing to know and understanding that cause comes before effect. It's a rather philosophical concept, admittedly, as is is more of a scientific postulate rather than something that has been proven.

    Never the less, it appears that the cause of the Great Recession began prior to 2008. This would have been during the Bush administration. It ended shortly after Obama took office, after the The American Recovery and Reinvestment Act of 2009. See how that works?

    Bush was president, the recession began. Obama took office, the recession ended.

    • Western Canadian

      Rather dishonest on your part, to be expected from the hard left. The recession began when the dems took control of the other two elected bodies.

      Your housing woes started before bush got into the white house.

      You are pitiable.

      • itfitzme

        I find it curious how people will accuse others as being "left" or "right" leaning, depending on what the reported facts turn out to be. They are, of course, revealing their own perception of their own bias.

        I am so sorry for having insulted you with my "liberal" use of facts. It never occurred to me that presenting the facts would be "dishonest". Still, I never fail to be surprised at how insane people can be.

        The article points out that "In the Great Depression, real output only regained its 1929 level in 1936. Then it slipped again in 1938. Unemployment held at 14 percent for 10 years."

        For this Great Recession, the peak for real GDP (chained 2005) was 12/31/2007 at 13326. As of 9/30/2011, the real GDP (chained 2005) returned to 13331.6. So, while the article says that the Great Depression took 5 years to return to it's real output, the Great Recession has done so in 4 years.

        Unemployment was 9.3% in 2008. It peaked at 10.1% in October of 2009. It fell to 9.6% in 2010 and then falling to 9.0% for 2011. It seems it isn't going to reach the articles reported level of 14% seen during the Great Depression. And, while the unemployment rate for the Great Depression was actually 25% in 1933, finally falling to 10% in 1941, the unemployment rate for this recession is already falling, however slow it may be for us.

        So, it appears that this recession is looking less and less like the Great Depression. History, indeed, is not repeating itself.

        It is, of course, the author that said, "Great Depression’s days seem more like the Obama economy, with Obama’s damaging anti-growth policies…"

        All I have done is line up the data as presented by the Census Bureau, the BLS, the BEA, etc. And, every bit of it is verifiable. There is nothing "dishonest" in verifiable data. There is, though, considerable dishonesty is opinions without facts.

        And, none of the facts appear to support the assertion of anti-growth policies. I don't have a crystal ball, like the author, who apparently can see what the GDP will do 9 years after the beginning of the recession, that would be 1916. (1938 – 1929 + 2007 = 1916). Never the less, as of now, everything is moving in a growth direction.

        And, unless we want to rewrite history, we have to include the Emergency Economic Stabilization Act of 2008, signed into law by President Bush in October of 2008 along with The American Recovery and Reinvestment Act of 2009 was signed into law in February of 2009 by Obama. Those were not "hard left" or "hard right" policies, they were everyone's policies. You don't get to just pick and choose your facts based on your predetermined bias. That is dishonest.

        If you really want to know what is going on, try http://www.gurufocus.com/news/157161/balance-shee….

        You may not like it, though, as it is peppered with those fact things that you find so dishonest. I don't know if it's correct in all it's conclusions, but it starts off on the right foot, like reporting the actual unemployment rates by year for the Great Depression, which was more like 25% in 1933, a full 15% higher than the peak of this recession. It at least, has enough info to actually compare and contrast with this recession.

        That is what the article is about, right? Comparing and contrasting the Great Depression to the Great Recession.

        • itfitzme

          That said, the recession began in the last quarter of 2007 and ended June 2009. The 110th Congress sessions ran; 1st: January 4, 2007 – December 19, 2007
          2nd: January 3, 2008 – January 3, 2009. The presidential terms, which this article talks about, were Bush, through 2008 followed by Obama from the beginning of 2009.

          So by your myopic view of history, it was one or more of these laws http://en.wikipedia.org/wiki/110th_United_States_

          # February 2, 2007 — House Page Board Revision Act of 2007, Pub.L. 110-2, 121 Stat. 4
          # May 25, 2007 — U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, Pub.L. 110-28, 121 Stat. 112, including Title VIII: Fair Minimum Wage Act of 2007, 121 Stat. 188
          # June 14, 2007 — Preserving United States Attorney Independence Act of 2007, Pub.L. 110-34, 121 Stat. 224
          # July 26, 2007 — Foreign Investment and National Security Act of 2007, Pub.L. 110-49, 121 Stat. 246
          # August 3, 2007 — Implementing Recommendations of the 9/11 Commission Act of 2007, Pub.L. 110-53, 121 Stat. 266
          # August 5, 2007 — Protect America Act of 2007, Pub.L. 110-55, 121 Stat. 552
          # September 14, 2007 — Honest Leadership and Open Government Act, Pub.L. 110-81, 121 Stat. 735
          # November 8, 2007 — Water Resources Development Act of 2007, Pub.L. 110-114, 121 Stat. 1041 – Veto Overridden
          # December 19, 2007 — Energy Independence and Security Act of 2007, Pub.L. 110-140, 121 Stat. 1492

          enacted by the 110th and Bush that caused the recession which started in the last quarter of 2007. Care to point out which ones? We should probably see what the date that they became effective was.

          I don't suppose it really matters as you don't actually know what caused the recession. You just know it must have been those dems. Rather dishonest on your part. But, that's is, after all, how your right wing nut mind works.

          Or, perhaps it's that business owners are all passive aggressive and the uncertainty of a democratically controlled congress causes them to refuse to sell product or conduct business. I just hate to thing that is what it is. It flies right in the face of the rational agent that classical economics relies on.

          But then again, it sure sounds like a typical right wing nut behavior. And it sure sounds like what the far right keeps saying, that they don't care whether their is demand or not, they just not going to people because they are "uncertain"?

      • Snow White

        I agree with your sumation 100%. Leave it to the left to try to take credit for all things good and blame the Republicans for all things that go wrong. Remember how Clinton gets credit for balanced budgets and surpluses that were forced on him by the Newt Gingrich led House?

    • Cherly

      You must be working for the Gov? Let me get this right if it takes approx 130K jobs a month to keep the unemployment rate at what ever level it is at, then show me any average of 100K for the last 36 months! How can the rate decline? So let's see last month the Gov propaganda rag stated that 120K jobs created, that represents 1/1000th of the people looking for work. So how can the unemployment rate drop 4/1000th like 0.4%. You can't even do simple math in your head. Oh I know you have a Government K1-K12 education! I don't even believe you wrote your own comment since you do show a high level of illitercy! tsb_AWM

      • itfitzme

        So, the starting point is imagining whom I work for or what my education level is? And, the method of argument is that of not knowing how the US economy can add 130K jobs a month. A lot of questions, but no answers. As if, not being able to answer a question is somehow an argument. I generally suspect that, when someone begins with, "You must work for…." or "Your education must be…", they aren't exactly attached to reality. They are far more attached to their imagination, after all, it is what they report first. The first thing that comes to mind is what they imagine.

        The simple answer is that there are over 7 million companies. If every company hired a person next month, that would be 7 million jobs added in one month. Of course, I'm not holding my breath waiting for that to happen, no matter how physically possible it may be.

        I'm just reading off of the data provided by the BLS. It says that, from 2008 to 2009, the unemployment rate went from 5.8% to 9.3%. How did it go up by 3.5%? In 2008, there were 154,000,000 in the civilian labor force with a total number of people employed of 145,362,000 people employed. That fell to 139,877,000 in 2009. So, between 2008 and 2009, 5,485,000 or 5.4 million people became unemployed. That is 450K per month.

        "How can the rate decline?" Well, how can it go up? I suggest that, as a starting point, if it can lose 0.4% a month, it can also gain 0.4% a month. If it can lose 3.5%, it can gain 3.5%. I'm wasn't doing any math, just reporting the numbers as reported by the Bureau of Labor and Statistics. I personally don't do a phone survey and compile unemployment data. I am sorry if people don't like those numbers. And, if anyone has better numbers, by all means, they should present them. And the methodology of the BLS isn't a secret, they do publish it. And they aren't part of some nefarious conspiracy by the Rothchilds, the Gettys, the Vatican and Colonel Sanders, to put an addictive substance into chicken and make us crave it fortnightly.

        In 2000, there were (http://www.census.gov/prod/2003pubs/02statab/business.pdf)

        Total number of establishments in the US……..7,070,000

        Total number of employees…………………114,065,000

        That comes to an average of 16.1 employees per firm. That is, of course, an average. (You can do the math).

        In 2000, the workforce was 142,583,000 (according to the BLS). According to the BLS, the number of employed individuals was 136,891,000. (Why is that different from the Census.gov number of the number of employees?). In 2000, the unemployment rate was 4.0% and in 2001 it was 4.7%. To go from 0.04 to 0.047, the number of people that became unemployed went from 5,692,000 to 6,801,000 for a net change of 1,109,000. So that is a net loss of jobs of 1.1 million people. Obviously, some people that were not working in 2000 found work in 2001. So that 1.1 million isn't exactly how many people lost jobs, it's just the change in the number of unemployed individuals.

        With the number of businesses being 7 million and the change in employment being 1.1 million, then that would be an average of one in every seven companies letting one person go. So, in 2000, a change of 0.007 or 7/1000 is about one in every seven companies. In a month, with 12 months per year, 1.1 million per year is 91.6K

        If, in 2000 to 2001, the economy can lose 1 million jobs or 1 job per every seven companies, it is not a stretch of the imagination that if 1 in every seven companies hired someone, it can create 1 million jobs.

        I suppose that, if the economy can lose 450K per month, or 91.5K per month, it is certainly reasonable to conclude that it can add 130K per month.

        All that is simply taken from the existing data provided by the U.S. Census Bureau and the Bureau of Labor and Statistics, with a little math added. If you think that the Census Bureau or the BLS is part of some great government conspiracy, I can't really help you there. Perhaps you should do your own phone survey or start a private company so we can have data that you trust.

        Still, just going on the assumption that the number of businesses in 2010 and 2011 are 7 million, then 130K jobs would be 1 in every 53 companies hiring someone. If you don't like the 7 million assumption, by all means, look up what it was for 2010. I've gone through a lot of work to find the hard data for unemployment, number of companies, populations, GDP, etc. I've even given you the sources, BLS, BEA, US Census Bureau, etc.

        I don't tend to rely on "authority by education attainment" as proof of anything. But, seeing as you do, I'll tell you. I have an MBA, an undergraduate degree in electrical and electronic engineering, and a certificate in applied statistics. These are from accredited universities. I also have formally studied both economics and psychology. So, yeah, I can do da' math. Still, I didn't double check my math, so you might find some error. That will help you.

        • John

          Facts don't matter to these people, you need to accept that and move on.

  • Brujo Blanco

    The government apparently calculates the unemployment rate based on the number of people receiving benefits. They do not use the number of people that were not entitled to benefits in the first place and those who have received all they are going to get. I am originally from a coal mining town. The mines bascially shut down when I was a kid. I returned to my home town as an adtult and there were people who had been waiting for 20 years for the mines to reopen. These people had the liberal mind set that the capitalists were responsible for their problems. Many people in my home town were on welfare.

    • itfitzme

      That was my understanding, years ago. Currently, “A monthly household survey provides comprehensive information on the employment and unemployment of the population classified by age,”

      I am always cautious about what any particular report of unemployment is based on. What bothers me most is the possibility that people working 16 hours may be counted as employed. And, I am not sure I like the idea of not counting people who have finally given up. As far as I am concerned, any one that has worked and has actively looked for work would accept work given the opportunity. Keeping up a positive attitude after a year of rejection is a difficult thing. It is difficult, though, to come up with a really valid number. The work force is the number of people over 16. I wouldn’t include anyone younger than 18 as being part of the work force. I also wouldn’t automatically include full time students living at home, at whatever age, as being unemployed. I wouldn’t include anyone collecting disability insurance or social security. I point these out as I would rather consider the unemployment rate as being the difference between the work force and the number of employed individuals. So far, I haven’t found a data path to a number that I like.

      Never the less, the BLS determines the unemployment rate by surveying the population, not by counting the number of people on unemployment. And, as a relative value, that this year is higher or lower than last year, it’s generally and marginally okay. Currently, with so many long term unemployed, that would easily say that they had given up, I am cautious.

  • George

    Historians don't help when you're committed to rewriting history.

  • LindaRivera

    An inferior health care plan that no one wants and CANNOT afford to pay. The threat to jail and/or fine those who don't purchase the government enforced plan.

    Massive spending as if there is no tomorrow. Fighting wars we have no money for. Massive borrowing.

    The Massive giving away of Billions of dollars every year to other countries, including the oil-wealthy Middle East, Hamas-controlled Gaza and the Palestinian Authority organization who fill their war chests, build mansions and laugh all the way to the bank with FREE infidel money. Whilst in America, homeless shelters are filled to capacity; tent cities have sprung up all over the U.S. filled with desperate, jobless, homeless, neglected Americans.

    Massive debt. The massive printing of paper money out of thin air to DELIBERATELY create out-of-control inflation. There is no question that the total DESTRUCTION of America's economy is planned. The results will be horrifying. In the once wealthy and great nation of America, millions of Americans will become destitute, hungry and homeless with no money or resources to help them.

  • LindaRivera

    Organic, non-GMO avocado, fruit and nut trees and berries must be planted in all of our nation’s cities’ and towns’ parks to help the many millions of Americans who will soon be in a desperate struggle to survive because of the frightening, highly destructive economic policies of our government.

    Watch it. And weep for our great nation and people:

    FALL Of The Republic – The Presidency Of Barack H Obama – The Full Movie HQ http://www.youtube.com/watch?v=F8LPNRI_6T8&fe

  • LindaRivera

    Most people are unaware of government raids made on small-medium sized farms. Raw, organic dairy farms have had their healthy dairy products seized and thrown out. At least one farmer has been taken away in handcuffs! Many people in a desperate struggle to regain their health (or not lose their health) know how IMPORTANT raw, organic dairy is in the battle for health.

    Businesses and jobs must be PROTECTED! The WAR against small-medium sized businesses must stop!

    The new Animal Identification rule will act like a tax on every livestock animal that crosses state lines – something that happens THOUSANDS of times a day in the United States! This is incredibly hard on small-medium sized farms WHO CANNOT AFFORD THIS!

    Family farmers and ranchers cannot afford additional paperwork and unnecessary expenses to please the industrial agribusiness lobby. We must stand up for our rights and the rights of farms! Farm and Ranch Freedom Alliance is standing up for family farms and backyard livestock growers!

    This is their internet address: http://farmandranchfreedom.org/

    PROTECT American JOBS! PROTECT American BUSINESSES!

  • LindaRivera

    WAR is being waged on American BUSINESSES and American JOBS!
    Americans must not be denied the human right to jobs and businesses!

    FOXNEWS
    Is Fed Raid on Gibson Guitar​ Company Enforcing Policy . . . or a Push to Target ‘Made in the USA’?
    September 07, 2011

    They are among the most sought-after musical instruments in the world.
    Gibson is also a company that is proud to put the “Made in the USA” label on its instruments. While the company has lower-end lines that are made overseas, every guitar that bears the “Gibson” label is made in the U.S. by American workers.

    Related Stories
    Attacking U.S. Companies Is No Way to Create Jobs

    Gibson: Feds Want Guitar Woodwork Done by Foreign Labor

    Related Video

    Gibson Guitar CEO: Don’t Know Why We Were Targeted

    On August 24, armed agents from the U.S. Fish and Wildlife Service and Homeland Security raided the corporate headquarters and two factories of the Gibson Guitar company. The agencies took away 24 pallets of Indian rosewood and ebony, as well as a number of guitars and computer files.

    “I think they’re taking the position that we should be shifting these jobs overseas,” says Bruce Mitchell, the chief legal counsel for Gibson. http://www.foxnews.com/politics/2011/09/07/does-w

  • WilliamJamesWard

    I do not think it is so much history repeating itself as planned destruction in order
    to make all Americans dependent on the government and exist without
    Constitutional protections. It is and effort to end personal freedom and is doing
    a job on all of us. Obama and the left are engineering a disaster and the
    disaster is us if we do not fight back and take control of our affairs and vote
    in new politicians forever forward, we must end professional politicians.
    William

  • Ellman

    "The Obama administration is sorely in need of an historian." The Obama administration is in desperate need of (1) a psychiatrist, and (2) an economist from the Austrian School of Ludwig von Mises – and an objective historian.

  • henery25

    These days economic conditions are pretty similar to 1929 great depression. History is repeating and some solid steps are needed to cope with this problem. Otherwise we have to face severe effects
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  • mlcblog

    I looked up Andrew Mellon in Wikipedia and saw the beautiful tax structure that he understood and proposed and which resulted in a release of prosperity in the Harding, Wilson, and Hoover regimes. Then, with bumps in the road and the advent of FDR and others who don't understand the American economy the blood lust for our tax money became really strong, with FDR overturning all of Mellon's devices that had brought us into a beginning of prosperity and instead we were drawn into a war that was later justified and given credit for having brought us our prosperity. How sinister…it seems, but they really do believe that they must capture the money by taxes because they do not understand how money is created by the entrepreneurs and the producers. Mellon really got that and devised a system that would take complete advantage of the way things truly work, to a decided advantage for everyone.

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