In 1939, the Secretary of the Treasury under President Franklin D. Roosevelt, Henry Morgenthau, acknowledged after 10 years of economic depression and slightly fewer than that of the New Deal, “We have tried spending money. We are spending more than we have ever spent before and it does not work… After eight years of this Administration we have just as much unemployment as when we started . . . . And an enormous debt to boot!”
The numbers are enormous, so large that it is difficult comprehend their magnitude. An additional federal stimulus package that could top $1,000,000,000,000 – that’s a trillion – is now under consideration in Washington. The predominant thought is that government can spend us out of recession, but at what cost?
The Great Depression years, which were also the years of the New Deal, where not times of plenty. Unemployment remained stubbornly high ranging from 15% to 25%. Prices and wages were falling, not growing. The response was more government programs which crowded out private enterprise and elongated the pain.
The New Deal resulted in more government, higher taxes, and less Liberty. It hurt businesses, especially small businesses, stifled innovation, drove competition from the marketplace, dictated how to buy and sell chickens, and wreaked havoc with our monetary policy with global consequences.
History in par, repeats itself and today America looks at the black and white images of the Great Depression/New Deal Era and I have to ask – Why would we want to go back?
The New Deal Era saw the top marginal tax rates go from 25% to 79% with corporate income taxes increasing from 12% to 24% (today they are 35% - the highest in the world). There were also excess profits taxes – sound familiar? – and undistributed profits taxes, taxes on dividends and new payroll taxes, aka, Social Security.
The New Deal simply reallocated money from the private sector to the public sector. The New Deal sought to create “work”, instead of family supporting jobs that create “wealth”. It effectively took resources from one part of our economy to redistribute them to another leading to a planned economy – an economy where oligarchs rule and the citizenry suffers. America is a land of opportunity, not a land of subsistence.
As it stands today, the federal stimulus package has about $550 billion in new spending and $275 billion in tax relief. This spending includes $79 billion to bailout states that made bad decisions (Missouri was not one of them), $87 billion to states to pay for Medicaid – a program they can’t afford anyway, only $30 billion for highway infrastructure, and billions more for a cadre of government expansions.
We know what works. Broad based permanent tax relief works. Money should stay with the people who earn it. It inspires them to innovate further, take more business risks, creates more jobs which, in turn, creates more wealth.
Doesn’t the Preamble of our U.S. Constitution begin “We the People” and sets out to define why we “ordain”-ed and “establish”-ed the Constitution stating among those reasons that it was to “…secure the blessings of liberty to ourselves and our posterity”? Or has Washington relegated you and me to become Sumner’s “Forgotten Man”?
Shouldn’t Congress, the Federal Reserve, and the Executive branch seek solutions to empower individual liberty, instead of dictating individual actions? Shouldn’t they leverage American’s ingenuity and rugged individualism to help solve our problems, instead of harnessing our insecurity to fundamentally alter each American’s relationship with the State?
As we move forward in 2009, we must be mindful that 1939 was not a pinnacle of successes for government “solutions”. No government program can replace, or replicate, the American will to succeed. Government does not innovate, people do, government does not create jobs, people do, unshackle them from repressive tax policies and burdensome regulations and we will succeed.
The resiliency of the U.S. Constitution and the American people who are hard working, honest, and devoted to their families and communities will ultimately bring us out of these economic times in spite of what takes place in Washington, DC. Where Washington has faith in itself, I have faith in the American people, in other words, the Forgotten Man lest we forget that, “…he works, he votes, generally he prays – but he always pays…”