Trump Is Following The Failed Strategy Of Herbert Hoover

Donald Trump is not a student of history. Perhaps that is why he has chosen to follow the failed example set by Herbert Hoover as the U.S. slid into the Great Depression.

Instead of taking action to save Americans from another depression (as unemployment numbers start to rival those of the Great Depression), he has chosen to follow failed GOP policies of the past.

The result in 1930 led the country to disaster, and Trump's action (or lack of action) will likely also result in economic disaster.

Here's what Jamelle Bouie had to say in The New York Times:

Additional economic assistance is the only thing that can keep the U.S. economy from falling into a second Great Depression, and with interest rates near zero, the government has all the fiscal capacity it needs to borrow the trillions necessary to relieve the pain. But Congress, or rather congressional Republicans, won’t budge. After backing the $2 trillion CARES Act in March, they believe they’ve done enough for now. . . .

And President Trump appears unmoved by the prospect of economic devastation, except insofar as it affects his chances for re-election. The White House halted talks with Congress over any further stimulus.

All of this — the passivity, the indifference, the refusal to embrace the tools at hand for ideological reasons — is reminiscent of Herbert Hoover, who also presided over a catastrophic economic downturn, the mismanagement of which plunged the United States into a crisis that tore at the seams of American society.

Popular memory of the Great Depression is that Hoover did little to avert catastrophe or prevent suffering, a view captured at the time by Senator Robert Wagner of New York, who claimed the president had “clung to the timeworn Republican policy: to do nothing and when the pressure becomes irresistible to do as little as possible.”. . .

Hoover was a staunch conservative, who opposed government intervention on principle. The historian Joan Hoff Wilson reports that after reluctantly backing a modest public works and relief program (“$2 billion for public works and $300 million for direct loans to the states ‘to be used in furnishing relief and work relief to needy and distressed people in relieving the hardships resulting from unemployment.’”), Hoover told a friendthat all such emergency legislation had to be repealed to prevent the country from being “plunged into socialism and collectivism with its destruction of human liberty which pursuance of those measures are bringing.”

The American people, Hoover insisted, didn’t need aid. They needed confidence. The day after the stock market crash, he told reporters that “The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis.” The next month, he declared that “Any lack of confidence in the economic future or basic strength of business in the United States is foolish. Our national capacity for hard work and intelligent cooperation is ample guarantee of the future.”

The next year, as joblessness began to rise into double digits, Hoover would insist that “The income of a large part of our people is not reduced by the depression” but “is affected by unnecessary fears and pessimism.” And on the anniversary of the stock market crash, the historian Eric Rauchway points out, Hoover would reject calls to take action against unemployment. “No special session is necessary to deal with employment,” he said. “The sense of voluntary organization and community spirit in the American people have not vanished.”

By 1931, Hoover was telling reporters that “We cannot legislate ourselves out of a world economic depression” and rebuking Congress for its attempts to pass relief. “We cannot thus squander ourselves into prosperity,” he said. . . .

Hoover was not without tools; he could have taken steps to cushion the blow of the crash and relieve suffering for millions of Americans. But he refused, captive to a rigid, unyielding view of the world around him.

What was true then is true now. The Republican Party seems ready to let the country descend into depression rather than do what’s needed, from aid to families to help for states, to sustain the economy as the country struggles against a deadly disease. The plan, such that it exists, is to “reopen” the economy — justified with Hoover-esque rhetoric about the “American way of life” — and immunize employers against legal action should their employees fall ill.

It would be nearly four years after the stock market crash in 1929 before the federal government, under Roosevelt’s administration, began to do anything to meaningfully alleviate the pain of the Great Depression. By then, nearly a quarter of working Americans were unemployed and tens of millions of people struggled to find food and shelter.

Not only are we not that far gone, but we have a chance to remove our modern-day Hoovers before they can lead the country to further disaster. With luck, we’ll make good on that opportunity in November.

Are GOP Policies Leading Us Toward A New Depression ?

In the past, Republican policies (favoring the rich and corporations) created a situation where the gap in wealth and income between the rich and the rest of the country was enormous. A stock market crash in 1929 triggered the Great Depression (which was inevitable because of that wealth/income gap).

Today's Republicans have recreated that wealth and income gap, and it is growing even larger than it was prior to the Great Depression. The policies, deregulation of financial institutions and huge tax cuts for corporations and the rich, have also had another effect. It has created an enormous debt -- both government and private debt.

Some economists believe it is this ballooning debt that will trigger a new depression -- and it could happen before Trump's presidential term ends. Consider this part of a thought-provoking article by John Aldan Byrne in The New York Post:

Ten years ago, it was too-easy credit that brought financial markets to their knees. Today, it could be a global debt of $247 trillion that causes the next crash.

After a decade of escalating US household debt brought on by low wages and the national debt more than doubling over the same time frame, to $21 trillion, debt could soon put the brakes on this economic recovery, analysts warn.

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,” said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

The economic stats:

• US household debt of $13.3 trillion now exceeds the 2008 peak. That’s due in part to mortgage lending, which is hovering near its decade-ago level of $9 trillion-plus.
• Student loans outstanding have skyrocketed from $611 billion in 2008 to around $1.5 trillion today.
• Auto loans, at nearly $1.25 trillion, have exceeded the 2008 total, while credit card balances are just as high now as before the Great Recession.
• Meanwhile, global debt — a result of central bankers flooding economies with cheap money to lift them out of a funk — is now $247 trillion, up from $177 trillion in 2008. That is close to 2½ times the size of the global economy.

“We won’t be able to call it a recession, it’s going to be worse than the Great Depression,” said economic commentator Peter Schiff, forecasting a major economic downturn as early as the tail end of the Trump presidency’s first term. “The US economy is in so much worse shape than it was a decade ago.”

Economic theorists say insurmountable debt is the big kahuna. The huge sums today certainly fed the boom times. But since it must eventually be repaid, the tipping point will come when a wave of defaults by overwhelmed borrowers — potentially squeezed by rising interest rates — leads to a widespread reduction in spending and incomes, economists explain.

Republicans Are Setting Us Up For An Economic Disaster

The chart above shows the inequality in the United States from 1913 through 2013. Note that the highest inequality was in 1929, when the richest 1% had 23.9% of the nation's total income. That resulted in the greatest economic disaster to ever hit this country -- the Great Depression.

Democrats changed the economic ground rules, and that resulted in a much more equal distribution of income. But the Republicans regained enormous power in 1980, and used their power to re-institue the old "trickle-down" theory of economics (the idea that giving more to the rich will benefit everyone).

That didn't work, and by 2013, the richest 1% had grown their share of national income from 8.9% to 22%. And it has grown even larger since 2013 (because the Republicans refuse to abandon their failed trickle-down economics). We are now back at the 1929 level.

But it gets even worse. The new tax law passed by the Republicans gives most of the tax cuts to the rich. That will only increase the inequality of income in this country -- giving the rich an ever-growing share of income. It will turn the nation into a country of haves and have-nots, and that will kill our democracy.

It is also setting us up for another economic disaster like the one that happened in 1929. It may be next year or several years from now, but it will come if we don't correct the growing inequality of income (and wealth) in the United States.

Wealth Gap In The U.S. Is Still Growing

Back in 2007, this nation was thrown into a serious recession. While that recession was triggered by the malfeasance and incompetence of the giant Wall Street firms, the root cause of it was the huge gap in wealth between the richest people in America and the rest of America ( just as the Great Depression was rooted in the same kind of vast inequality of wealth).

Economists now tell us that the recession is over. The stock market is booming and corporate profits are at record levels. But the truth is that the recession is only over for the rich and the corporations, while the vast bulk of Americans are still feeling the effects of that recession -- because of huge unemployment, stagnant wages, deteriorating buying power of minimum (and stagnant) wages, drastic cuts in government spending (especially in social programs), and a weakened union movement.

After the Great Depression, the federal government took steps to bring down the huge gap in wealth inequality -- and that resulted in a healthy and booming economy. But the current federal government has done nothing to address the vast inequality of wealth in this country -- resulting in the continuation of economic suffering for most Americans, while the corporations and the rich get richer.

As the charts above show (from the Pew Research Center), the wealth gap has only gotten larger and continues to grow. In just two years, from 2009 to 2011, the share of this nation's wealth held by the top 7% has grown from 56% to about 63% (from $19.8 trillion to $25.4 trillion). In that same period, the aggregate wealth of the bottom 93% of Americans has shrunk from 44% to 37% of the nation's total wealth (from $15.4 trillion to $14.8 trillion). That's a huge chuck of America's total wealth that has been grabbed by the rich in only two years!

Those shocking figures show why most Americans are still suffering from the Bush recession -- and why the United States is fast becoming one of the most unequal nations in the world in terms of wealth (and income). There are many so-called "banana republics" that now have a more equal wealth distribution than the United States does.

Why does this wealth gap continue to grow? Because the federal government has still not abandoned the Republican-inspired "trickle-down" economics (which tilted the economic playing field to favor the rich). This must be changed! Failure to do so will result in another recession -- perhaps even greater than the Great Depression.

The Never-Ending Battle Against Plutocracy

The quote by Thomas Jefferson above is just as valid today as it was a couple of hundred years ago. When he said it, the choice was between being ruled by royalty and their appointees or a rule by the people. The Revolutionary War ended the rule by royalty, but it did not end all of America's problems or firmly establish a lasting democracy in this country. Jefferson knew that democracy was a never-ending fight, and there would always be those wanting to seize power away from the people.

In the United States, those who want to seize that power for their own benefit have mainly been the robber barons -- and their preferred method of doing that was simply to buy that power (although they never shirked from using violence, mainly through their surrogates in the political establishment and the police). By the early Twentieth Century, these robber barons had nearly succeeded in destroying democracy and establishing rule by themselves -- a plutocracy.

The United States was saved from that effort at establishing a plutocracy (rule by the wealthy class) -- but it took the greatest economic disaster of the Twentieth Century to wake up voters and spur them to seize their country back from the robber barons -- the Great Depression. The greed of the robber barons has caused them to overreach, and that overreaching had caused the most serious depression the country had ever seen. Voters replaced all (or most) of the politicians that had been bought by the robber barons with politicians that had the benefit of ordinary Americans as their primary interest.

These politicians (Roosevelt Democrats) began to re-establish economic justice through a variety of measures like government job creation, higher taxes on the rich, Social Security, and sensible regulations on banking and investment. The robber barons (and their Republican lackeys) whined that the measures would destroy America, but it only destroyed the plutocracy and re-established democracy -- and the country began to emerge from the plutocratic depression.

After World War II, the economy had fully recovered, and through new measures like the GI Bill and increased union power, the country prospered like never before. And this prosperity was enhanced further by the War on Poverty, Medicare and Medicaid, and the Civil Rights Acts. The country was well on its way to establishing a strong democracy with equal rights and economic justice for all citizens.

But the robber barons had not gone away -- their names had simply changed. And they wanted back the power they had lost. But they were smarter this time. They knew they had to create a message that large numbers of voters could be fooled into accepting, so they couched their nefarious agenda into innocent sounding messages like patriotism (accusing those who opposed them as unpatriotic), spreading democracy (using American military power to steal the resources of other countries), law and order (misusing the law to attack those who disagreed with them), pro-life (an excuse to attack the rights of women), returning to traditional values (the new code for racism), and defending christianity (using religion to achieve their political and economic goals).

But perhaps the most nefarious of these new political messages was trickle-down economics. Through a concerted propaganda campaign, they convinced many people that the way to economic prosperity was to deregulate corporations and the financial industry, and cut taxes on the rich. The idea was that by feeding ever larger amounts of money to the rich and the corporations, much of that money would trickle back down to ordinary American in the form of rising wages and new job creation. The truth is that it was simply a return to the economics of pre-depression era America -- and it didn't work back then and hasn't worked today.

The rising wealth of the corporations and the rich didn't raise wages for anyone but the rich -- who have seen their income rise by over 270% since the trickle-down economic theory was put into effect under Reagan, while the wages of ordinary workers have remained stagnant (and in fact, have actually lost much of their buying power). Instead of raising wages or creating jobs, the rich just fattened their own bank accounts. And this had the same effect it did in the early Twentieth Century -- it threw the country into a serious recession (depression?) and threw millions of Americans out of work (which was exacerbated by corporate outsourcing, which continues unabated).

Now we stand at the same place our forebears did in the Great Depression -- on the edge of greater economic disaster and plutocratic rule. Will we re-establish economic justice and democratic rule, or will we give in to the robber barons this time? The answer is anything but certain. Many Americans still buy the lie of trickle-down economic theory, or have fallen for the diversions created to fool them into voting against their own economic (and democratic) interests -- like defending religion (against a non-existent war), pro-life (for the fetus only), patriotism (putting a pink sticker on a vehicle and continuing wars that can't be won), low taxes (but only for the rich), and traditional values (opposition to rights for anyone but white men).

Will Americans vote for democracy and economic justice, or will they cement the power of the robber barons? We'll find out in November.

Austerity Is The Problem - Not the Solution

This is not the first time this country has suffered an economic disaster, throwing millions of people out of work. The last time was the Great Depression, which like the current economic disaster started with a stock market crash caused by Republican policies that favored the rich over everyone else. But the voters of that time knew what to do. They booted out the party (Republicans) that caused the economic mess and replaced them with huge Democratic majorities in Congress and a Democratic president.

And President Roosevelt knew there was only one way out of that mess. Government spending to create jobs and spur the economy. And spend he did (on the CCC, the TVA, the NRA, etc.). The Republicans howled that it wouldn't work -- that he was just creating a massive debt that could never be paid off. But it did work, and the debt created got paid off with taxes from the income of the new jobs. It should have been a lesson remembered for generations -- that a recession/depression requires government spending, not austerity.

But Americans have short memories, and fail to learn from the mistakes of the past. After a few decades of prosperity, they let the Republican go back to the same policies that caused the great depression -- and it had the same result as before, the current Great Recession. But the Republicans had learned a few tricks since the last time. Knowing they could not win the economic argument, they diverted the attention of voters with an array of side issues (gay marriage, war on terror, evolution, abortion, contraception, immigration, etc.). While some of these may be legitimate issues -- they are not the most serious issue facing the country, which is our jobless economic disaster.

These issues have allowed the Republicans to keep just enough power to block all Democratic efforts to create jobs and spend to spur the economy. And their excuse for blocking action to fix the economy is the same as they proposed in the 1930s -- that austerity is needed, not spending (exactly the opposite of the policies that brought us out of the Great Depression). And it is keeping the country mired in this economic mess.

And the crazy thing is all we have to do is look at Europe to know that austerity won't work. The European governments have bought into the austerity idea big time, and they are paying dearly for it. Many of those countries (Great Britain, Spain, Italy, Belgium, the Netherlands, and the Czech Republic) have already slipped back into a recession and others are on the brink of it. In fact, Great Britain is having a worse time climbing out of this recession than they did the Great Depression (thanks to the austerity imposed by their Tory government).

The only reason the U.S. has not followed Europe back into a deeper recession is that we have a Democrat in the White House and a Democratic majority in the Senate. They have been able to block the worst of the austerity measures the Republicans have tried to impose on the country.

The coming election is important to the economic health of this nation. It will decide whether we continue down the path of austerity and disaster (with the Republicans), or create jobs and spur economic growth by spending (with the Democrats).

Recovery Is A Myth For Most Americans

The Great Depression of the 1930's has a lot in common with the current Great Recession, which poses the question of why the economy is not recovering today the same way it did from the Great Depression. As the chart above shows, the period from 1933 through 1934 showed an 8.8% income growth that was enjoyed by the bottom 90 % of Americans. But in the "recovery" of 2009 through 2010, the bottom 90% of Americans actually dropped another 0.4% in income while the top 0.01% (the richest Americans) gained 21.5%. Why is the current recovery benefitting only the super-rich?

It all boils down to how the government has acted in response to it. In 1932, the country elected a huge majority of Democrats to Congress and put Democrat Franklin Roosevelt in the White House. The Democrats then went to work creating jobs. They created many jobs through government programs like the Works Project Administration (WPA) and the Civilian Conservation Corp (CCC), and taxed the rich to pay for it. These organizations went to work building America up, and we still enjoy many of the projects they completed.

But this also did something else besides putting some people in government jobs. It also increased the money flowing through the economy (because the people with those jobs now had money to spend). And all that new spending boosted the small businesses around the country, and as their business improved they also began to hire workers. The actions by those Democrats resulted in a rising economic tide that helped most Americans.

But Americans are not good at learning from history, so when the Great Recession struck in 2008 the country's leaders did exactly the opposite of what the government had done to cure the Great Depression. They did this because the Democrats did not have a big enough majority to override Republican obstructionism. In 2009 and 2010, the Republicans in the Senate mis-used the filibuster rule to block any efforts the Democrats made to create large numbers of jobs.

The Republicans then shrunk the economy by laying off massive amounts of government workers (on both the state and federal level), cutting social programs severely, encouraging the export of American jobs, and extending the Bush tax cuts for the rich. And to their great shame, too many Democrats went along with this. This shrinking of the amount of money flowing through the economy also had the effect of hurting small businesses, so they also laid off workers.

After the 2010 elections, the Republicans had control of the House of Representatives so the obstructionism shifter from the Senate to the House. But the Republican policies (to block help for ordinary Americans while giving more to the rich) is still having the same effect it did in 2009 and 2010 -- to keep the recession going for most Americans while only the richest Americans enjoy a "recovery".

There is a solution -- vote as many Republicans out of office as possible, and replace them with progressives. The Republicans know they have no solutions for the economic recovery of most Americans -- they just don't care as long as they can keep the money flowing to their rich Wall Street and corporate buddies.

That's why they are trying to change the political venue from the economy to social issues (like abortion, contraception, immigration, race, same-sex marriage, etc.). If the Republicans are successful in changing the political agenda, then we can expect the economic pain to last many years longer for most Americans.

More Evidence Of Economic Disaster

Bush and his Republican cohorts (including McCain) are still trying to convince Americans that the country is not in serious economic trouble. They would have us believe the economy is just going through a "rough patch". To hear them tell it, all we need to do is give out a bunch of $600 checks and cut taxes for the rich again and everything will magically be all right.

But that's just not the truth. They are trying to hide the disaster they have made of our economy until after the coming election, because when Americans understand the real situation they certainly won't want to vote Republican.

Every week, more bad economic news trickles out. We are learning of stagnant wages and disappearing jobs, inflation (especially regarding food and gas), rising and record oil prices, a record number of home foreclosures that gets worse each day, higher-education being priced out of reach of many, and rising unemployment.

Frankly, Republican policies have not done this much damage to the American economy since the late 1920's, when they created the conditions that brought on the Great Depression. Now they seem dead set on repeating that history, by creating and nurturing a record gap between the rich and the rest of us. Never before has so much of the wealth been concentrated in so few people.

This week, the bad news is about house prices. During the Great Depression, house prices fell by a disastrous 30%. Since 2006, American home prices have fallen by 15%, and look like they could fall much further. Yale economist Robert Shiller, who created one of the most respected indexes regarding home prices, believes the fall in home prices could easily outpace that of the Great Depression.

With jobs disappearing, wages stagnant or falling and savings at an all-time low, the only thing many Americans had left was the equity in their homes -- now that is fast disappearing. There is simply no good news for ordinary Americans.

The worst thing that could happen to this country is a continuation of current Republican economic policies after next January. The upcoming election is extremely important. It could mean the difference between a recession and a depression.