Echoes of 1937, big government and a new market collapse?

  • Article by: AMITY SHLAES , Bloomberg News
  • Updated: November 22, 2012 - 8:51 PM
  • 32
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pumiceNov. 22, 12 9:33 PM

From the article: "It was only in 1937 that Americans had to pay into Social Security, diverting cash from the economy. And it was only in 1937 that John L. Lewis, the labor leader, pushed his hardest for wage increases and strikes, forcing companies to pay higher wages than they could afford." Beginning with revisionism, Amity Shlaes puts the blame for 1937's double dip recession on Social Security and organized labor unions. Paraphrasing Shlaes: "Social Security, bad. Unions, worse." Maligning a self-funded social insurance program which was implemented at a time when more than 50% of senior citizens lived in poverty? Shades of putting the blame for today's deficit/debt on today's Social Security recipients who paid higher rates on more income for a longer time (per the 1983 bipartisan reform)! Forcing companies to pay higher wages than they could afford??? Paying a fair day's wages for a fair day's work increased demand for goods and services and injected far more cash into the economy than FICA diverted from the economy!

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pumiceNov. 22, 12 9:41 PM

From the article: "In 1936 and 1937, the Fed effectively doubled reserve requirements. The consequence was reduced available cash, increased uncertainty and lower business confidence." Ah then, Amity Shlaes like so many of today's young conservatives believes that capital is not a risk-taker, but a coward who sees uncertainty around every corner and spares no effort in privatizing profit and socializing risk.

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pumiceNov. 22, 12 9:47 PM

From the article: "The obvious question is why an announcement by Obama or Roosevelt to cut back just after the election doesn't reassure those who dislike government expansion." Yes, Amity Shlaes, that is the obvious question. Your answer ("Expansionists tend to revert to expanding government, as FDR did, most drastically, in World War II") is revisionism reduced to absurdity.

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martiankingNov. 22, 1210:00 PM

The country was trying to come out of the Depression and was not really sure how to go about it. But one thing they found out was that by cutting spending resulted in the country falling back into recession. If the author wants to try and draw comparisons between 1937 and now, let's hope we don't make the same mistakes and cut spending and programs out of fear or stupidity.

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hobie2Nov. 22, 1211:49 PM

Interesting fantasy article. The author should have probably checked with some economists rather than listening to a self-credentialed blogger or talking head... If there is any economist of any school that says the 1938 fall back into recession in the US was not caused by the US government choking off the money supply (which did NOT happen in many other countries who understood Keynes), let them stand up and explain to everyone why drastically reducing a country's money supply does not choke the country's lifeblood... And when they are done explaining, they can tell every one that the fiscal cliff does not exist and Wall Street and Washington have no clue... Hint - exactly what do they think the fiscal cliff is all about? It is about money supply contraction... And as to the author's blathering on about Roosevelt and Social Security, she can tell us why did we NOT crash hard in the Great Recession? Hint again - It was because we had that Social Security base-money-flow that was not there in 1929 (you didn't think that Social Security was some altruistic social program, did you? How amusing... It's a monetary policy used to guarantee a floor in the economy money supply that prevents recessions from being depressions).

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obamafone4meNov. 23, 12 4:07 AM

Facts are facts... the Great Depression was extended because the government interfered in the private market. The same thing is happening today. Regardless of how many times it is said, you cannot spend your way out of debt, you cannot borrow money to gain prosperity and welfare does not stimulate the economy.

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chuckdancerNov. 23, 12 6:06 AM

Amity's specialty is the Great Depression. Over and over she comes back to that time to let us know Roosevelt and the American people were wrong and the conservatives were right and are right. I guess when you get paid to write columns having a subject that you can crank out in a few minuts makes life a lot easier.

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twspt7Nov. 23, 12 6:06 AM

Well, at least the far right isn't comparing Obama to Hitler any more. He could do worse than be compared to FDR, although I'm sure the author does not feel this way.

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pumiceNov. 23, 12 6:57 AM

Re: "[Obama] could do worse than be compared to FDR..." Rumor has it, twspt7, that FDR is miffed because neither his political opponents nor his PR team literally attached his name (or at least his initials) to his signature achievement. But for that oversight, we could still be debating the merits of "RooseveltSecurity" or "FDRSS".

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pumiceNov. 23, 12 7:43 AM

More on Amity Shlaes: She's the director of the 4% Growth Project, a George W. Bush Institute initiative. The comprehensive 4% growth strategy espoused by Amity Shlaes and the GWBush Foundation in the words of Jeb Bush: "an immigration strategy true to our heritage [he's 'intrigued' by Gary Becker's notion that immigration rights should be auctioned off], an energy strategy that’s based on American innovation ['Frack, Baby, frack']and our own resources ['Drill, Baby, drill']to start with, a tax strategy that simplifies the code and unleashes the entrepreneurial spirit of the country [lower marginal rates--which are at historic lows--when the nation is running trillion-dollar deficits as a result of the Bush 43 iteration of 'borrow-and-spend-'til-and-prosperity-will-trickle-down], a regulatory strategy that deals with the fact that we haven’t really reformed regulation. We’ve just added regulations on top of rules [after decades of deregulating and repealing regulation and underfunding regulatory agencies]... Education policy [read, vouchers] that assures that more than just a third of our kids are college and/or career ready..."

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