The Obama administration has encountered another pothole on the road to re-election. CBS is reporting that the national debt taken on in the three years and two months of the Obama administration now exceeds the debt added during the Bush administration’s entire eight years in office: $4.899 trillion for Bush, $4.939 for Obama.
In other words, Bush ran up the tab at the rate of $51 billion a month, while Obama is running it up at the rate of $137 billion a month, 2.6 times as fast. The debt now stands at $15.566 trillion, over 100 percent of GDP for the first time since the immediate aftermath of World War II. Obama’s own budget projections show no end in sight: $16.3 trillion by the end of 2012, $17.5 in 2013, $20 trillion by the end of Obama’s second term if, heaven forefend, he wins one. That would mean an increase of 87 percent in the total debt over Obama’s two terms.
Obama, to be sure, faced a tough economic situation when he was inaugurated in January 2009. The economy was shrinking rapidly, the stock market was down by nearly fifty percent, and unemployment was headed towards 10.2 percent. Deficit spending is inescapable in those circumstances and, in fact, desirable. And Obama has rarely missed a chance to let us know that he faced the worst economy since the Great Depression, although as Peter Wehner has pointed out, that is, to say the least, an arguable proposition.
But not even Obama argues that he faced a worse situation than Franklin Roosevelt faced in March 1933. The GDP had fallen by half, unemployment was above 25 percent, and the stock market was down not by 50 percent but by 90 percent. Farms were being foreclosed at the rate of 20,000 a month. Banks were entirely closed in 38 states and in only very limited operation in the other ten. Hoovervilles dotted the landscape of American cities.
So how did FDR do in his first three years? The debt increased in those years by 73 percent, but from a very low base (only 33.6 percent of GDP). While Obama’s debt/GDP ratio has increased 33 percentage points, FDR’s increased only 7 percentage points in the same time frame. In his first eight years, as the Great Depression lingered on and on, FDR presided over an increase in the debt of 124 percent and saw the debt rise as a percentage of GDP from 33.6 percent to 50.85 percent. As a percentage of GDP, in other words, Obama has increased the national debt more in three years of moderate economic troubles than FDR did in eight years of economic catastrophe.
Not much of a record to run on, is it?
Part I n nIn the mind of GOP/right-wing, the Depression was a set-back that would have righted itself eventually. According to these revisionists, if the economy were left alone, recovery would have eventually happened As Herbert Hoover said, “Prosperity is just around the corner.” Not only did recovery not come in the forty months of the Hoover Administration that followed the late October1929, stock market crash, but Hoover, in a campaign speech almost three years later to the day, On October 31, 1932, predicted with a Roosevelt victory, “The grass will grow in the streets of a hundred cities.” Well the grass did not grow in the 100 cities under the New Deal! nAs HW Brand has written in his new book on FDR, Traitor to his Class, “Herbert Hoover hated Roosevelt during the campaign, and he hated him even more after the election,” He never really understood what FDR’s landslide victory really meant. He even thought that the slight up-tick in the economy right before the election was a sign that his “patient policies has all but ended the depression, only for the economy to swoon again as a result of Roosevelt’s victory, which frightened investors and made them withdraw from the marketplace.” As Brand, wrote, “Like many other counterfactual claims, Hoover’s couldn’t be disproved.” Hoover finally came to his senses decades later. Regarding his limitations on his perspective, Hoover said, “my education was that of an engineer, and I do not know all the nuances of economics.” n nBefore the Crash of 1929, more wealth was in the hands of fewer people then any other period in our long history. Unrestricted capitalism led to wild speculation in the market places, an eventual credit crunch, and since we didn't believe in "safety nets" or entitlements, the ensuing collapse devastated our social order. In Arthur M. Schlesinger Junior’s great works, on that period, which include The Crisis of the Old Order, and the Coming of the New Deal much of this history is accurately reported and eloquently described. As in 1929, tax policies from Reagan on, with the exception of the eight prosperous years of the Clinton Administration, favored the rich, have shrunk the middle class, and have concentrated more wealth in fewer hands than at any time since the crash. n nThe panic and collapse of the economy, brought on by the crash resulted in a massive deflation that President Herbert Hoover called the “Depression.” The New Deal, authored by Franklin D. Roosevelt, stopped the bleeding, but because of the severity of the collapse it could never resurrect the artificially inflated, halcyon days of the 1920’s. Of course present day business -oriented “talking heads” like to say that the New Deal prolonged the slump. Of course they have conveniently forgotten that the 1920’s made the “Techie Bubble” of 2000 look like a walk in the park. n nRichard J. Garfunkel nHost of the Advocates nWVOX 1460 am radio
Part II n nThe size of the economic cataclysm is almost hard to perceive. Even though the Department of Commerce listed unemployment at 25% many estimates believe it ranged as high as 36% and the most likely number is probably a bit above 30%. The amount of new capital financing had declined 95% since 1929. The amount of new building contracts had declined by at least 75% in those same years. The Dow Jones Average was off 90% since its high in late 1929, and there were 5000 bank closings since the crash, which eliminated nine million, pre FDIC uninsured accounts. US Steel, which had almost a quarter of a million full-time employees in 1929, now employed no one but executives. Schools in major cities and some states virtually shut down for lack of money. In the first half of 1933, 250,000 homes were taken over by the banks, and over 1000 families per day were cast homeless into the streets. This is what Franklin Roosevelt inherited on March 4, 1933. nBy 1933, business failures had risen almost 50% from the end of 1928 (109 to 154 per hundred thousand). From 1933 to 1935, only two years they dropped to almost 40% from the 1928 levels (62 to 109 per thousand). Unemployment rose from 3% in 1929 to 25% in 1933. From 1933 through 1937 unemployment dropped 44% to 14%. This figure did not include over 2 million workers employed by the WPA. As to the Gross National Product, by 1933 it had dropped from $103.6 billion in 1929 to $56.4 billion in 1933. This represented a loss of 44% of the total goods and services of the country in 3 years. In FDR’s first administration it rose approximately 64% to $92 billion. By 1940, with defense spending still only 22 % of the federal budget (from 1928 through1932, defense spending represented an average of 38% of the US Budget), and 2% of the GNP, the GNP had risen to $101.4 billion or 4% higher than 1928! Because of the New Deal, hourly wages which had dropped from 58 cents per hour in 1928 to 49 cents for hour in 1933 (a drop of approximately 25%) rose 74 cents per hour in 1940. This represented a strong recovery of 28% from 1928. These figures are undeniable. n nFDR took bold decisive action in the Hundred Days, and fifteen pieces of major legislation passed. The hemorrhaging of the banking crisis ceased, stability was brought back to the market places, and the NRA which came out of the National Recovery Act was the first of many regulatory efforts which would eventually include, the SEC, the AAA, the CCC, the PWA and the WPA. n nThe argument over debt is specious. When there is a national emergency: The Crash, the Great Depression, WWII, The Cold War, and the Great Recession, we need spending, and ignoring revenue enhancement from the 1% is ridiculous. The 1%, represented by Paul Ryan and his acolytes, wants to exempt the top 400 billionaires and the 1% from helping out. They are paying the lowest taxes in American history, and the "debt issue" is on their backs, not the elderly, the shrinking Middle Class and the poor. n nRichard J. Garfunkel nHost of The Advocates nWVOX 1460 AM Radio n
Mr Garfunkel is either unaware, or studiously avoids the fact that after the 1929 crash Hoover increased spending and we went from a surplus to deficits of .5%, 4%, and 4.5% of GDP. Also, FDR's campaign promised to reduce government spending and the deficit. After the election, FDR did the opposite and increased spending. n nFunny, that last bit sounds familiar, something about cutting the deficit in half during the campaign, and then more than doubling it by increasing spending after the election. n nAnyway, I'm pretty sure that increasing spending and debt did not end the depression. And even if deficit spending had been the cause of the ecomomic turn around, I don't see how we can afford 10 years of it. (3 years from Hoover, 7 for FDR) Sustained economic growth began with the spending cuts that followed WWII.
Michael I'm also pretty sure he's unaware that there were tiny factors like: n1) most of the industrialized worlds productive capacity being destroyed except for the US n2) the entire continent of europe needing to be rebuilt n3) Family formation at a pace never seen before and not likely to be seen again n4) the corresponding demand for consumer goods and housing n5)economic activity spurred on further by the advancements in science and medicine that came from the war n