Is history repeating itself this quickly in President Barack Obama’s first in the White House? He has been accused by some economists of making the same mistakes policymakers in the US made in the Great Depression, which followed the stock market crash of 1929. Sadly, many of these economists have said that his policies even have the potential to consign the United States to a similar fate as Argentina, which suffered a shocking slide from first to Third World status last century. I won’t dance around the issues confronting this country today, though I voted for Barack Obama in the presidential election, I must agree that there are some troubling similarities between POTUS and those in the 1930s that sent the US and the world into a downward spiral into the worst economic collapse in history. But it isn’t all his fault. He hasn’t been in office long enough, but what he does now will have a lasting effect for generations to come. His predecessor George W. Bush set the wheels in motion that have come off the bus on Obama’s watch.
A new pamphlet published by the Institute of Economic Affairs are very critical of President Obama and his plans for the economy.
In particular, the authors, economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, claim that the White House’s plans to pour hundreds of billions of dollars of cash into the economy will undermine it in the long run. They say that by employing deficit spending and increased state intervention President Obama will ultimately hamper the long-term growth potential of the US economy and may risk delaying full economic recovery by several years.
The study represents a challenge to the widely held view that Keynesian fiscal policies helped the US recover from the Depression which started in the early 1930s. The authors say: “[Franklin D Roosevelt's] interventionist policies and draconian tax increases delayed full economic recovery by several years by exacerbating a climate of pessimistic expectations that drove down private capital formation and household consumption to unprecedented lows.”
Although the authors support the Federal Reserve’s moves to slash interest rates to just above zero and embark on quantitative easing, pumping cash directly into the system, they warn that greater intervention could set the US back further. Rowley says: “It is also not impossible that the US will experience the kind of economic collapse from first to Third World status experienced by Argentina under the national-socialist governance of Juan Peron.”
The paper, which recommends that the US return to a more laissez-faire economic system rather than intervening further in activity, has been endorsed by Nobel laureate James Buchanan, who said: “We have learned some things from comparable experiences of the 1930s’ Great Depression, perhaps enough to reduce the severity of the current contraction. But we have made no progress toward putting limits on political leaders, who act out their natural proclivities without any basic understanding of what makes capitalism work.” Source: UK Telegraph
It will be rather interesting to see how this will play out. As far as the right wing is concerned, no matter what the president does will be good enough for them, though they did nothing when President George W. Bush started the process of sending this country on a downward spiral with an unpopular and unprovoked Iraqi war. They gave him two terms to send this country on a dangerous course. What is troubling with the new president is that he is continuing some of the very same policies of his predecessor and he is being pigeon-holed for no other reason than the color of his skin. I am not into making predictions, but if the Democrats in Congress don’t get their act together and the president continues to be spineless, then this historic presidency will be a one term phenomenon. An experiment of sorts, if you will.
Photo credit: Wall Street collapse in 1929, BBC