August 19, 2011

Once upon a time, schools systems across the country required two or three years of history as a pre-requisite for graduation from high school. Later, it dropped to an average of one year.

When I was in high school, three years on the subject were required. Most students didn't particularly care for the classes and maybe one in eight read a few pages from the textbooks. Now, as my grandson tells me, U.S. History is a course taught in 11st grade only which begins with (are you ready for this?) the Surrender at Appomattox. For those of you who were exempted from history classes, the Appomattox surrender took place in 1865 as Confederate General Robert E. Lee waved the white flag before Union General Ulysses S. Grant to end the Civil War.

What happened to Pre-Civil War events? The first permanent settlement at Jamestown, VA? The landing of the Mayflower? The first Great Awakening? The Revolutionary War (and the events leading up to that)? The writing of the Declaration of Independence and the Constitution? The Industrial Revolution? And what about the events that lead up to the War Between The States?

OK, so the left has almost effectively wiped out the study of our Founding Fathers and the first fifteen presidents. In conjunction with the Teacher's Unions, revisionist educators and far-left, Founding Fathers bashing liberals, now choose texts which start with Reconstruction as if our country started with the adoption of the thirteenth, fourteenth and fifteenth amendments (instead of the Constitution and the Bill of Rights).

Add in a little "revisionist" history and you will learn that Woodrow Wilson was a war hero, Calvin Coolidge was a lazy dolt and FDR was the savior of the nation. FDR, you remember, was the one who prolonged the Great Depression with his never ending agenda of building a very large government and creating more public sector jobs per capita than all the succeeding presidents, Truman through G.W. Bush combined!

Now comes Barack Obama, who is on track (if he were re-elected and served a full eight years) to more than triple what FDR did.

President Obama’s New New Deal of massive government intervention was inspired by FDR’s New Deal, and both have been plagued by chronic high unemployment.

In her recent New York Times column, Christina Romer noted that there was some remarkable economic expansion during the New Deal period (1933-1940), but I doubt anybody disputes that. The key question is why, despite expansion, did high unemployment persist. It averaged 17 percent.

I suggest that New Deal unemployment and related economic difficulties were unintended consequences of New Deal policies. In particular:

1. Federal tax revenues more than tripled, from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and "excess profits" taxes all went up. FDR introduced an undistributed profits tax. Consumers had less money for spending, and private sector employers had less money for hiring.

2. New Deal programs, intended to benefit the middle class and the poor, were mainly paid for by the middle class and the poor. This was because the biggest source of federal revenue during the 1930s was the excise tax on beer, cigarettes, soda, chewing gum, radios and other cheap pleasures disproportionately enjoyed by middle class and poor people. Until 1936, the federal excise tax generated more revenue than the federal personal income tax and the federal corporate income tax combined. Not until 1942, amidst World War II, did the federal personal income tax become the biggest source of federal revenue.

3. FDR caused uncertainty that discouraged investors from taking the risks of funding growth and jobs. Frequent tax hikes (1933, 1934, 1935, 1936) made it harder for investors to estimate the net returns of possible investments. FDR added to the uncertainty by denouncing investors as "economic royalists," "economic dictators" and "privileged princes," which amounted to threatening investors. No surprise that private investment was at historically low levels during the New Deal era.

4. The New Deal channeled government spending away from the poorest people who lived in the South. Comparatively little New Deal spending went there. Most New Deal spending went to political "swing" states in the West and East, where incomes were more than 60% higher. The decision was probably made that allocating more federal dollars to the South wouldn’t yield more Democratic votes, since the South was already overwhelmingly Democratic.

5. The New Deal made it more expensive for employers to hire people. By enforcing above-market wages (National Industrial Recovery Act, Fair Labor Standards Act), introducing excise taxes on payrolls (Social Security Act) and promoting compulsory unionism (National Labor Relations Act), the New Deal increased the costs of employing people about 25% from 1933 to 1940 -- a major reason why double-digit private sector unemployment persisted throughout the New Deal era.

6. The New Deal paid farmers to destroy food when millions were hungry. FDR promoted higher food prices by paying farmers to plow under some 10 million acres of crops and destroy some 6 million farm animals. The food destruction program mainly enriched big farmers, since benefits were paid on a per acre basis. This policy related farm programs meant the approximately 100 million American consumers had to pay more for food.

7. The New Deal made everything more expensive during the Depression. Americans needed bargains, but FDR signed the National Industrial Recovery Act that authorized some 450 industrial cartel codes. They forced consumers to pay above-market prices for goods and services. Moreover, FDR banned discounting by signing the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937).

8. FDR disrupted companies employing millions. In 1938, he authorized an unprecedented barrage of antitrust lawsuits against about 150 employers and industries. FDR had big employers tied up in court, distracting them from the urgent task of creating growth and jobs. In some cases, employers were attacked for pursuing policies that had been mandated by the National Industrial Recovery Act.

“We have never made good on our promises,” FDR’s Treasury Secretary Henry Morgenthau despaired in May 1939, after acknowledging that the New Deal failed to banish chronic high unemployment.

Since Obama is a great admirer of FDR’s New Deal, we shouldn’t be surprised that the Bureau of Labor Statistics reported fewer people are employed now and more people are unemployed now than when Obama became president in January 2009.

We need very different policies, not more of the same.

You know, if they taught true history in the schools today, many students will have "aha" moments as they discover the our current President is merely repeating the failures of what another has done before him, only to a greater degree of failure.

We believe that the Constitution of the United States speaks for itself. There is no need to rewrite, change or reinterpret it to suit the fancies of special interest groups or protected classes.