THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Volume XII, Issue # 181, September 5, 2010
Dr. Almon Leroy Way, Jr., Editor
Government Committed to & Acting in Accord with Conservative Principles
Ensures a Nation's Strength, Progress, & Prosperity
FEELS LIKE A DEPRESSION TO ME
By Alan Caruba
THE CURRENT CONDITION OF THE AMERICAN ECONOMY: THE U.S.A. EXPERIENCING AN ECONOMIC DEPRESSION,
NOT AN ECONOMIC RECOVERY -- THE LIKELY CONSEQUENCE OF ADOPTION & IMPLEMENTATION OF OBAMA'S ECONOMIC
& FISCAL POLICY AGENDA -- THE HIGHLY PROBABLE IMPACT OF INCREASED TAXES ON THE ECONOMY -- THE NEED FOR
TAX "HOLIDAYS" & FOR KEEPING IN PLACE THE BUSH TAX CUTS -- THE NEED TO RESTORE THE BALANCE SHEETS,
FINANCIAL FIRMS RAISING MORE CAPITAL & CONSUMERS & BUSINESSES SAVING MORE OF THEIR REDUCED INCOMES
FULL STORY:
Between the time that George Washington took the first Oath of Office as President and when Barack Obama did, 1789
to 2009, the United States government had borrowed nine trillion dollars. Since Obama took office, it has borrowed or
imposed nearly three trillion more debt. Tell me he is not deliberately seeking to bankrupt the nation.
In an August 28, 2010, editorial, Wall Street Journal noted:
“To no one’s surprise, except Vice President Joe
Biden’s, second quarter economic growth was
revised down yesterday to 1.6% from the prior
estimate of growth of 2.4%, which was down
from first quarter growth of 3.7%, which was
down from the 2009 fourth quarter’s 5%.
Economic recoveries are supposed to go in the
other direction.”
I was born during the Great Depression of the 1930s and have lived long enough now to find myself in a new one.
There are similarities between the two, but the first one led to the creation of a variety of government regulatory
entities and programs that should have avoided or at least were expected put the brakes on the current one.
At the heart of the current depression is the government’s intrusion into the nation’s housing market via Fannie Mae
and Freddie Mac, government “entities” that functioned to purchase the mortgages provided by banks and lending
companies that, by law, were required to make “sub-prime” bad loans. They have since been seized and billions
remain at risk, until such time as they are removed from distorting the housing market.
The mortgages were then bundled and resold to banking and investment firms. When the housing “bubble” failed, it
threatened the financial structure of the nation. It was a classic asset bubble as people used their homes as piggy
banks, taking second mortgages to pay for lifestyles that often did not include saving money for a rainy day. If this
sounds like infantile behavior, it is.
Despite the multi-billion dollar bank bailouts initiated in 2008 at the end of the second Bush term and “stimulus”
bailouts continued by the Obama administration, the recession has grown longer and there is talk of a “second
recession.” This is like saying the family drunk or druggie has a “consumption problem.”
Despite zero interest rates for banks borrowing from the Federal Reserve, justifiable fears have slowed lending.
Consumers have held off spending. Home sales reached a 15-year low in June, 2010.
If the Obama administration and Congress allow the Bush tax cuts to expire, it will deepen the current crisis. In 1932,
President Herbert Hoover persuaded Congress to raise taxes, and we know this led to a decade of a severe
economic depression.
Poor monetary policy drove the Great Depression and is being repeated in this one. Government does not create
jobs. Its highest priority is to protect the U.S. dollar so that investment and growth can be maintained.
E. Ralph Hostetter, Publisher of American Farm Publications, recently noted that “The federal government has been
in control of the U.S. dollar since 1913, when the Federal Reserve Banking System was established.”
Hostetter said:
“The 130 years prior to 1913, going back to 1783, was
the longest period of currency stability in U.S. history.
Since the dollar came under control of the Federal
Reserve Bank in 1913, it has lost 90 percent of its
original value. Eighty percent of that loss has occurred
since President Richard Nixon took the United States
off the gold standard in 1971.”
As Gerald P. O’Driscall, Jr., recently wrote in a Wall Street Journal essay,
“The solution lies in restoring balance sheets. For
financial firms that means raising capital. For consumers
and businesses alike, that means saving more of their
reduced incomes.”
O'Driscall warned that “Low interest rates slow the process…by keeping asset prices artificially inflated.” The current
Federal Reserve interest rate is zero.
The entire governmental and economic system depends on trust, and the Obama administration has squandered that
by constantly telling Americans that things were getting better when it was obvious to everyone they were not.
Claims that “shovel ready” projects would turn around the economy were false. Only 3.3% of the $814 billion stimulus
was allocated to the Federal Highway Administration for highway and bridge projects. The bulk of the funds expended
were directed at retaining civil service jobs of teachers and funds for police and firefighters. Union contracts, fat with
pension and health benefits, have bankrupted many states of the American federal union.
In early August, 2010, first-time claims for unemployment hit a nine-month high. Since the stimulus passed, 2.6 million
Americans have lost their jobs and 1.2 million have given up trying to find a new one. Despite the 9.6% figure the
government cites, the actual levels of unemployment are far closer to 20%.
During the Great Depression, unemployment was 25% and wages fell 42%.
The nation has reached a point where well-respected economists are now openly using the “Depression” word. David
Rosenberg, writing in his daily briefing to investors, warned against interpreting the occasional blips of Gross Domestic
Product and stock market gains as signs of recovery. Other economists from major investment and banking institutions
are reducing their GDP predictions for 2010 to an anemic range of 1.5% to 2%.
The United States is not in “a summer of recovery” and is not likely to see any recovery, if taxes increase. Massive
“reform” of Medicare will drive up insurance and healthcare costs. Massive infusions of taxpayer money to keep states
afloat to pay for Medicaid and other mandated costs are temporary at best.
Social Security, insolvent because successive Congresses have raped its socalled trust fund, will require a major
overhaul to protect those who have paid into it and free new generations from its requirements.
Tax “holidays” are needed to allow businesses and consumers to keep their money, instead of handing it over to a
profligate federal government and to states that have failed to exercise fiscal sanity.
Get used to the word “Depression.” That’s what we’re in, and the first step to get out of it will be to send people to
Congress who will address these problems.
© Alan Caruba, 2010
LINKS TO RELATED TOPICS:
Political Economy -- Philosophies, Systems, & Public Policies:
Government, the Economy, & Economic Prosperity
Fiscal Policy: Taxation & Government Spending
Alan Caruba writes a daily post at http://factsnotfantasy.blogspot.com. An author, commentator and business and science writer,
he is the Founder of the National Anxiety Center, a clearinghouse for information about "scare campaigns" designed to influence
public opinion and public policy.
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THE PROGRESSIVE CONSERVATIVE, USA
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Dr. Almon Leroy Way, Jr., Editor
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Conservative Government Ensures a Nation's Strength, Progress, & Prosperity