Although economy is showing strong signs of growth and recovery, the Republican candidates are still focused on jobs and economy. The essence of their argument is essentially that the country is heading to a wrong direction and Barack Obama’s economic policies are not and will not turn around the economy. To turn around the economy, we must cut spending and taxes and make government small. Welfare programs should be drastically slashed down, government regulation of businesses should be reduced. They believe that this will spur a growth in business activity, resulting into a better economy and job growth.
Let us analyze this extremely ideological argument with a historical perspective and run a reality test on it. I am calling it ideological because Republicans and conservative economists, politicians and media pundits have maintained this arguments over centuries.
Last time we were in a mess like this was great depression. The unemployment rate was 25% and Hooversvilles, shady camps for unemployed and homeless, named after the Republican president at that Time, Herbert Hoover, were spread all across the country. This was the time when Franklin D. Roosevelt, a Democratic president took office. The economic reforms he placed in, are known as The New Deal. These reforms were mainly put in place between 1933 and 1936, in the middle of worst economic depression in U.S. history. The three major parts of his reforms are remembered as three Rs, relief, reform and recovery. They were aimed at providing relief to poor and unemployed, recovery of economy and reforms to prevent economic depressions in future. The impact of his reforms was so huge that Democrats won seven out of nine presidential runs between 1933 and 1969 and Democratic party became the leading party of United States. These are the major economic, financial and social initiatives taken by Roosevelt administration to bring economy back to it’s track:
1. Providing help to diverse groups like banking, railroads, industry and farming.
2. Wagner Act to promote labor unions.
3. Work Progress Administration (WPA) relief program.
4. Social Security Act.
5. New programs to help tenant farmers and migrant workers.
6. Creation of United States Housing Authority.
7. Formation of Farm Security Administration.
8. Fair Labor Standards Act of 1938, setting up the maximum hours and minimum wage.
These reforms divided the U.S. political arena, forever, into Liberals, who support these reforms and conservatives, who oppose these reforms. These reforms were so popular that despite the fierce opposition and criticism of these reforms from conservatives, even the Republican presidents like Eisenhower and Nixon, left these reforms alone and these remained by and far intact until 1974.
In the mean time, U.S. legal immigration policy kept getting more and more complicated and the legal immigration process kept getting more and more prolonged, cumbersome and expensive, discouraging legal immigration and encouraging illegal immigration. This resulted into a rapidly mounting influence of illegal immigrants on U.S. economy, finance, business and social lives. Due to this Democratic Party, which traditionally enjoyed the support of white south, lost it’s support there and it became a permanent strong base for Republican Party.
Several new deal programs are still intact and mostly popular including Federal Deposit Insurance Corporation (FDIC), Federal Crop Insurance Corporation (FCIC), Federal Housing Administration (FHA), Tennessee Valley Authority (TVA), Social Security Administration (SSA) and Securities And Exchange Commission (SEC).
Between 1929 and 1933, the unemployment jumped from 4% to 25%, manufacturing output decreased by one-third, prices fell by 20%, making it impossible for businesses to pay their debts. Virtually all banks were closed by the time Roosevelt took office on March 4 1933. Farm incomes had fallen by 50%. 844.000 non-farm mortgages were foreclosed between 1929 and 1933, out of a total of 5 million. Everyone was talking about revolution and anarchy. His reforms were so effective that U.S. GDP recorded the fastest growth rates in history, during his first term. It is now realized that Roosevelt’s deal did not only revived U.S. economy, it helped countries around the world to regain prosperity.
Two major arguments were invented by conservative economists, politicians and media pundits to discredit and downplay the Roosevelt’s success:
First was, war helps economies. It was not Roosevelt’s policies that revived economy. But, it was world war two that helped recovering the economy. Ironically, every single war we have fought, since then, has proved it entirely wrong. Whether it was Korean war, Vietnam war, Iraq war or Afghanistan war, none of these helped economy. Rather then that, all of these ditched our economy and caused serious financial problems. Why Roosevelt and World war Two are an exception to the rule? Just because, he was a liberal and a Democrat?
The other invented argument was, depressions, recessions and economic and financial downturns have nothing to do with policies. They just integral parts of unavoidable economic cycle. As ridiculous as it sounds, then, why would you even say that slow recovery is Obama’s fault? As per this notion, economy will recover when it enters the recovery phase. The most funny part of this assumption is that Republicans almost always get the bad part of cycle and Democrats almost always get the good part of cycle. They said this about Roosevelt and Clinton and I bet they will say this about Obama, if he is successful. So, if a Democrat fails, it is due to bad policies. But, if he succeeds it is due to economic cycle. On the other hand, if a Republican fails, it was just the bad phase of economic cycle. But, if he succeeds, even temporarily, like Reagan, it is due to his good policies. What a convenience? Are Democrats really God’s chosen people?
When U.S. economic and financial policies were focusing on strengthening of Middle class wages and employment, and the upward movement of lower class into the professionally oriented middle class, we build the biggest and strongest middle class and most prosperous society in human history. On the other hand since 1978, when we adopted the Reagan’s trickle down economy, financial crashes and crises, and recessions have become a routine, middle class is disappearing, poverty rates are rising, disparity between rich and poor is increasing, standards of living are falling, and we are losing our number one position in wealth and strength of economy.
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