Bad Beltway Medicine
This column was written by South Carolina Gov. Mark Sanford.
They say that those who don't learn from history are destined to repeat it. As we're being greeted almost daily with a new bailout proposal - with one forthcoming from the president-elect - Americans ought to ask whether history suggests they will work.
Neither our recent history nor the evidence from our last comparable economic crisis suggests such efforts will prove effective.
What's worse is that the bailout approach undermines what has historically been the ultimate source of economic stimulus - the American worker and entrepreneur. The market-based economy of our country, responsible for creating 200 years of wealth, is now threatened as never before in our Republic. Furthermore, history shows issuing debt on top of debt, to solve a problem created by too much debt, threatens both the financial strength and the sustainability of our government, given its impact in countries across time.
Each bailout leads many who work hard and take prudent risks to wonder why they should work hard while Washington strays toward a political economy - one in which you need the right lobbyists or a loud voice to be heard by Congress. There's no bailout for your cousin across town or your brother-in-law's little business; they didn't pass muster with those in Washington who are picking winners and losers in today's political marketplace.
Similar measures to stimulate the economy were tried without success in the 1930s.
Prescribing the wrong medicine for an illness can make the patient still sicker. In downturns caused by excess production or inventory, current stimulus efforts could have worked because the goal is to spur consumer spending. By contrast, what we face today is a balance-sheet crisis, and in this situation, a stimulus like the one proposed will have little effect. We were told by leaders in Washington last spring that if we just sent $150 billion in stimulus checks things would get better, and we were told the same thing as we saw $2.3 trillion spent and committed to various stimuli and bailouts for the year. The tab for what's been committed has now crossed $7 trillion - half of the yearly U.S. economy. Our leaders in Washington sound less credible with each new attempt.
The new administration's bailout proposal is said to total between $700 to $800 billion.
In a global slowdown, with a $67 trillion world economy, can another 1 percent make a difference? It's as if we've tried to sweeten a local lake with truckloads of sugar and, upon seeing that this didn't work, propose to toss in a box of donuts and confidently proclaim, "Now that will make the difference!"
The automobile companies got their bailout. Now the states, homebuilders, homeowners, and retailers are lining up for the next round of bailouts, though the history of the early 1930s suggests they won't work.
Amity Shlaes' book, The Forgotten Man, chronicles the history of the Great Depression, and shows it was prolonged and worsened by raising taxes and limiting trade. History also shows Depression-era policies of expanding labor-union power and increasing spending did little to improve the economy: We had nearly 20 percent unemployment in 1939, ten years after the stock-market crash. For today's policymakers, that should underscore how important it is that this administration not pass the so-called card check legislation, which would repeat the expansion of union power that harmed job creation in the 1930s.
In the same vein, history shows the consequence of pulling money from the private sector to fund large public projects. Few people know that it was Hoover, not Roosevelt, who initiated the practice of piling up big deficits to support huge public-works projects like the San Francisco Bay Bridge, the Los Angeles Aqueduct, or the Hoover Dam. But if government spending were the key to preventing recessions, then we'd never have one, since increasing spending is the default response from Washington for every problem.
The bottom line is that history teaches that we need to look much more broadly as we attempt to define "economic stimulus." It is more than simply borrowing money and sending checks out of Washington. Our toolkit needs to be expanded to include issues as wide-ranging as strengthening the dollar to make it a stable store of value, preserving healthy competition in our labor market, and reconsidering unfunded mandates from Washington.
Ben Franklin's words as he left Independence Hall - the same building in which our governors and president-elect found themselves meeting last month - were that we had been given a republic - if we could keep it. Given today's global competition, we would also be wise to remember this thought, and consider how important it will be for our nation's economic health to get the right policy prescription out of Washington.
Mark Sanford is the governor of South Carolina and chairman of the Republican Governors Association.
By Mark Sanford
Reprinted with permission from National Review Online
National Review Online They say that those who don't learn from history are destined to repeat it. As we're being greeted almost daily with a new bailout proposal - with one forthcoming from the president-elect - Americans ought to ask whether history suggests they will work.
Neither our recent history nor the evidence from our last comparable economic crisis suggests such efforts will prove effective.
What's worse is that the bailout approach undermines what has historically been the ultimate source of economic stimulus - the American worker and entrepreneur. The market-based economy of our country, responsible for creating 200 years of wealth, is now threatened as never before in our Republic. Furthermore, history shows issuing debt on top of debt, to solve a problem created by too much debt, threatens both the financial strength and the sustainability of our government, given its impact in countries across time.
Each bailout leads many who work hard and take prudent risks to wonder why they should work hard while Washington strays toward a political economy - one in which you need the right lobbyists or a loud voice to be heard by Congress. There's no bailout for your cousin across town or your brother-in-law's little business; they didn't pass muster with those in Washington who are picking winners and losers in today's political marketplace.
Similar measures to stimulate the economy were tried without success in the 1930s.
Prescribing the wrong medicine for an illness can make the patient still sicker. In downturns caused by excess production or inventory, current stimulus efforts could have worked because the goal is to spur consumer spending. By contrast, what we face today is a balance-sheet crisis, and in this situation, a stimulus like the one proposed will have little effect. We were told by leaders in Washington last spring that if we just sent $150 billion in stimulus checks things would get better, and we were told the same thing as we saw $2.3 trillion spent and committed to various stimuli and bailouts for the year. The tab for what's been committed has now crossed $7 trillion - half of the yearly U.S. economy. Our leaders in Washington sound less credible with each new attempt.
The new administration's bailout proposal is said to total between $700 to $800 billion.
In a global slowdown, with a $67 trillion world economy, can another 1 percent make a difference? It's as if we've tried to sweeten a local lake with truckloads of sugar and, upon seeing that this didn't work, propose to toss in a box of donuts and confidently proclaim, "Now that will make the difference!"
The automobile companies got their bailout. Now the states, homebuilders, homeowners, and retailers are lining up for the next round of bailouts, though the history of the early 1930s suggests they won't work.
Amity Shlaes' book, The Forgotten Man, chronicles the history of the Great Depression, and shows it was prolonged and worsened by raising taxes and limiting trade. History also shows Depression-era policies of expanding labor-union power and increasing spending did little to improve the economy: We had nearly 20 percent unemployment in 1939, ten years after the stock-market crash. For today's policymakers, that should underscore how important it is that this administration not pass the so-called card check legislation, which would repeat the expansion of union power that harmed job creation in the 1930s.
In the same vein, history shows the consequence of pulling money from the private sector to fund large public projects. Few people know that it was Hoover, not Roosevelt, who initiated the practice of piling up big deficits to support huge public-works projects like the San Francisco Bay Bridge, the Los Angeles Aqueduct, or the Hoover Dam. But if government spending were the key to preventing recessions, then we'd never have one, since increasing spending is the default response from Washington for every problem.
The bottom line is that history teaches that we need to look much more broadly as we attempt to define "economic stimulus." It is more than simply borrowing money and sending checks out of Washington. Our toolkit needs to be expanded to include issues as wide-ranging as strengthening the dollar to make it a stable store of value, preserving healthy competition in our labor market, and reconsidering unfunded mandates from Washington.
Ben Franklin's words as he left Independence Hall - the same building in which our governors and president-elect found themselves meeting last month - were that we had been given a republic - if we could keep it. Given today's global competition, we would also be wise to remember this thought, and consider how important it will be for our nation's economic health to get the right policy prescription out of Washington.
Mark Sanford is the governor of South Carolina and chairman of the Republican Governors Association.
By Mark Sanford
Reprinted with permission from National Review Online
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If you studied the Depression properly, you would discover that it had its origins in Europe and the starting date was sometime in 1922. Its initial cause was manufacturing not retooling from wartime to domestic production.
irmcvet971,
You are just repeating uncritically the propaganda that has been going around for years. For another perspective of Roosevelt''s successes and failures, have a look at this: http://www.econlib.org/library/Enc/GreatDepression.html
Then I studied the Depression in detail. I saw the causes of the crash of 1937. I saw that the economy was little better in 1940 than it was in 1930 despite by then more than seven years of Roosevelt policies. I learned about Hoover''''s attempt to bail out the economy through public works. I learned that countries that tried even more socialist policies fared even worse. I learned about the starvation in the Soviet Union.
Perhaps you two need to read a little more before you make your uneducated comments.
Posted by ausus at 05:48 AM : Jan 10, 2009
It''s absolutely Amazing how fascist can distort HISTORY and just go on as if they say it and it''s truth. TODAY we are living with the New Deal. Roosevelt and his Administration put in place so many things that we take for granted EVERY day and some try to say it didn''t work. We USED the Roosevelt Economic Plan from the Great Depression all the way up to 1980 when we allowed these slimy creatures to sell us Trickle Down. That Economic Policy produced the greatest economy on planet earth! It created a standard of living second to NONE in the entire World. Trickle Down? Well Trickle Down has never, NOT ONCE, ever operated in the BLACK nor has the American Standard of Living ever gone up under it!! NEVER.
but is even going to make things worse; the only reason Obama was elected was to keep the ________ in check
during the upheaval from the dire straits to come from
the greastest dpression since _____
I once believed as you did. Hoover created the policies that caused the depression, he tried to solve it with trickle down economics and then Roosevelt came along and applied Keynsian economics and we all lived happily ever after.
Then I studied the Depression in detail. I saw the causes of the crash of 1937. I saw that the economy was little better in 1940 than it was in 1930 despite by then more than seven years of Roosevelt policies. I learned about Hoover''''s attempt to bail out the economy through public works. I learned that countries that tried even more socialist policies fared even worse. I learned about the starvation in the Soviet Union.
Perhaps you two need to read a little more before you make your uneducated comments.
Posted by ausus at 05:48 AM : Jan 10, 2009
The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The end of the depression in the U.S is associated with the onset of the war economy of World War II, beginning around 1939.
I once believed as you did. Hoover created the policies that caused the depression, he tried to solve it with trickle down economics and then Roosevelt came along and applied Keynsian economics and we all lived happily ever after.
Then I studied the Depression in detail. I saw the causes of the crash of 1937. I saw that the economy was little better in 1940 than it was in 1930 despite by then more than seven years of Roosevelt policies. I learned about Hoover''s attempt to bail out the economy through public works. I learned that countries that tried even more socialist policies fared even worse. I learned about the starvation in the Soviet Union.
Perhaps you two need to read a little more before you make your uneducated comments.
This country is going to spend itself into oblivion with these blasted bail outs. All the bail outs are doing is covering the @ss of the rich. It is wasted money and won''t do a blessed thing to create jobs or ressurect the economy.
Union expansion in the 1930''s harmed job creation? That must be why the unemployment rate fell by more than half between 1936 and 1941. Union expansion in the 1930''s made it possible for a man in the 1950''s to support a wife and kids, own a home and two cars, all from the wages of one middle-class job.
It''s a Right Wing Rag.