Back in the Great Depression, President Roosevelt thought it was necessary to reinvest in our country and put Americans to work building our nation’s infrastructure. His programs put thousands of people to work, and increased the country’s workforce. The Republican party back then, much like today, pushed for austerity measures. The national debt was too high. We couldn’t afford to do these things, is what told President Roosevelt. FDR gave the GOP what they wanted and decreased spending in 1937. What happened next is exactly what happens to all economies when the cash flow stops moving, it dips into a recession or worse.
You would think that the Republican Party today would have learned from their past folly, but unfortunately, they have not. In the month of June of 2011, a jobs report came out and it showed a net jobs gain of 18 thousand. The underlying issue here is 39,000 public sector jobs were eliminated in June and over the course of 8 months, almost a quarter million public sector jobs were lost. There is no wonder why the economy is losing steam, there are almost a quarter million people without a job, that used to spend money in the economy. 60% of our economic activity comes from spending and the consumer. Those 239K former workers spent their checks at the local shops and markets. Now they are tightening their belts.
Bruce Bartlett just wrote a piece in the New York Times,
Now, Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. So he is from their side of the aisle.
It is starting to look like 1937 all over again. As the table below indicates, the economy made a significant recovery after hitting bottom in 1932, when real gross domestic product fell 13 percent. The contraction moderated considerably in 1933, and in 1934 growth was robust, with real G.D.P. rising 11 percent. Growth was also strong in 1935 and 1936, which brought the unemployment rate down more than half from its peak and relieved the devastating deflation that was at the root of the economy’s problems.
By 1937, President Roosevelt and the Federal Reserve thought self-sustaining growth had been restored and began worrying about unwinding the fiscal and monetary stimulus, which they thought would become a drag on growth and a source of inflation. There was also a strong desire to return to normality, in both monetary and fiscal policy.
On the fiscal side, Roosevelt was under pressure from his Treasury secretary, Henry Morgenthau, to balance the budget. Like many conservatives today, Mr. Morgenthau worried obsessively about business confidence and was convinced that balancing the budget would be expansionary. In the words of the historian John Morton Blum, Mr. Morgenthau said he believed recovery “depended on the willingness of business to increase investments, and this in turn was a function of business confidence,” adding, “In his view only a balanced budget could sustain that confidence.”
Due to FDR caving to GOP demands back then, much like President Obama today, the gross domestic product plunged, 3.4 percent in 1938, and the unemployment rate rose to 12.5 percent from 9.2 percent in 1937.
It seems we are about to repeat this scenario again. The GOP has forced the President’s hand to make dramatic cuts because of the looming debt ceiling default. This may plunge the United States back into a deep recession that could last another year.
What happens a year from now? The Presidential election, and regardless of what the White House says, unemployment will matter in this election and the Republican Party knows that an improving economy means Obama will be re-elected and that they could also lose the House to Democrats again.
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Reynardine
Jul. 12th, 2011 at 8:23 pm
You may bet this is Republican premeditation and malice aforethought.
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Hrafnkell Haraldsson
Jul. 12th, 2011 at 8:33 pm
Great article, Ray. At least they’re being consistently stupid.
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Shiva (Moderator)
Jul. 12th, 2011 at 8:48 pm
But that on coming recession could also work against the Conservatives too. If the word is let out the right way who is responsible.
But the greater evil is always what it will do to the people in that year. And what it will do to the people to vote republican at the end of the year. What will they lose then in the unholy name of deficit? Because we do know if the republicans take office the income to the treasury has to go up and so will taxes. On people who are not working and who are barely working. The wealthy know it wont be their problem. And what will it do to a great many small businesses? It will provide the wealthy with one thing they need. Less competition and fewer banks
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Ingarose
Jul. 12th, 2011 at 8:53 pm
The good news is that the GOP is forever overplaying their cards. They really thought that America was on their sides when they won the House in 2010 and for a long time it seemed to work for them. Not only that, they had and have 2 rather attractive females trying to fight for the presidency (sort of). A number of rabid, insane governors won in many states which gave them more power.
I used to be an optimist most of my life until about 10 years ago. There was a little uplift with Obama but then I tanked again. It just appeared that the GOP was winning. Luckily, they are so stupid to overplay their cards that I just might become an optimist again. Murdock and Sarah Palin really help. They are being taken down. I sure hope so, because they can easily come back more furious than ever.
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seeinthedark
Jul. 13th, 2011 at 2:01 am
It is premeditation and serves their unwavering agenda to create a permanent underclass in America that will be subservient and obedient as the inevitable demographic shifts in our society threaten the old order. They(republithugs) want the economy to tank so they can hang the albatross they created around Obama’s neck. They have committed economic treason against the American populace and they have not been getting called on it because a corporate media is in lock step with the march to this corporate fascism. The only hope we have lies in sites like this one that can cause like voices to begin to resonate and reach the critical mass necessary to begin to meaningfully fight back against them. Never forget that they are extremely well resourced( the Kock Bros. fortunes went up by $11B apiece last year) and they are bolstered by the types of religious fanaticism that keeps them in focus at all times. They don’t want to learn from history at all, rather they want to advance their obscene agenda in spite of all evidence or argument over how deranged it really is or how much damage it causes to innocent Americans.
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sherriww
Jul. 13th, 2011 at 2:22 am
There is only one way this country will be forever well and prosperous again,and that is by Americans being smart enough to finally get rid of the Republican Party once and forever,vote them ALL OUT!Repubs,and now Teapubs,have been a complete drag on this nation for the past 80 years,at least.Now,today,you have these completely” mad-dog”,insane,goofy religious types,that want EVERYONE to live THEIR way!The Good Lord did not mean for us to be driven by these Lunitics,I promise you! Pres.Obama in 2012 SO WE STAY SAFE AND PROSPER!After that,still REMEMBER just HOW crazy the Repubs are and NEVER vote for another one,for any reason!That will give our country its best chance,for our children and grandchildren,and God will CERTINLY APPROVE OF THAT!
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