Wednesday, August 24, 2011
It was not the war that cured the Great Depression
As evidenced by the fact that the big rise in output for private consumption occurred AFTER the war
World War II increased GDP, but more than 100% of the increase was devoted to munitions, building the Pentagon, employing teams of bureaucrats to control prices and government activity generally, much of it misguided. Gross Private Product decreased from $921 billion in 2005 dollars in 1940 to $427 billion in 1944, well below 1932’s level, showing that the private economy was badly squeezed. Then in 1946, while GDP decreased by 11%, GPP more than doubled to $1,309 billion. Readjustment was inflationary and disruptive, but it saw an astonishing increase in output and living standards.
The Keynesian thesis can be further demolished by looking at 1946 compared to 1938-40. At the tail end of the Great Depression, in November 1938, there was a massive turnover in the U.S. Congress, similar to the Tea Party revolt of 2010, in which the Republicans gained six Senate seats and an astonishing 72 House seats (9 more than in 2010). Although this did not give them a majority, it stopped dead the New Deal policies of heavy state spending and economic experimentation. GDP increased by 8% per annum between 1938 and 1940 and GPP increased even more rapidly, by 9.2% per annum.
This pulled the U.S. out of the Great Depression, with 1940 GPP 10% above that of 1929, but left the economy far below capacity. If you apply the average 1929-2000 growth rate of 3.43% per annum to 1929’s GPP, you get a 1940 full employment GPP estimate of $1,203 billion in 2005 dollars, 31% above the actual figure. That suggests that without the war the 1938-40 boom would naturally have continued, perhaps slowing somewhat, until it ran up against resource constraints. Apply 1938-40’s actual growth rate to the next six years and you get a 1946 GPP of $1,558 billion, 19% above actual 1946 GPP. Applying the 1929-2000 growth rate to 1929 GPP gives you $1,473 billion in 1946, 13% above the actual level. 1947 and 1948 showed further GPP increases, but reduced actual GPP’s gap below full employment GPP only to 11%.
Bottom line: without the war, GPP would have continued recovering at a rapid rate after 1940, probably giving a higher GPP by 1946. Second bottom line: a combination of the Great Depression and the war, probably mostly the latter, depressed 1946’s GPP by around 10%-12% below the level it would naturally have reached in a free peaceful market.
Intuitively this makes sense. As policy was stabilized after 1938, the U.S. economy began recovering rapidly to its natural full-employment level. World War II depressed the private economy to a low level, but its effect was mostly temporary, with an astonishing bounce-back as peace returned. However, a combination of the Great Depression and the damage caused by the war caused the United States to lose about 10%-12% of its full-employment output by 1946-48 (catching up which long-term may have resulted in the exceptionally good economic performance of 1948-66.) The Keynesian story of World War II’s economic boost makes no sense; this one does.
Perry supports Israel
Over at Commentary, Alana Goodman profiles the lawyers responsible for stopping the second Gaza flotilla by cleverly threatening lawsuits against any entities involved in helping the flotilla. "Led by Nitsana Darshan-Leitner and her husband Avi Leitner, the legal center is pioneering a new strategy of Israeli-self defense: Pro-Israel Lawfare."
One of the means at their disposal was threatening lawsuits against the Americans participating in the flotilla. "[The] lawyers discovered American flotilla activists were potentially in violation of the Neutrality Act, which prohibits U.S. citizens from taking part in a hostile act against an allied country. “So we approached the Attorney General of the United States to fix it. And we also got Gov. Rick Perry to write a letter to Eric Holder,” said Darshan-Leitner."
Why did the Israeli lawyer approach Perry, Goodman asks. Because as Darshan-Leitner explains, she met Perry on one of his trips to Israel and he told her he'd do anything to help her fight. Perry told Darshan-Leitner: "I love what you do. It’s amazing what you do. If you ever need help combating Israel’s enemies, I’m here to assist."
Perry was genuinely enthusiastic about combating Israel's enemies and certainly put his reputation where his mouth is by writing a letter to Attorney General Eric Holder about the matter. Fellow supporters of Israel may just have found the best presidential contender in Gov. Perry.
A far-reaching decision in favor of freedom
The federal appeals court ruling that struck down the centerpiece of Obamacare has dealt a massive, possibly fatal, blow to the government-imposed health care system passed by a Democrat-controlled Congress over bitter public opposition.
The decision earlier this month by a divided, three-member panel in the 11th Circuit Court in Atlanta, with the support of a judge named by President Clinton, condemned a central provision that will force uninsured Americans to buy health insurance or else face financial punishment.
The court said the mandate was an unconstitutional extension of government's excessive regulation of interstate commerce -- in this case, requiring people to purchase a private commercial product they may not need, want, or be able to afford.
The judges called the legislation President Obama proposed and signed into law March 22, 2010, "breathtaking in its expansive scope." And they didn't mean that as a compliment.
The national news media routinely, perhaps grudgingly, reported the court's decision, but in the days that followed seemed to dismiss the ruling as a one-day story with few lasting repercussions.
But the law, after all, was the authoritarian core of the president's social and economic agenda, one that he spent more than a year battling on Capitol Hill against a furious groundswell of grass-roots opposition that gave birth to the tea party revolution and sharply eroded his support among independents and senior citizens who feared the costly reforms would come at the expense of Medicare benefits.
The court didn't mince words, characterizing the new law's sweeping mandate as an unprecedented and dangerous assault on the fundamental rights and liberties of American citizens. That's why its criticisms deserve more attention than they have been given thus far. Like this one:
"This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives," the court ruled in its 2-1 decision.
The court said that if Congress can force Americans to buy, under penalty of law, health insurance plans under the guise of the Constitution's Commerce Clause, then they can compel us to purchase almost anything.
The appellate court said that if we let Congress to get away with this, then "there is no reason why Congress could not similarly compel Americans to insure against any number of unforeseeable but serious risks."
"Individuals subjected to this economic mandate have not made a voluntary choice to enter the stream of commerce, but instead are having that choice imposed upon them by the federal government," the judges said, adding that "we are unable to conceive of any product whose purchase Congress could not mandate under this line of argument."
Further strengthening their argument against the unrestricted reach of the Commerce Clause to sanction any and all regulation of our personal economic decision-making, the court set forth this self-evident constitutional barrier that it said Congress cannot violate:
"... what Congress cannot do under the overused Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die."
A key complaint by the court concerns the government's false claim that the financial charge it would levy on those who refuse to buy health insurance is actually just another tax, not a penalty.
"Not one of the courts which so far has ruled, no matter what the decisions, has agreed with the Obama administration that the penalty for not buying insurance is really a 'tax," said Grace-Marie Turner, president of the Galen Institute, a Washington public-policy think tank that has spearheaded opposition to Obamacare.
"The government thinks calling it a tax is its home-free ticket. It's unlikely to work," she said in a recent analysis of the appeals court ruling.
The case that the appeals court decided against the government was filed in Florida by 26 states, along with the National Federation of Independent Business, the nation's small-business association whose members will be hit hard by $52 billion in new taxes under the health care law.
Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, testified before the House Budget Committee in February that Obamacare will result in 800,000 fewer jobs at a time when good-paying jobs are in short supply.
But something else is at stake here in a legal battle that will end up being decided by the highest court in the land. "As with so many other issues in this historic debate, it ultimately all comes down to freedom -- and whether it will be lost or preserved pending decisions by the Supreme Court and the voters next year," Turner writes.
The 11th Circuit Court's unflinchingly courageous ruling lays out the deeply disturbing reasons why Obamacare poses the single greatest threat to freedom by an all-powerful federal government.
Obama Is a Robot That Needs Reprogramming
President Obama's legacy is shaping up to be a recurring cycle of rhetorical failures chasing policy failures, an endless, stupefying effort to convince us of the wisdom of pursuing -- again and again -- policies that have already failed.
This point is reinforced as we read reports about Obama's umpteenth luxurious golf outing while our economy and financial condition approach DEFCON 2 and Middle East turmoil continues apace.
From the superficial snippets we get from the liberal media, Obama doesn't seem to be too concerned with either domestic or foreign policy while on the links, but to the extent he allocates thought to either, he's contemplating his next speech more than deliberating over any substantive decisions.
From all appearances, he's not fretting over the grim jobs reports and hints of creeping inflation; he's not meditating or seeking advice about a new direction he could propose to navigate us out of this malaise.
He's thinking about his abysmal approval ratings, wondering how he can fob those off on President Bush, too. And he's thinking about how he can con the nation into permitting him to give us more doses of the same poisonous elixirs he crammed down our throats the first time.
If he really cared what the people think, he might try listening to them instead of just pretending to be on a listening tour. When an Iowan farmer tried to gently school him on the depressing effects of stifling governmental regulations, Obama cavalierly blew him off and launched into one of his canned monologues deriding income disparities and partisanship. He's got to be the closest thing to a robot ever to inhabit the Oval Office.
As an incorrigible and stunningly narrow-minded ideologue, Obama can't process information or ideas that don't conform to his presuppositions and predispositions. When his policies don't work, it must be because conditions were worse than he'd realized or he didn't go far enough. There is utterly no room for consideration of the possibility that his policies don't work.
So it was that last year when Obama returned from Martha's Vineyard, he didn't emerge revealing any hint of humility about the ongoing failure of his economic prescriptions. He didn't announce that economic realities had finally forced him to take a second look at the wisdom of his agenda.
Instead, he strode into Wisconsin and Ohio to unveil a "bold economic program," as if his $800 billion stimulus package hadn't been brassy enough. He called for "quickly" investing some $50 billion in roads, bridges and other public works projects and, of course, for his obligatory tax hikes for the evil "rich," who could always "afford to give back a little more."
I don't know why more people didn't outright ridicule this juvenile idea at the time. If not already, at what point will he have forfeited the privilege of being taken seriously about the economy? At a time when almost every thinking American was becoming increasingly horrified at the national debt, Obama was proposing that we increase it substantially more in pursuit of policies that had already failed. He never provided any glimpse into the bizarre thought process that had led him to believe that $50 billion could jump-start an economy when 16 times that amount had not.
In the past year, since Obama attempted that preposterous Stimulus II, the people have made it even clearer how opposed they are to his reckless Keynesian schemes, but he refuses to hear them. Just as with Obamacare, he has no intention of deviating from his programmed course. His only challenge is to repackage it -- and fool us into buying it in fewer than 54 speeches this time.
That's right. Believe it or not, in between holes, he's crafting a grand September speech, "mapping out a jobs package that he hopes can boost a sluggish economy and win over voters who are coming to doubt his leadership," according to the Los Angeles Times.
He's not about to propose that the government, to stimulate growth, relax its stranglehold on the private sector by loosening onerous regulations, easing the tax burden, and drastically reducing spending. Those do not compute.
He's going to propose -- in a different, perhaps more deceptive, form -- the same blueprint: government spending of borrowed money to "stimulate" growth. And he'll ratchet up his attack on Republicans, blaming them, along with his predecessor, for obstructing his ingenious reforms. To make his case, he will have to revise history to distort the fact that he had supermajorities in Congress long enough to get his way on the omnibus bill, the stimulus package and Obamacare and that they've all greatly exacerbated our financial crisis.
Obama's puerile predictability is pathetic, but even more so, it's tragic. If only there were a way to reprogram this robot.
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)
Posted by JR at 10:40 PM