How the Great Depression Really Ended

A lot of people think that FDR ended the Great Depression with his big-government, New Deal policies, but a closer look really shows that his policies in reality perpetuated the depressed economy, rather than fix it. I fear that some of the same actions taken by the current administration are pushing us down the same path, creating a stagnate economy for years to come and provide government with excuses to take from us more of our freedoms in the name of "security."

I read a great book on just this topic which looks into this subject in depth, The Forgotten Man: A New History of the Great Depresson, by Amity Shales, which I highly recommend if your reading list is getting short.

From today's Wall Street Journal:

Did FDR End the Depression?

The economy took off after the postwar Congress cut taxes

By BURTON FOLSOM JR. AND ANITA FOLSOM

'He got us out of the Great Depression." That's probably the most frequent comment made about President Franklin Roosevelt, who died 65 years ago today. Every Democratic president from Truman to Obama has believed it, and each has used FDR's New Deal as a model for expanding the government.

It's a myth. FDR did not get us out of the Great Depression—not during the 1930s, and only in a limited sense during World War II.

Let's start with the New Deal. Its various alphabet-soup agencies—the WPA, AAA, NRA and even the TVA (Tennessee Valley Authority)—failed to create sustainable jobs. In May 1939, U.S. unemployment still exceeded 20%. European countries, according to a League of Nations survey, averaged only about 12% in 1938. The New Deal, by forcing taxes up and discouraging entrepreneurs from investing, probably did more harm than good.

What about World War II? We need to understand that the near-full employment during the conflict was temporary. Ten million to 12 million soldiers overseas and another 10 million to 15 million people making tanks, bullets and war materiel do not a lasting recovery make. The country essentially traded temporary jobs for a skyrocketing national debt. Many of those jobs had little or no value after the war.

No one knew this more than FDR himself. His key advisers were frantic at the possibility of the Great Depression's return when the war ended and the soldiers came home. The president believed a New Deal revival was the answer—and on Oct. 28, 1944, about six months before his death, he spelled out his vision for a postwar America. It included government-subsidized housing, federal involvement in health care, more TVA projects, and the "right to a useful and remunerative job" provided by the federal government if necessary.

Roosevelt died before the war ended and before he could implement his New Deal revival. His successor, Harry Truman, in a 16,000 word message on Sept. 6, 1945, urged Congress to enact FDR's ideas as the best way to achieve full employment after the war.

Congress—both chambers with Democratic majorities—responded by just saying "no." No to the whole New Deal revival: no federal program for health care, no full-employment act, only limited federal housing, and no increase in minimum wage or Social Security benefits.

Instead, Congress reduced taxes. Income tax rates were cut across the board. FDR's top marginal rate, 94% on all income over $200,000, was cut to 86.45%. The lowest rate was cut to 19% from 23%, and with a change in the amount of income exempt from taxation an estimated 12 million Americans were eliminated from the tax rolls entirely.

Corporate tax rates were trimmed and FDR's "excess profits" tax was repealed, which meant that top marginal corporate tax rates effectively went to 38% from 90% after 1945.

Georgia Sen. Walter George, chairman of the Senate Finance Committee, defended the Revenue Act of 1945 with arguments that today we would call "supply-side economics." If the tax bill "has the effect which it is hoped it will have," George said, "it will so stimulate the expansion of business as to bring in a greater total revenue."

He was prophetic. By the late 1940s, a revived economy was generating more annual federal revenue than the U.S. had received during the war years, when tax rates were higher. Price controls from the war were also eliminated by the end of 1946. The U.S. began running budget surpluses.

Congress substituted the tonic of freedom for FDR's New Deal revival and the American economy recovered well. Unemployment, which had been in double digits throughout the 1930s, was only 3.9% in 1946 and, except for a couple of short recessions, remained in that range for the next decade.

The Great Depression was over, no thanks to FDR. Yet the myth of his New Deal lives on. With the current effort by President Obama to emulate some of FDR's programs to get us out of the recent deep recession, this myth should be laid to rest.

Mr. Folsom, a professor of history at Hillsdale College, is the author of "New Deal or Raw Deal?" (Simon & Schuster, 2008). Mrs. Folsom is director of Hillsdale College's annual Free Market Forum.

Constitutional Amendment.....Yes!

Finally! Some Republicans are starting to act like Republicans again!

A constitutional amendment requiring the national government to have a balanced budget each year (you know, PAY for what we spend), I feel, is the only way to ensure the longevity of our country. We cannot sustainably continue this philosophy of having our cake and eating it too.

Americans are not asked to sacrifice at all for the entitlements or actions of government when they can simply deficit spend, where the government gives us things, yet does not ask anybody to pay for it through taxation. Nobody pays attention to what government does, either, if it doesn't affect their pocketbook.

Even with this amendment, government may still just try to tax the hell out of the rich and minimally tax lower income earners to maintain this "taxation blindness" on the majority of the country, which is why I feel a constitutional amendment for a balanced budget with some form of a flat tax will ensure America is around for many years to come.

Republicans as well as Democrats are both guilty for their irresponsible spending practices, so this amendment will remind politicians that the rule that money doesn't grow on trees also applies to them. We don't want to end up like Greece.

From U.S. News & World Report:

How Green Jobs Are A Sham

Here's a great article I read yesterday in U.S. News & World Report explaining how the "green jobs" push doesn't really create jobs, but simply deletes many jobs over here, while only creating a few over here. And lots of only temporary jobs, like replacing the barbed wire along the interstates. Why not lower the corporate tax rate (the 2nd highest in the world, behind Japan), encouraging businesses to add on another wing to the factory or expand into new markets. You know, create LASTING jobs, and at the same time getting rid of the uncertainty for business.

Green Energy Jobs? Not From Obama's Big Government Meddling

By Kenneth P. Green

Posted February 22, 2010

Kenneth P. Green is an environmental scientist and a resident scholar at the American Enterprise Institute.

The Obama administration and its congressional allies have been promising to usher in a green economy that will create millions of new green jobs that "can't be outsourced." Many of those jobs, we're told, will come from wind and solar energy development, but other areas are supposed to benefit as well, including the automobile, construction, and ill-defined "green technology" sectors. These claims are nothing new, though they have grown more Orwellian over time. In the 1990s, California politicians promised to replace a fleeing aerospace sector with a new industry making batteries for the electric cars they tried to mandate into an unwelcoming market (didn't happen), and they're making the same claims for a new greenhouse-gas-control regime.

There's only one problem with all this feel-good blather: It makes no economic sense whatsoever, and where it has been tried most extensively, evidence shows that it's a job-destroying, econo­my-weakening fiasco.

First, Economics 101. What we know, from the fundamentals of economics, is that governments don't "create" jobs; consumer demand for goods and serv­ices does that. All the government can do is subsidize some industries while jacking up costs for others. In the green case, it will be destroying jobs in the conventional energy sector, and most likely in other industrial sectors, through taxes and subsidies to new green companies that will use taxpayer dollars to undercut the competition. The subsidized jobs that will be "created" are, by definition, less efficient uses of capital than market-created jobs. That means they are less economically productive than the jobs they displace and contribute less to economic growth. Finally, the good produced by government- favored jobs is inherently a noneconomic good that has to be maintained indefinitely, often without an economic revenue model, as in the case of roads, rail systems, mass transit, and probably windmills, solar power installations, etc.

Now to the empirical evidence. When talking about our bold green energy future, President Obama held up Spain as an example. Spain invested heavily in wind power and other renewable energy. Alas, after studying the Spanish experience, Prof. Gabriel Calzada Alvarez and colleagues at Spain's Universidad Rey Juan Carlos found that if America followed Spain's example, for every renewable energy job that the United States managed to create, it should expect a loss, on average, of at least 2.2 traditional jobs.

Each job created in Spain's effort cost about $750,000, and only 1 in 10 was permanent. Thus, creating even 3 million new green jobs would cost $2.25 trillion. Even in a time where a trillion is the new billion, that's a lot of money.

And the goods produced (wind and solar power plants in this case) jack up energy prices dramatically and cause more job losses throughout the econo­my. Electricity rates in Spain would have to rise 31 percent just to repay subsidies given to renewable developers.

Finally, the Spanish team found that "the high cost of electricity due to the green job policy tends to drive the relatively most [sic] energy-intensive companies and industries away, seeking areas where costs are lower."

As for the nonexportability of green jobs, New York Sen. Charles Schumer recently asked the administration to keep stimu­lus money from going to a proposed West Texas wind farm because it would have generated as many as 3,000 permanent jobs in Shenyang, China (proposed site of the wind turbine construction), but would have created only 300 temporary jobs in the United States and a laughably trivial 30 permanent jobs here. Anyone who thinks the United States is going to compete with China for windmill and solar cell manufacturing, given that nation's lower labor rates and greater access to vital rare-earth elements, is living in a fantasy world.

The bottom line: Government job creation, green or otherwise, is private-sector job destruction. In the end, there are fewer net jobs and less net economic productivity than if the government had not interfered with the market.

Really?

Politico.com reports that Alan Grayson (D-Fl) is introducing a bill that would mandate paid vacation time in an effort to "stimulate" the economy. Is he serious?

Sure more happier, rested employees are more productive, but where does the government get off MANDATING this? Paid time off should be a perk at the discretion of the company offering it, because that's what it is...an INCENTIVE to work better, not an ENTITLEMENT. Where did our country go wrong that we feel that we are entitled to being paid for time we are not actually working??

As far as stimulating the economy, what a great way to help companies keep afloat...force them to pay all their employees a week's wages and get no productivity from those dollars spent. Great formula for success. Hey why not pay me for each hour I sleep per night? That would ensure I'm fully rested and will be more productive at work.

It should be up to individual companies whether or not they can afford the perk of paid time off. They know better than anyone if they can afford it, and it should be up to them whether or not they want to provide paid time off. If you don't like it, don't go work there...0r maybe work for a living instead of feeling you should get paid for time you don't work.

Mr. Grayson should get himself out of the unions' pockets and come back to the real world and hang out with the rest of us hard-working blue collar Americans.