As I said in my previous post, I am an independent, and just because I will not vote for a Republican this election does not make me a Liberal. My reason for not voting Republican is based on economic policy. Every Republican candidate is laying it on about the national debt and federal deficit (as if Obama created the whole thing himself despite the fact that Bush ran larger deficit in his last year than Obama has in any of his 3 so far). Now don’t get me wrong the national debt IS a serious issue and one that must be dealt with, just not RIGHT NOW and here’s why. Increased federal spending is a NECESSITY in periods of severe economic turmoil. It was necessary during the Great Depression which I will elaborate more on for the bulk of this post. And it was necessary in the early 1980’s as well.
Another point that needs to be made before advancing is that interpreting the National Debt in terms of current U.S. Dollars is very misleading and will result in a very inaccurate evaluation because you have to take into account inflation and relative value of the dollar (but its current dollars that are bigger numbers and add to sensationalism so if you’re going to get all your info from what is supposed to be NEWS media that’s what you’re gonna hear about). Yes I know the Federal Deficit is more (in $) than it ever has been, but the AVERAGE PRICE of a new CAR in 2011 (in $) was more than the AVERAGE PRICE (in $) of a new HOUSE only as far back as 1970. Heres a link to average cost of houses by year provided by what I consider to be a reliable source http://www.census.gov/const/uspricemon.pdf and it only goes back ’63. Pretty confident vehicle prices are in the multiples of what housing prices were before the Great Depression but that’s just an educated guess, could be wrong, feel free to track that down. It is far more accurate to evaluate our current Federal Deficit as a % of GDP (any economists reading this feel free to correct me if I’m wrong in this assumption). For those who do not know, GDP stands for Gross Domestic Product which is “the output of goods and services produced by labor and property located in the United States” (definition taken for U.S. chamber of commerce). This is essentially what your nation is worth if you want to look at it that way. So again, looking at debt as % of GDP;
But back to the Great Depression and Government Deficit spending. The Great Depression was and continues to be the worst economic period in U.S. history, do not be fooled otherwise by claims that this is the worst economic time ever. Really it is laughable to compare this recession to the GREAT Depression where the unemployment rate was SIGNIFICANTLY MORE than double what it is now. But I reassert my claim that increased Federal Spending to point of running a deficit is necessary and it was this spending under FDR that truly pulled the U.S. out of it. Now many have made the argument that WWII pulled us out of the Depression and not FDR welfare programs (as I’ve faced this several times). I never said it was his Welfare Programs (although his programs did at least STOP the worsening) but he did have the right idea, I just venture to say that it wasn’t enough spending. Then WWII happens and the government is forced to spend and run a deficit that otherwise would not have occurred and at a level that had never and still has never been seen in terms of debt as % of GDP (like I just discussed).
If for some reason you still don’t want to make the connection between the MASSIVE spending and us coming out of the recession then maybe you should consider what happened BEFORE FDR was president and when Herbert Hoover was in office. Herbert Hoover was the President during the PEAK of the Great Depression and that too is not just coincidence. You see Herbert Hoover sounded a lot like these candidates now who (DURING A TIME OF RECESSION) want to NOW worry about the deficit spending and National Debt and want to balance the budget and cut into the welfare programs as a means of doing so (ONCE AGAIN, ALL VALID IDEAS AND CONCERNS JUST NOT NOW!!). Upon doing this, the Depression continued to get exponentially worse while he remained in office and continued to act on this concept. Only when FDR came into office and reversed that mentality did things start to improve. Also it is worth noting that during the recession in the early 1980’s (widely considered the 2nd worst economic period) another increase in deficit spending was necessary to pull the nation out (also can been seen on the above debt % of GDP chart).
POINT BEING THAT SEVERE RECESSIONS ARE NOT THE TIME FOR BALANCING BUDGET! THERE WILL BE CONSEQUENCES!
BALANCING BUDGETS ARE FOR TIMES OF ECONOMIC GROWTH!
THE HANDLING OF THE FEDERAL BUDGET SHOULD HAVE THE SAME PRINCIPAL AS PERSONAL SAVINGS ACCOUNT!
You save up during times of economic prosperity (I would say when GDP growth rates are positive would be a good criteria) so that you have money available during emergencies (the recessions being emergencies). Over the Bush Administration and the administrations before Clinton, the Government behaved like a 20 year old college student carelessly blowing what ever money it actually made and then some! So yea, just like you would expect to happen with personal finances, things go south and your in a spot that is 100x’s stickier than it should be because you didn’t prepare when you had the chance! (and that’s Obama’s fault?) And it baffles me as to why this is such a hard concept for politicians to understand. The issue is best summed up in this quote that I have taken from the GOVERNMENT’s website on the FEDERAL DEFICIT;
“The United States government did not always run a deficit. In the 19th century the federal government typically only ran deficits during wartime or during financial crises. The government ran a deficit of 2 percent of GDP at the end of the war of 1812, and through the decade after the Panic of 1837 and culminating in the US – Mexican War of 1846-48. It ran a deficit of over 7 percent of GDP in the Civil War; and ran a deficit in the depressed 1890s.
In the 20th century the US ran a defict during World War I, the Great Depression, World War II, AND IN ALMOST ALL YEARS SINCE 1960, DURING PEACE AND WAR.“ (I dont recall any 50 year wars or recessions during this period….)
On a side note, during a discussion with a clear Republican he stated that we needed to return to a “Conservative Fiscal Policy” or a “fiscal conservative” I can’t remember which but I was curious as to what form of conservative he was referring to. Conservative as in running a tight budget and not spending alot of money? Or did he mean a fiscal republican? because these are not the same thing considering that the ONLY 2 presidents to actually manage a deficit over the last SEVERAL DECADES were both Democrats (Kennedy and Bush).
During the same discussion he also stated that he was against Obama because things have only gotten worse since he’s been an office. A statement that I assure you is 100% false in every aspect. Unemployment has been a slow but gradual decline since OCT 2009 and as of it turns out the United States GDP actually grew this last quarter (4th quarter of 2011). Here’s the links to the unemployment chart (can’t figure out how to get the actual chart in here) and about the last quarter GDP.
(4th quarter 2011 GDP) http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
I look to do another post tomorrow, not sure if I’ll do another political post but if I do it’ll be a more general look at politics in general as opposed liberal vs conservative.