The Democrats have it wrong

Outside of military and corporate welfare and certain farming subsidies programs, there's not really many places left to cut.

SO I'm glad to see that you're one of the very few conservatives with enough critical thinking to see that tax increases, including on the wealthy, will have to happen. But I'm not sure where this idea of "runaway spending" comes from. Generally, government expenditures have kept pace with the growth of population in recent years, with the exception of war spending and the expansion of homeland security programs.

 

The stimulus package was far too weighted towards tax cuts, when infrastructure and education spending along with job creation programs were the keys to ending the recession. The last time we were in this deep, stimulus spending the size of WWII was needed. The good thing is that it's far cheaper to enact a solid stimulus program without having to go into a war economy.

I'll state it flatly that lowering spending on Medicare or Social Security is the dumbest thing we could do. And as I stated before, the only places left to cut spending is on war/military spending and corporate/farming subsidies.

And better collection of taxes from wealthy individuals and corporations who have illegally parked money in tax havens is also a good place to start seeing better enforcement.

 

Quite a few of these cuts would see the economy hurt by increased costs or less money for people to spend in the economy,. That means lower revenues. It's why I ignore these budget simulators, because they don't reflect reality. Just the Medicare/Medicaid cuts alone would be disastrous for those who need it.

the budgets simulator is pretty much BS.

 

This statement simply isn't true. We need deficit spending to get us out of the recession. It's that simple.

 

When I read nonsensical opinions like this one, I question the validy and merit of this entire illogical assertion. Traditionally, when economies sink into recessions tax cuts should be implemented accross the board and budgetary reductions should be enabled. Currently, our Federal budget exceeds government revenues. Before Obama’s stimulus became law, federal debt equaled 36 percent of GDP and was projected to decline slightly over the next few years. Instead, thanks in large part to the Obama stimulus, debt reached 62 percent of GDP by 2010. Debt will reach 70 percent of GDP by the end 2011, the highest percentage since World War II. Since the inception of the Obama Presidency, the National Debt has increased 35% If our Congress repealed the Bush tax cuts and ObamaCare which save roughly $1.3 trillion dollars, our Federal budget would be balanced.

 

Untrue.

deficts at this point don't matter for the next one or two decades. The trick is to put more spending and energy into policies and programs that will increase economic growth and bring in more revenue. Infrastructure, education and job creation spending is the way to go. The economic data has been out there for nearly 80 years proving it is the smartest thing to do.

 

The problem is that the bolded has never worked before (maybe the tax cuts at the lower end does help), so why would we want to see the same failure repeated for idealogical ends instead of doing what has been empirically proven success?

 

There is no data in the last 80 years that show more spending creates sustainable economic growth. In fact, in the 1920s, a decade of growth, the government spent very little and instead lowered taxes and paid off much of the national debt.

The problem is, spending doesnt stimulate economic growth. We can turn to the New Deal, where the government tried EVERYTHING to stimulate growth. They used the CCC for new infrastructure programs, created new jobs in a variety of gov't agencies, and set a record for government spending. At the end of the day, Treasury Secretary for FDR Henry Morgenthau sums it up quite nicely:

“We have tried spending money. We are spending more than we have ever spent before and it does not work.”

The date: May 9, 1939. The setting: Morgenthau’s appearance in Washington before less influential Democrats on the House Ways and Means Committee.

Look people, spending more and more clearly won't stimulate further growth, because there is no net gain in the transfer of wealth. You're in essence taking away spending money from citizens and redirecting the money to a public project that otherwise would not materialize. Any jobs created by this "stimulus" won't be sustainable because they're dependent on government money.

Deficits will matter soon. By 2020 the interest payments on our loans will reach 20% of federal revenue. Try "investing" and "spending" when you lose 1/5th of the revenue you bring in to interest payments to foreign and domestic creditors.

And none of this addresses the issue of unfunded Social Security and Medicare payments. We've been borrowing from social security surpluses every year to reduce the deficit every year. In return, we put an IOU in the trust fund. Eventually, we're gonna run deficits in social security and reach into the trust fund only to find no surplus cash and only a guarantee from our indebted government.

 

you're incorrect my friend. The New deal did not end the Great Depression. WWII didn't either. It was the return to normalcy AFTER the war as well as the pent up consumer demand created by savings made during the war (since no one could buy consumer goods due to rationing). Look in my previous post and you'll see FDR's OWN Treasury secretary admitting the failure of the New Deal.

“We have tried spending money. We are spending more than we have ever spent before and it does not work.” ---Henry Morgenthau, 1939 (7th year of the New Deal)

Also, War does not solve depressions because there is no sustainable economic growth. Unemployment was solved because men were drafted to fight. We cant support a standing army indefinitely due to high costs. Manufacturing was only in military goods and not consumer goods. Thus, the kind of manufacturing during the war is no good for peacetime. Finally, the only thing that kept the economy running (since there was limited commerce and exchange of goods) was the government pumping billions of dollars into the war effort through loans and war bonds.

If we don't cut entitlement spending, then we could cut every penny in discretionary spending (all spending appropriated by congress) and there still wouldnt be enough to handle our long-term obligations. Entitlement spending isnt controlled by congress. Its determined by a formula, and depending on demographic changes, the total payout may change as well. We have to reform entitlement spending because the way the current system is run is unsustainable. Whether we cut it, tie it to commerical market investments, or raise the retirement age, something has to be done to change the status quo.

While some may make a good case for raising taxes, the key issue at hand is cutting spending! We spend far more than we take in per year (deficits) and would save a lot more if we trimmed our frivolous spending habits down! The issue of whether lower tax rates is debatable, but for now the main action to take is to cut spending! NOW! I agree with you on tax breaks, especially for energy subsidies. The liberal environmentalists that pushed through ethanol subsidies see the money go to large farming corporations or large farmers for ethanol that pollutes more than regular gas. Cutting all energy subsidies as well as food subsidies would be a good first step. Then take on our foreign involvements and foreign aid by eliminating or reducing it. End the War on Drugs (billions of $ per year). Eliminate Congressional Pensions. And after all of that is done, reform entitlement spending. That, is a plan to avoid being trapped in the interest payments of our unbearable national debt.

 

Yeah... that ended well. Classical economic policies of austerity and unregulated financial and stock markets that result in 1929 is something to hang your hat on.

But I'll make sure to let you know that multiplier effects of spending is a known economic fact.

Morgantheau was proven completely wrong when the largest spending program in the world, WWII, took the U.S. and the world out of the Great Depression. Prior to that, spending grew GDP, and FDR's proposal to return to fiscal austerity in 1937 ended with a new recession. The lesson learned is that the New Deal, while it helped a lot, wasn't large enough to spur enough demand to create jobs. WWII provided that final pump primer that put the economy over the top.

Again, one needs to learn some American and World History, particularly the Economic History of the 20th Century, to see that your premise is completely false.

Fiscal austerity will drive those deficits up, if the conservatives get their way.

It's all based in the full gfaith and credit of the United states. Now, the GOP wants to harm that full faith and credit by taking the debt ceiling to brinkmanship, so if I were the Obama administration, I'd show that congress approved the 2011 budget and crush the debt ceiling argument into the dirt by showing how unconstitutional it is.

Other than that, thanks for coming in with traditional, but thoroughly debunked economic ideals.

 

FDR's Treasury secretary has had over 70 years of being wrong on that point if one looks back at the economic history of the New Deal. By the early 1940s, before the U.S. entered the war, the economic situation was getting much better.

Lots of people hold opinions that are wrong, Morganteau was wrong on this one.

Which is why WWII was a temporary stimulus plan. And Ike paid down the debts during the good times, as Keynesian policies would have governments do.

First thing to do is create a universal single payer system for the whole country. It would bring jobs to the U.S. as foreign investors balk at the unecessarily high private insurance costs for health care. Second, wages and investment would be higher for firms if they shed the larger costs the private sector insurance companies bring to the table for health care. as a result, payroll tax collections will be higher from the higher wages. Medicare has outperformed private insurance every year in lower health care inflation, since Medicare was made law. Making it universal would take the added costs of block grants to states out of the equation for Medicaid.

Meh. The only place where spending could be cut is where I stated previously about corporate, farm and military spending in the discretionary budgets. I'm divided about the war on drugs, as I don't see a need for a nearly victimless crime of marijuana use doesn't seem to be worth the efforts, IMO.

I do have a novel idea for congress pay and pensions, I think. Congress should make the median wages of Americans, plus stipends for travel to and from districts and a moderate housing (DC is extremely expensive). if congress wants a raise, then seeing the median wages rise will give them more jingles on their own pockets.

Anyway, the budgets were balanced from Ike-Carter, generally, through slightly higher taxes. I've thought that the Democrats should offer to keep the Bush tax cuts in place if two more brackets were added, so that people making $379k/year aren't being treated as if they are on the same playing field as those making over $1 million/year or $5 million/year. Making two more brackets with marginal rates at 39% for $1 million - $5 million/year, and 45% for those over $5 million/year would add enough money without hurting the economy to balance budgets and pay down the debt.

 

http://www.csmonitor.com/USA/Politi...-Congress-national-debt-needs-action-and-soon

The nonpartisan Congressional Budget Office has warned Congress that the rising national debt and projected deficits are going to have far reaching negative impacts on America. In 2008/2009 it predicted that just the TARP and Stimulus Package borrowing, if not repaid, would result in a 1/3 reduction in GDP growth within 10 years. That decrease in GDP growth has a cummulative impact as it is not replaced and results in fewer and lower paying jobs.

Both the Democrats and Republicans are failing to address the problem in a serious manner. At best they've proposed up to about $2 trillion of reduced spending over ten years but that only represents 20% of the deficits so the national debt will continue to grow at astronomical rates. If less than $2 trillion in additional federal debt will reduce the increase in the GDP by 1/3rd then what will the results of an additional $8 trillion in national debt do?

If we go from $14 trillion in debt to $22 trillion as projected even with $2 trillion in deficit cuts then the interest on the national debt (at fair market value for money) will be $1.1 trillion per year. This requires taxation that cannot be used for government programs and expendatures and is more than the projected annual deficits for the next ten years.

The CBO is correct. We need both major reductions in expendatures to significantly reduce the deficits and if a balanced budget cannot be reached through spending cuts then the difference must be made up for by increasing FICA/Payroll taxes for Social Security/Medicare shortfalls and by general tax increases for other expendature shortfalls.

But the cuts must come first and only after every dollar that can be cut is cut should Congress ask the American People to pay more in taxation. As I noted this is where the Democrats have it wrong because they want to raise taxes before cutting the expendatures to the bone. They are basically proposing tax increases to fund wasteful expendatures because they are not cutting the expendatures first.

When every dollar that can be saved by cutting expendatures then even the Republicans will have to agree that only tax increases can result in a balanced budget. Until every possible dollar is saved the Democrats have no foundation to ask for tax increases.

 

They seem to be arguing pretty well despite not having any foundation. They have the emotional argument. The demagogue argument firmly within their grasp.

They have Grandma, and threaten to throw her over a cliff. In America, that's all the foundation you need anymore.

 

Sort of reminds me of the Mayan society where they engaged in human sacrifices. "We should sacrifice the future of our children for the benefit of Grandma."

 

Yeah, if nothing changes and we're still in a low growth after recession.

Funny thing about economies, especially the largest economy on the planet --things change.

The current debt as a percentage of GDP is much smaller than it was after WWII. We grew out of the WWII debt, with the help of massive spending by the way, such as the GI bill and the interstate highway bill. It also helped to have a 90% marginal rate on the top bracket.

I'm for all that.

 

The Great Depression was not caused by tax cuts and paying off the deficits. It was caused by two reasons. The first was Hoover passing the Hawley Smoot Tariff, which imposed record high tariff rates and basically shut down all international trade. The second reason was Hoover advising companies to keep wages high at a time of recession. His hope was that this sustained level of consumer money would spur spending by consumers and stop the recession. Unfortunately, businesses kept wages high but simply laid off workers. This in essence turned a recession (which lasted 0.5-2 years in the 19th century) into the Great Depression. Besides, I never mentioned regulation of the stock market so that issue is irrelevant in this debate.

Please let me know. I wanna know! Prove you're point with examples! I've given you my reasoning and you've simply said that I'm wrong.

Why was there a recession in 1937? Lets turn to your reasons for the great depression in the first place:
1) Austerity----We didnt look back as we spent record high amounts of tax money in failed gov't programs.
2)unregulated financial markets---FDR passed comprehensive bank regulation reform in his "Hundred Days" of the first term.

Now lets see why the recession occurred. By Passing labor laws such as the NLRA and instituting the social security system, FDR unintentionally rasied the costs of employing workers due to the associated costs of union bargaining, union worker salaries (higher than un-unionized), increased labor costs associated with SS tax. Economic historian Robert Higgs has insisted that "regime uncertainty" also hindered recovery. Businessmen and investors were unsure of what punishment the government would impose upon them next, and simply stopped investing. Also, in the 1930s, long-term bonds carried a very high risk premium, showing that business leaders were very uncertain about the future, or in other words, future government policy.

But another source of unemployment was the unconstitutional AAA. This bill, when implemented, confiscated and destroyed millions of pounds of farm produce and meat in an attempt to reduce supply and thus raised the price of farm produce (helping farmers). Note that at this time America was found to be not producing enough food to "sustain the population at the minimum (subsistence) diet." By preventing farmers from selling their produce (the gov't destroyed them instead), tthis AAA destroyed millions of agricultural jobs, especially small farmers and sharecroppers.

I've studied it and all I've seen is that the New Deal ultimately failed after 12 years of implementation. Ask any economist (even Paul Krugman) and they'll tell you a wartime economy does not cause sustainable domestic economic growth.

Wait....fiscal austerity means cutting spending. If we cut spending, we'll have more money left over. We'll use this money to pay off the deficits, thus LOWERING the deficits! Its almost like magic!

I do agree on the necessity of raising of the debt ceiling, but it is stupid to refuse to make spending cuts with it. Otherwise, we'lre gonna continue to raise the ceiling over and over again with no end in sight. Besides, as investors see that the US government will never pay off the debt, its only a matter of time ( i think anywhere from the next 1-5 decades) that our credit score (confidence in our ability to pay off debts) goes down.

You've shown me nothing but ideological propaganda that whitewashed textbooks taught. I've given you confirmed economical analysis done by seasoned economists over the last century. I think im gonna go with the economic principles over the unfounded and partisan propaganda you espoused.

 

Ok, so the economy took 17 years to rebound from the Great Depression. However, without the New Deal, it would have been sooner. Why wasn't the Depression followed by a vigorous recovery, like every other cycle? It should have been. The economic fundamentals that drive all expansions were very favorable during the New Deal. Productivity grew very rapidly after 1933, the price level was stable, real interest rates were low, and liquidity was plentiful. Nobel Laureate Robert Lucas and Leonard Rapping calculated on the basis of just expansionary Federal Reserve policy that the economy should have been back to normal by 1935.

So what stopped a blockbuster recovery from ever starting? The New Deal. Some New Deal policies certainly benefited the economy by establishing a basic social safety net through Social Security and unemployment benefits, and by stabilizing the financial system through deposit insurance and the Securities Exchange Commission. But others violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels. All told, these antimarket policies choked off powerful recovery forces that would have plausibly returned the economy back to trend by the mid-1930s.

Following government approval of each industry code, industry prices and wages increased substantially, while prices and wages in sectors that weren't covered by the NIRA, such as agriculture, did not. The WSJ calculated that manufacturing wages were as much as 25% above the level that would have prevailed without the New Deal. And while the artificially high wages created by the NIRA benefited the few that were fortunate to have a job in those industries, they significantly depressed production and employment, as the growth in wage costs far exceeded productivity growth.

The downturn of 1937-38 was preceded by large wage hikes mandated by FDR that pushed wages well above their NIRA levels, following the Supreme Court's 1937 decision that upheld the constitutionality of the National Labor Relations Act. These wage hikes led to further job loss, particularly in manufacturing. The "recession in a depression" thus was not the result of a reversal of New Deal policies, as argued by some, but rather a deepening of New Deal polices that raised wages even further above their competitive levels, and which further prevented the normal forces of supply and demand from restoring full employment. Research from the WSJ indicates that New Deal labor and industrial policies prolonged the Depression by seven years.
http://online.wsj.com/article/SB123353276749137485.html

My friend, you're the misinformed one here.

WWII didn't stimulate the domestic economy at all. All of the spending was geared towards the military sector. Rationing at home basically eliminated purchases of everyday items such as snacks, gasoline, rubber, clothing, etc. It was the tax cuts by Truman and Eisenhower from New-Deal levels after the war as well as the return to normalcy (elimination of many New Deal programs) that allowed for economic growth.

If you even know what Keynes' original ideas were, you would have know that he set a maximum level of debt at 25% of GDP. FDR surpassed this amount by spending (and raising the debt to 40+% of GDP. The War that you say saved our economy actually increased the debt percentage FIVEFOLD from what Keynes though was the maximum an economy should handle. WWII increased debt to 125+% of GDP. Besides, after eisenhower's deficit reductions, we had LBJ, who implemented Medicare and Medicaid. Medicare was orignally estimated to only cost 6.5 billion for the long-term, but ended up costing hundreds of billions by 1990. Basically, none of the presidents after Eisenhower made any efforts to cut spending.
http://www.usgovernmentspending.com/federal_debt_chart.html

What you dont understand is that healthcare isn't the main reason companies outsourced. Its the high labor costs associated with the minimum wage and union bargaining. The single payer system wouldnt bring jobs to the US by itself. Labor costs would still remain high and nothing would change from just reform in healthcare. Besides, there are many complications with the costs of single payer healthcare that I advise you to turn to the Healthcare section of this forum for additonal information before you continue. Medicare has underpaid hospitals by millions of dollar a year, causing hospitals to shift this cost to privately insured individuals. Under the single payer system, there would be nowhere to shift the cost caused by the government underpaying hospitals, so prices would increase as a whole.

We really dont need any of this. All energy subsidies should go, foreign and military spending decrease. End the war on drugs because it increases criminalization of people who didnt do anything violent. Marijuana is not addictive like alcohol or cigarettes, and even it is, why should it be illegal when cigarettes and alcohol is legal? Ending the war on drugs and legalizing marijuana (taxing it too) would stop the flow of cash to the mexican cartels and this would help the mexican govt FAR MORE than giving them financial support.

Exactly, holding political office wasn't supposed to be a glorious occupation. THe founding fathers saw this as a citizen's obligation. Its not supposed to entitle you to huge salaries and pensions.

The budget was NOT balanced after Ike left office. If it was then we would have run surpluses. Instead, we spent billions of dollars on LBJ's hysterical "war on poverty" that has ultimately failed (just like his war on vietnam). The poverty rate had been decreasing under Ike and JFK, but LBJ never missed an opportunity to buy votes (see Civil Rights Act of 1964 and Black voting trends since 1960s). By giving handouts to poor people, he essentially bought their votes. Decades later, the poverty level has not decreased and many argue it has gotten way worse.

The only years we made a "surplus" was under Clinton. Even then, it wasn't a surplus. Clinton took billions of dollars out of the Social Security surplus and used it to eliminate the deficit. While he did well by presiding over the 1990s economic boom, it still fell short of a surplus (because he borrowed money from Social Security to achieve it).

Look, even if we taxed milionaires at 100% of income this wouldnt solve the crisis. Not only is the deficit 100-1000 times the little amount we would gain from this measure, but history has shown that when you tax higher income earners at higher levels, they "shield" their income from taxes by investing in non-taxable bonds. (I would too. why lose your money to the IRS when you could invest it in long term bonds that carry virtually no risk?). Under the New deal (when top bracket was taxed up to 91%), the number of millionaires paying taxes dropped to 100 by 1936. Compared to the 1,000 some in 1930, the year after the stock market recession occurred. If you tax more, people will be less likely to pay up. That has been a moral well learned in history. When Carter increased taxes, revenues saw little change, but when Reagan cut taxes, more people paid up to the IRS and revenues actually increased.

 

"After the recession" means normal economic growth. That contradicts your statement. If we didnt waste nearly a trillion dollars in stimulus money for political pet projects such as turtle crossings and research on robotic birds for D-ARPA growth would have returned much faster.

We grew out of the WWII debt by lowering tax rates from new deal levels and removing price and wage controls FDR had implemented on our economy. The debt was paid because we cut government spending from new deal levels and actually (for once) refused to create new political projects that buy votes.
The GI bill was a unique situation, because it was needed to transition domestically unskilled men into workers fit for the workforce. Under times without such massive mobilization (such as now), the GI bill wont provide the same economic growth you described.

Building more roads won't help our economy because we already have an existing system. The gasoline tax already pays for much of the maintenance, and if costs become too high states can always turn to enforcing tolls (its only fair, since only the people that use roads [almost 100% of population] pay for the maintenance).

Please give an example of some of the "massive spending" you advocate.

 

The 90% tax rate is often cited but what is ignored are the related tax deductions that went along with it. When the tax codes were revised to lower the top tax rate to below 40% this was done because the related tax deductions were also eliminated. The revision to the tax code that lowered the top tax rate also increased the revenues relative to gross income with the elimination of the related tax deductions. To reinstate the 90% tax rate would logically necessitate reintroduction of the tax deductions as well and the government actually nets less revenue if that is done.

This also ignores the fact that there are two different tax structures depending upon whether we're addressing Social Security/Medicare or general expendatures such as defense. FICA/Payroll taxes pay for Social Security/Medicare and private/corporate income taxes pay for all other expendatures. Raising income taxed does not address the funding deficits for Social Security/Medicare which are roughly $600 billion per year and increasing annually.

This still misses the mark as the reduction in spending is mandatory first. Before asking for more money the government needs to address the fact that its overspending by hundreds of billions of dollars per year. Simply raising taxes does not address the over-spending.

 

This recession was unusual and more like the Great Depression since it resulted from particularly virulent market evangelist policies, especially their deregulation of toxic assets like CDSs. So it will take more time to get out of the hole the conservatives have dug. But it will happen. And it will happen faster if we spend more on infrastructure using low interest loans the world is dying to give us.

 

Even taking into consideration different deductions, the effective rate on the top bracket in 1955 was 50%.

I'm all for that. Are you with me? A 50% rate on the top bracket during a time of massive economic growth for this country. It seems to put to rest the market evangelist revisionist histories.

 

Smoot-Hawley was enacted almost a year into the Great Depression. And Hoover's problem was that when he asked employers to keep the higher wages, he didn't add to the demand in the markets. That's not only very well known, it's not even really debateable.

http://www.imf.org/external/np/seminars/eng/2010/eui/pdf/ACS.pdf
http://www.frbsf.org/publications/economics/papers/2010/wp10-17bk.pdf

What "failed" programs? While not all programs were successful, many of the New Deal programs put people to work and were cost effective when looking at the short term fiscal deficits for putting people to work as opposed the larger deficits of doing nothing.

Again, you point to something after the fact, that started under Coolidge and blew up on Hoover. But I'll note that generally, until the deregulation of banking/financial sectors, the U.s. didn't have any banking/financial crises.

The NLRA did not cause any unemployment. And while it's true that there was some initial regressivity in starting SS, since then, it has kept people out of poverty and had a positive impact on the economy. Just the fact that it can't be lost in a crapshoot like Wall Street has kept many retirees from falling into abject poverty.

As with the NLRA and SS, you show no proof for this, either. Robert Higgs' explanation still can't explain why employment should be up in a time of lowered aggregate demand.

Perhaps you need better readings to use for studying. No one says that a war time economy is a good thing over the long haul, unless the aggressor is able to keep growing from conquests. But when it comes to stimulus, it's supposed to be temporary. And luckily, WWII was temporary.

Well, the right does rely on magic instead of facts...

Other than military and corporate welfare and some farming subsidies, there's very little room to cut spending without harming the economy.

You've shown me idealogical propaganda with zero logic and a complete refutation of history and facts. What confirmed economic analyses have you brought to bear past your (uninformed) opinion? The economic "principles" you've espoused are merely the words of a shaman using misdirection to keep people from seeing what's really going on.

 

It was originally a recession caused by a run on banks. Its happened numerous times in the 19th century. Demand for workers would have gone up as wages went down (no min wage back then) and the amount of unemployed went up (more idle workers mean employers dont have to pay as much). Thats how recessions ended numerous times in the 19th century.

The reason why this recession became a depression:

Hoover hiked taxes for the top rate from 24% to 63%. He hiked tariffs (thus ending US exports to global markets), placed a tax on writing checks (causing runs on the banks, fueling the recession into depression). As a result of the tax on writing checks and runs on the banks, banks shut down to keep cash reserves. Closed banks would severely hurt our economic system. It was actually the government levying more taxes that helped cause this depression.

Now dont think that we didnt try spending. Hoover unleashed new social programs and created new programs, and raised our deficit from $462 million to $2.7 billion in one year.

Walter Lippmann (liberal journalist) wrote in 1935 "the policy initiated by Hoover in the autumn of 1929 was utterly unprecedented in American history. The national government undertook to make the whole economic order operate prosperously...the Roosevelt measures are a continuous evolution of the Hoover measures."

"Does the introduction of money make the multiplier possible?

The introduction of money will not alter our conclusions. Money only helps to facilitate trade among producers— it doesn't generate any real stuff. In short, money is just a claim on real saved goods. Paraphrasing Jean Baptiste Say Mises argued that,

Commodities, says Say, are ultimately paid for not by money, but by other commodities. Money is merely the commonly used medium of exchange; it plays only an intermediary role. What the seller wants ultimately to receive in exchange for the commodities sold is other commodities.[4]

When an individual raises his spending by $100 all it means is that he has lowered his demand for money by $100. We can also say that the individual has exercised his claim over real saved goods for $100. The seller of goods has now acquired $100 claims on real savings. We can also say that seller's demand for money has increased by $100. All this, however, doesn't give rise to an overall increase in output, as suggested by popular thinking. The increase in monetary spending does not give rise to any increase in income in the economy. Likewise if the seller will now spend 90% of $100 all that we will have here is a situation wherein his demand for money has fallen by $90, i.e., he has exercised his claim on the existing pool of real goods to the extent of $90. (Somebody else's demand for money has now risen by $90).

Likewise loose monetary policy cannot give rise to the expansion of real output. All that it will generate is a reshuffling of the existent pool of real savings. It will enrich the early receivers of the new money at the expense of last receivers or no receivers at all. Obviously then, a loose monetary policy which is aimed at boosting consumers' demand cannot boost real output by a multiple of the initial increase in consumer demand. Not only will loose money policy not lift production, but on the contrary it will impoverish wealth generators in exactly the same way as the enforcer in our previous example."

http://mises.org/daily/1889

Everyone nowadays seems to forget that money isn't a commodity. Its a medium of exchange that actually doesnt represent any production output in the economy at all. Instead of using estimates based on the removal of mafia influence, use basic economic theory.

If you still aren't convinced, think about where the government money comes from. To achieve your "multiplier," government taxes $1 from a private citizen who is just as capable of spending the money. part of the dollar is lost in paying for the administrative costs of government agencies. Finally, 95 cents (hypothetical example) is given to someone else. Government spending isnt commerce. Its taking 1 dollar from a productive person and giving it to someone else. Theres no exchange of goods taking place. In fact, you would lose money because you have to pay for the middleman in the transaction (government employee salaries). The person who was taxed could easily have stimulate the economy by himself. Instead, he loses $1 in consumer spending.

The Cencus bureau didnt count workers employed under programs such as the CCC because many of them really didnt receive more than "3 hots and a cot"

Doing nothing would have at least allowed people to buy food and not starve. While millions lay in the streets and in hoovervilles starving for food, the government destroyed pounds of produce and meat in an attempt to raise farm prices for farmers.

FDR also created agencies that set standard high wages, hours of operation, and minimum prices. The limit of minimum prices prevented businesses from underselling each other to gain a competitive advantage and also made it hard for private companies to meet the federally mandated high payrolls.

In addition, government raised tax rates for the top bracket to 80%, causing the rich to shelter their income by saving or investing in bonds. This as a result decreased the incentive for the rich to invest in private sources of income (companies that create jobs). The poor were even taxed at 19% at one point. Even the most liberal economists argue against highly taxing the poor.

But MOST importantly, FDR hired workers based on regions. Political analysts now concede that FDR spent the most in states that he lost or narrowly won in the last election. The solid democratic south saw little government money compared to other areas of the country. This policy of creating federal jobs unbalanced the national economy and really failed to generate growth. (you're taking money from the rich that usually hire people to create domestic output and using that money and hiring people with it to do the tasks of government).

 

The US had frequent banking crises in the 19th century.

Panic of 1819 was caused by depreciation of bank bonds as a result of inflation after the War of 1812. This caused widespread foreclosures, bank failures, collapse in real estate prices, unemployment, and slumps in agricult and manufacturing (sound familiar?) (lasted 5 years)

Panic of 1825 was caused by the crash of the bubble created by speculations in Latin America. (lasted less than a year)

Recession in 1836-1838: After Andrew Jackson stopped payments in gold or silver, speculation markets were hurt drastically. 600 banks failed. SOuthern cotton industry hit very hard. (2 years)

Panic of 1837: Failure of the Ohio Life Insurance and Trust Company burst a bubble of investments in railroads. 5,000 businesses failed. (lasted 1 year)

The list goes on. Theres the panic of 1873, 1882-1885 recession, Panic of 1893, Panic of 1907. Look them up. They were all before financial regulation of markets. banking and financial crises arent anything new.
http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

NLRA additionally raised costs of doing hiring workers because it essentially forced all companies to negotiate with unions. The SS simply added to short term costs. The failure of FDR to peg the SS age to the average life expectancy would inevitably result in benefits paid exceeding taxes taken in as life expectancy rises. He knew this and if he made this program sustainable, it would have been great for the economy for the long term as well.

Thats because the government heavily taxed people and used the money to hire workers. You would be right under normal market conditions, but having the CCC hiring people with taxpayer money is not normal conditions.

The War does not act as a stimulus because it taxed people at record high levels and diverted the income towards military funding, which no consumer needs. In effect, we diverted money from our consumer economy to pay for the war.

Between 1943 and 45, 2/5 of the labor force (including armed forces, civilians working for armed forces, people who worked in military factories, and the unemployed) were producing neither consumer goods nor capital goods. However, the taxes of the remaining 60% of americans were used to fund the activies of these 40% that were not producing things consumers needed. This actually resulted in a loss in material wealth for the economy.

Due to rationing, the consumer economy that powers this nation was stagnant, as new goods could not be created. While People sometimes believed they were prosperous in WWII because they were saving up large amounts of unspendable income (paper money and US bonds), they weren't actually welathy. Many economists make this error as well when they measure standard of living in WWII. People werent prosperous because they simply could not obtain the goods they needed/wanted during the war. Shutting down the consumer economy and destroying domestic consumer manufacturing is not exactly a stimulus. It was the return to normal market conditions (lots of unemployed, wage costs low) after the war that allowed a steady recovery.

Statistics and proven economic theory isn't magic. On the contrary, the left relies on common misconceptions to make judgements about issues.

If we reformed our entitlement system similar to a 401k (otherwise known as privatization) it might actually be sustainable. Medicare has to be reformed, if not cut. If we managed to solve the immigration problem and criminalize hiring illegal workers, we would actually help get people off welfare and reduce welfare spending.

I've responded to your information with solid information and facts. By simply applying economic principles that were the standard for over 2 centuries we can arrive at the answer. These economic principles actually belong to those of the Austrian school of economics, which has been around and accepted as credible theory since the mid 1800s. Meanwhile, the principles you've based your argument on were the works of a single man (keynes) whose theory still has many flaws debated by many on the left and right.

 

This recession was especially caused by the artificial housing boom created by government regulators and agencies freddie mac and fanny mae. They lowered lending standards and gave loans to millions who shouldnt have qualified.These resulted in more forclosures and defaults, which caused problems for not only banks, but also fanny and freddie as well as the wall street firms that bundled and issued securities based on anticipated income from the loans. The original source of this problem stems from the refusal of politicians such as Congressman Barney Frank (champion of housing ownership for everyone) to reform the system before it was too late. Calls came from Thomas Sowell in the wsj and Time Magazine.

http://bubblemeter.blogspot.com/2008/06/flashback-2005-america-was-going-gaga.html
http://www.pikenet.com/dispatch/dispatch05/dispatch0855.html

So, this "hole" was actually dug by federal agencies that promoted housing ownership to meet a "magic number". Getting out of this hole means a return to normal market conditions, with no government agencies to artificially stimulate demand for a certain industry.