Welcome to the Second Great Depression

Posted: Aug 04, 2010 12:01 AM
Welcome to the Second Great Depression

Last Tuesday morning, Secretary of the Treasury Timothy Geithner "welcomed" us to the recovery. Seriously. "[A] review of recent data on the American economy shows that we are on a path back to growth," he assured us. "The recession that began in late 2007 was extraordinarily severe, but the action we took at its height to stimulate the economy helped arrest the freefall, preventing an even deeper collapse and putting the economy on the road to recovery."

This is what we call whistling through the graveyard. It's Geithner channeling Groucho Marx circa "Duck Soup": "Who're you gonna believe? Me or your own eyes?"

The Obama administration wants us to believe them. What evidence do they provide to the effect that they "saved" the economy? Vagaries heaped upon vagaries; meaningless phrases piled atop meaningless phrases. No hard numbers of any value.

In fact, the Second Great Depression is just beginning. And just as during the First Great Depression, economic liberals are declaring that it doesn't exist. "The depression is over," President Herbert Hoover told a group of clergymen in 1930. "I am convinced," he said in 1931, "we have passed the worst and with continued effort we shall rapidly recover." In 1930, the national unemployment rate -- which was a true unemployment rate, not today's watered down version, which doesn't count people who have totally dropped out of the job market -- was 8.7 percent. In 1931, it was 15.8 percent. Today, our real unemployment rate is somewhere near 20 percent.

Hoover was wrong and so are Obama and his lackeys. And just like Hoover, Obama will take measures that are economically feasible in a strong economy but absolutely disastrous in a weak one.

After declaring the economy on the rebound, Hoover pursued three economic measures: raising tariffs, raising spending and raising taxes. Despite his personal opposition to the disastrous Smoot-Hawley Tariff Act of 1930, Hoover signed it into law, stating, "With returning normal conditions, our foreign trade will continue to expand."

He raised government spending as well; between 1929 and 1933, Hoover raised real per capita federal spending by 88 percent. He forced through the construction of the Reconstruction Finance Corp., an agency designed to lend money to banks and building and loan associations, among other businesses. "I have been called a socialist, a Bolshevik, a communist and a lot of other terms of similar nature," fumed Rep. Fiorello La Guardia (R-N.Y.), "but in the wildest flights of my imagination, I never thought of such a thing as putting the government into business as far as this bill would put it in."

Even as he raised spending, Hoover hypocritically called for tamping down the deficit. His solution: raising taxes. "Nothing will contribute more to the return of prosperity than to maintain the sound fiscal position of the federal government," he declared in 1931.

Sound familiar?

President Obama's supposedly rosy view of the economy is designed to justify further intrusion into the economy. And the measures he seeks are eerily reminiscent of Hoover's favored policies. Cap and trade, Obama's environmentalist plan, nearly started a trade war when it was merely introduced in Congress. Like Hoover, Obama opposes a carbon tariff that would level the playing field for American businesses disadvantaged by cap and trade -- and like Hoover, he has made no suggestion that he would veto cap and trade were it to include such a provision.

Obama clearly favors more spending -- in all of his talk about bringing down the deficit, he has never embraced wide-ranging cuts in federal expenditures. Rather, he attempts to blame President Bush for spending that created deficits, despite the fact that in Obama's first two years, he will have raised the national debt more than President Bush did in all eight years of his presidency.

Obama has focused, as Hoover did, on raising taxes. This week, Obama warned Republicans that he would "call them on their bluff" with regard to deficits. By that, he meant that he would push Republicans to raise taxes in order to prove their dedication to a balanced budget.

Obama justifies all of this, as Hoover did, with empty bravado about the strength of the U.S. economy. The difference between Obama and Hoover is that Obama knows that the economy remains weak. Hoover wasn't an ideologue; he was ignorant. Obama has Hoover's example to examine -- and he's willfully imitating it for redistributionist ideological reasons.

We're entering the Second Great Depression. Unlike the first one, our current administration is pushing America knowingly into the pit, all the while singing, "Happy Days Are Here Again."