August 24, 2012

• It's been a while....

  I'm still doing my part to keep Xanga from becoming too frivolous or degenerating into a flame pit, but maybe not often enough.

  I'm bothered by the current political arguments which seem to ignore some basic historic facts.

  In the 1930's, FDR and his New Deal worked very hard to pull the US out of the great depression. The New Deal depended on several factors: Business was encouraged by the RFC,  workers inspired by the WPA and CCC, the infrastructure was rebuilt and upgraded by the PWA, and the whole grand plan was based on the NRA  (get out your HS history book to look up all those acronyms, if you're interested). Banks were re-regulated, retirees were given the first safety net in US history and the whole program was widely and loudly publicized. Most citizens were encouraged and things were looking up when the very conservative Supreme Court began to overturn the basic elements - most notably the National Recovery Act. 

  This led to a considerable slowing in recovery from the depression. In the late thirties, jobs were still hard to find and industrial output was slowing - then along came World War II and the economic buildup, to, through, and after the war led to the US economy taking off to unbelievable heights.

  The point is, that even though the government - far the largest single employer and consumer in any developed economy - is limited in its ability to influence growth. It can and must, however, be the leader in economic growth encouragement. In the late 1930's the New Dealers decided  or were forced to cut back on government spending and the economy slowed its recovery rate.

  Currently, the role of government spending has been drastically curtailed - the excuse being the public debt - and recovery has been slower than it should have been. Cutting government expenditures has actually increased the unemployment rate as government workers have been laid off. we can expect this to continue as the Afghan War winds down and military expenditures are reduced. Obama's administration has done remarkably well despite these constraints, but is given little credit.

  One obvious solution is to increase government domestic spending in a manner which will stimulate the rest of the economy. Rebuilding the infrastructure is an example where one dollar of government money is magnified several times as it circulates through the rest of the system. Higher taxes have consistently shown returns far in excess of their original amount. That government "Rathole" leads directly into the middle class pocket.

  A balanced budget will slowly reduce the amount of debt service (interest on borrowed money) and such a budget should be based on a sensible amount of tax money - don't depend on pie-in-the-sky promises that lower taxes will lead to an increased growth rate - that has never happened yet and is partly how we got in this mess in the first place.

  • 4:33 pm
  • 9 Comments