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Obama ignores history only to repeat it

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Barack Hussein Obama needs to take a lesson from history. After all, those who ignore history are bound to repeat it; at least that’s what a philosopher once said.

Look back to the 1930s when the Great Depression was dominating economic news. It did so because Franklin Roosevelt’s New Deal programs failed to create jobs. In May 1939, when unemployment stood at 20.7 percent Secretary of the Treasury Henry Morgenthau exclaimed: “We have tried spending money. We are spending more than we have ever spent and it does not work.” He concluded, “I say after eight years of this administration we have just as much unemployment as when we started … And an enormous debt to boot.”

Why did Roosevelt’s New Deal fail so miserably to deliver on jobs and economic recovery? One real problem was that federal spending can’t create jobs; it merely transfers wealth from taxpayers to central planners. Worse yet, such things are usually driven by politics. FDR’s certainly was and so is Barack Obama’s.

FDR’s program for industry, the National Recovery Act (NRA), set the prices for thousands of products and merchants who gave discounts to customers were subject to fines and imprisonment. To fix a pair of pants the price was 40 cents. 

One merchant gave a five-cent discount because his shop was far from the main shopping areas and he felt he needed a discount to draw customers and stay in business. 

The merchant insisted the central planners couldn’t tell him how to run his business but found out differently when he want to jail for charging his customers a nickel less. No one in FDR’s administration ever explained how jailing merchants for giving discounts either created jobs or made American industry more competitive.

The Agricultural Adjustment Act (AAA) granted farmers a preposterous deal: get paid not to produce on up to one-fourth of their land. Farmers could get instant cash and because less land was being cultivated crop prices would go up. Rising food prices made it increasingly difficult for city-dwellers to put food on their tables, hence the farmer’s gain was the city-dwellers loss. The AAA may have cost more jobs than it created.

Most of FDR’s New Deal programs were pure politics. They targeted federal money to lure specific voting groups into the Democrat Party. FDR admitted Social Security taxes “were never a problem of economics. They are politics all the way through.” Older voters were to be tied to the Democratic Party in perpetuity.

FDR’s Works Progress Administration (WPA), a $4.8 billion program to build roads, bridges, and other infrastructure projects was targeted mostly to favored Democrat congressmen. One Democrat, James Doherty of New Hampshire, stated, “that to the victor belongs the spoils and that Democrats should be holding most of these (WPA) positions.”

So, who footed the bill for FDR’s federal campaign fund? The taxpayers, of course. FDR gained revenue from taxes on cigarettes, alcohol, telephone calls, telegrams, cars, tires and bank checks. He also increased taxes on incomes. When he was elected in 1932, only one in 20 American families paid the income tax and the top rate was 25 percent. In 1945, at the time of his death almost two in three American families paid income taxes and the top rate was 94% on all income over $200,000.

Is it any wonder the Great Depression persisted when entrepreneurs and businessmen had no incentive to create new businesses or expand existing ones?

The same comments could apply to our current economic situation. When government makes the business environment so unpredictable with the possibility of higher taxes and more regulation why then should the job-creators in our economy have any incentive to do what they do best? Like it or not businesses are our economic engine, they are what employ people, feed their families, provide medical and worker’s compensation insurance, and in the absence of the proper motivation why should they risk assets or capital during uncertain times?

Barack Obama is experiencing two of FDR’s problems: expensive new government programs that don’t work, and discouraged entrepreneurs saddled with much of the bill.

It’s clearly a formula for failure.

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