Saturday, July 23, 2011

Pres. Obama Pushes "Serious Cuts" In His Weekly Address

George Santayana wrote in his Reason in Common Sense, The Life of Reason, Vol.1, "Those who cannot remember the past are condemned to repeat it."

As Pres. Obama prepared to take the oath of office in January 2009 his ambitious plans to repair the American economy drew comparison to the New Deal reforms and programs pioneered by President Franklin D. Roosevelt.

Conservative Republicans, unable to intellectually accept or unwilling to honestly admit that thirty years of cutting taxes for the rich and cutting regulatory oversight on the financial sector led to financial calamity twice in a period of 80 years, signaled they were as opposed to President Obama's new "New Deal" legislation as their conservative forefathers were to FDR's New Deal legislation.

Senate Minority Leader Mitch McConnell, the most powerful conservative Republican in Washington, said he intended to delay Obama's proposed $1 trillion economic stimulus legislation and use his 40 Republican Senator cloture vote filibuster power to block all Democratic legislation.

Within two months of taking the oath of office, Republicans had convinced Pres. Obama to push for half the amount of stimulus that his advisers thought necessary and substitute additional massive tax cuts as part of the stimulus plan.

Most economists now say the 2009 stimulus plan was slow to kick in, did little to promote American job growth and unnecessarily added to the deficit because the stimulus plan indeed provided half the amount of spending needed and the added tax cuts have not enticed corporations to reinvest their massive profit gains in U.S. based business growth and job creation.

Republicans continue to claim only more tax cuts for billionaires and mega-corporations will fix the flagging economy. But, will yet more corporate tax cuts really promote job growth in America? As a share of GDP, the U.S. has the second lowest tax rate, behind only Iceland. This statistic flips on its head the often-repeated Republican charge that America has the second highest corporate tax rate in the world (which is only true on paper). In 2009, U.S. corporate taxes had fallen to only 1.3 percent of GDP, from 4 percent in 1965.

The Republican 2010 mid-term election messaging strategy was to falsely claim Obama's Stimulus Spending and Private Health Insurance Reform legislation is depressing the economy just as Roosevelt's New Deal reforms and programs caused the 1930's economy depression. Republicans continue to use this messaging strategy.

On several occasions after the Great Depression began, President Hoover admonished the public and those demanding the government provide economic relief that the nation had run out of money and that it would be irresponsible to borrow and engage in profligate spending. Via Brad DeLong, In his Budget Message for fiscal year 1933, President Hoover wrote:

In framing this Budget, I have proceeded on the basis that the estimates for 1933 should ask for only the minimum amounts which are absolutely essential for the operation of the Government under existing law, after making due allowance for continuing appropriations.

The appropriation estimates for 1933 reflect a drastic curtailment of the expenses of Federal activities in all directions where a consideration of the public welfare would permit it…. The welfare of the country demands that the financial integrity of the Federal Government be maintained…. We are now in a period where Federal finances will not permit of the assumption of any obligations which will enlarge the expenditures to be met from the ordinary receipts of the Government….

To those individuals or groups who normally would importune the Congress to enact measures in which they are interested, I wish to say that the most patriotic duty which they can perform at this time is to themselves refrain and to discourage others from seeking any increase in the drain upon public finances…

Over 80 years later, we hear Hoover's philosophy echoed in the words of Republicans threatening to economic calamity by not raising the debt limit, and President Obama himself. From the President’s weekly address:

Weekly Address: A Bipartisan Approach to Strengthening the Economy

For years, the government has spent more money than it takes in.

The result is a lot of debt on our nation’s credit card – debt that unless we act will weaken our economy, cause higher interest rates for families, and force us to scale back things like education and Medicare.

Now, folks in Washington like to blame one another for this problem. But the truth is, neither party is blameless. And both parties have a responsibility to do something about it. Every day, families are figuring out how stretch their paychecks – struggling to cut what they can’t afford so they can pay for what’s really important. It’s time for Washington to do the same thing. But for that to happen, it means that Democrats and Republicans have to work together. It means we need to put aside our differences to do what’s right for the country. Everyone is going to have to be willing to compromise. Otherwise, we’ll never get anything done.

That’s why we need a balanced approach to cutting the deficit. We need an approach that goes after waste in the budget and gets rid of pet projects that cost billions of dollars. We need an approach that makes some serious cuts to worthy programs – cuts I wouldn’t make under normal circumstances. And we need an approach that asks everybody to do their part.

The full transcript can be found on the White House website.

Appearing on Meet the Press, White House Chief of Staff, William Daley explained why the President is putting so much effort into trying to reach a grand bargain with John Boehner that would include trillions in spending cuts on worthwhile government programs, Mr. Daley essentially said that Obama was doing this not merely because we need to raise the debt limit, but because, “this deficit is a serious drag on the economy.”

The President is ignoring economic history by seeming to take up the Republican messaging on the debt load. A debt load created, perhaps on purpose, in the last decade when Republicans held the White House and both chambers of congress. [see: Starving the Government Beast] Just as Hoover and Republicans insisted from 1929 through 1933, President Obama now insists the Republican manufactured debt limit crisis requires that we take economically damaging steps that most reputable economists say will stall our already slow economic recovery, throw a further mass of people out of work, and undermining popular and beneficial social programs.

Further, unlike President Roosevelt, this Democratic President refuses to go on the messaging offensive and use his bully pulpit to offer as an alternative to Hooverite Republican deficit hysteria. The has not even mentioned the Congressional Progressive Caucus' proposed budget that balances the budget in just ten years without cutting Social Security and Medicare.

The President instead tells us we must yield to the Republican's manufactured messaging hysteria and " share in sacrifice" to cut beneficial social programs before we can have a meaningful conversation about the job creation. Except, only the jobless, lower economic classes and the elderly will share the sacrifice while billionaires and multinational corporations, who have have off-shored tens of millions of American jobs over the past decade, get yet more taxes cuts and tax subsidy payments.

Arthur M. Schlesinger Jr. writes about FDR's challenges to rescue America through a "new deal" approach to government in his book, "Crisis of the Old Order,"

"The economy FDR inherited [from Pres. Hoover] in March 1933, delivered to him by 12 years of Republican laissez-faire rule, was a shambles. The Dow Jones industrial average fell 90 percent from its 1929 peak. and gross domestic product fell by more than a quarter between 1929 and 1933. One out of every four American workers lacked a job, hunger marchers, pinched and bitter, were parading cold streets in New York and Chicago, only a small percentage of the unemployed received relief. Americans suffered a degree of long-term financial distress that is almost unimaginable, but Republicans denied that [the conservative philosophy of] laissez-faire [no government regulation or intervention] governance during the 1920's was in any way responsible for the economic crisis."
From the first days of Roosevelt's Administration in 1933 conservative Republicans have viewed FDR's New Deal programs to regulate banking and Wall Street and protect and empower working class citizens as an extreme threat to their interests. Republicans hated FDR's ideas for financial system regulatory oversight, the Social Security Administration, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Tennessee Valley Authority, the Triborough Bridge program and the Work Projects Administration (WPA) programs.

Nobel prize winning economist Paul Krugman says, "The New Deal wasn’t as successful in the short run as it was in the long run. And the reason for FDR’s limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious." FDR listened too much to conservatives of his day telling him to ease up on the reforms and safety-net programs. In James K. Galbraith’s book, "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too" Galbraith makes the case that,

"America is in the grip of an economic orthodoxy defined by Ronald Reagan and embraced ardently by conservatives. This orthodoxy rests on four pillars: 1) Cut taxes on the wealthy, 2) Reduce regulation, 3) Fear inflation above all else, and 4) Insist on free-floating currency rates. Yet mainstream economists have spent much of the past decade examining the results, and declaring them false; Supply-side stimulation is a mirage. In plain English, Galbraith shows that the Republican Party has been hijacked by political leaders who long since stopped caring if their message conforms to reality."

Assertions by Republicans that the New Deal rather than Republican conservative governance during the 1920's caused the 1930's depression is flatly rejected by economists and historians. New York Times economic writer Daniel Gross debunks these false assertions writing:

It was only with the passage of New Deal stimulus spending and effective financial oversight through the SEC, the FDIC, the FSLIC that the mechanisms of private capital began to kick back into gear. Don't take it from me. Take it from Federal Reserve Chairman Ben Bernanke, who wrote the following in Essays on the Great Depression: "Only with the New Deal's rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression."...

It is time that President Obama flatly reject modern day assertions of Republicans that America must return to Hoover economics!

Unemployment During The New Deal Era

By James K. Galbraith - January 21, 2009, 12:15PM

The view that the New Deal was too small and accomplished little, that only WWII ended the Depression, is very widely held. But it is not correct. It is based on a mis-reading of reconstructed unemployment statistics from that time, which treat the workers actually employed by the New Deal as though they were unemployed. Which they were not.

In fact, the New Deal accomplished a huge amount, both in specific construction projects and in providing employment to the American people.

I am going to turn over my microphone, not for the first time, to Marshall Auerback, and quote at great length from his paper entitled "A New New Deal." Those wishing to get the whole paper should contact Marshall at


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