Below is an email I wrote a correspondent at MSNBC.com in response to this article:
http://www.msnbc.msn.com/id/29388258/
Hello Mr. Fineman,
I just finished reading your current article: “Reagan redux”. While the article is full of enthusiasm for President Obama's sweeping changes and hopeful rhetoric, I take issue with the content, especially with the comparison to President Reagan. As your article points out, Reagan expanded the federal government with increased defense spending and cut taxes, which lifted us out of the deep recession we were in, because of historically tested economic methods … not simply a mysterious booster shot of “optimism”. Unlike Reagan’s plans to reduce the overall scope of the Federal government while expanding our military force, President Obama has decided to support unprecedented, massive expansions in entitlement programs, along with agencies and policies which rob aspiring Americans from the precious autonomy which drives our most productive citizens and businesses. It is highly unlikely that these gigantic “entitlement” programs will ever be shrunk, once the general public has gotten a taste of the numbing elixir which dulls the desire to work, given the paltry reward for the sacrifice or risk.
Your subheading declares that “Like the Gipper, Obama offers hope”. I don’t see how the comparison can be made. Reagan based his hope on the time-tested model of free-enterprise capitalism. It was his belief and understanding that a strong America emerges when those daring enough to produce, risk and succeed are allowed to keep more means (lower taxes) with which to do so. Obama has built his hope on a time-tested model as well… one which history has shown leads to lower productivity, higher unemployment, and less reward for those willing to TRY. The funny thing with “hope” is that it doesn’t really count for much unless the correct actions are taken. I can “hope” that my loved one’s cancer will disappear by their simply wearing all purple clothes, or other such nonsense, but unless this actually yields the desired result, my “hope” produced nothing more than a warm feeling. We are all being told that historically proven methods for economic growth do-not-apply in this case, and that a government with a horrific track-record for governance now magically has the answer...one which has been historically proven to stunt economies.
I agree that both Ronald Reagan and Barack Obama are dynamic figures who clearly move the country to action. I pray that President Obama’s departure from the proven ideals embraced by Reagan will not lead us down the road to American mediocrity, resulting in a country Karl Marx could only dream of. I like hope…just not false hope.
Regards,
-Cameron Akrami
Glendora, CA
11 comments:
Wow! Nicely said, sweetheart!
and Marc said...
Hey Cameron,
It’s a contradiction to say, “Reagan expanded the federal government with increased defense spending and cut taxes, which lifted us out of the deep recession we were in, because … Reagan based his hope on the time-tested model of free-enterprise capitalism.” Defense spending and tax cuts are both mechanisms used by the government to interfere with free enterprise. Individuals and private businesses don’t stand a chance in this economy without such interference. It's what they're calling "stimulus" these days.
Free-market capitalism is what precipitated the Great Depression. What lifted the country out of the Depression? Massive government intervention, social works programs, redistribution of taxpayer money into federal subsidies. So since the 30’s, there really hasn’t been anything resembling “free- market capitalism” in this country, or in any other successful capitalist economy. The lesson was learned from the Great Depression that true free markets are an abysmal failure because they’re inherently unstable. Ever since then, government has heavily subsidized just about every industry of consequence, from agriculture to technology to pharmaceuticals to weaponry and defense. You’ll notice that every time the forces of free-market capitalism gain a foothold, the economy booms for a brief period before it collapses and we enter another recession. The government then has to step in, shovel more money in the proper direction, restore balance, and hope for a turnaround.
Whether stimulus takes the form of corporate welfare or social welfare makes no difference from the perspective of government (although one may be favored over the other, depending on to whom the president and Congress feel more indebted), so long as it has the intended result of rescuing the economy from collapse. Obama knows that more corporate handouts would be a dangerous political move right now, given the public’s intense dissatisfaction with the bailouts of the automotive and banking industries. What do people really want right now? They want direct assistance that will save their homes from foreclosure and their families from hardship. The banks that caused this mess are getting bailed out; why aren't the people affected by the fallout? And in reality, they’re the consumers whose spending is critical to the functioning of this economy. Without them, there’s no hope for recovery unless government begins to confiscate private property to pay off corporate debt … which is really what taxation is about in the first place. But that’s another topic.
The purpose of an economy is to provide the goods and services necessary to meet the needs of a society. Truth is that the economy no longer exists to fulfill that purpose, but rather as a means of generating extraordinary wealth for those willing to gamble on its success or failure. That's why it's unstable. Too bad the rest of us are along for the ride, depending on it to keep us fed, clothed, and sheltered. Incidentally, the richest people in the world didn't get that way through hard work -- they're rich because they're savvy investors (just look at Warren Buffet) or monopolists. This makes them a fundamental part of the problem.
Great response Cameron. You are spot on with your point that Government should encourage businesses to invest in the future instead of encouraging people to sit home and collect a check. The reponse of Obama and Reagan to a very similar situation could not be any more opposite. Reagan got government out of the way. Obama is forcing government down our throats.
In response to Laila,
You should read this article which came out this week by Patrick Buchanan. http://www.humanevents.com/article.php?id=31188 I don't agree with many articles by Pat but this one hits the mark. The Great Depression was most likely created by the Federal Reserve's lack of action and the Government Programs in response most likely prolonged the Depression instead of raising us out of it.
Reagan had it right but I think that pride gets in some people's way and they can't admit that a conservative Hollywood actor actually knew what he was doing.
Marc said...
First I think we need to dispel the notion that a $300-$600 annual stimulus check is going to encourage people to quit their jobs, "sit and home and collect a check." I know of no one that would even consider such a foolish suggestion, mostly because $600 wouldn´t even be able to cover a week's worth of debt for the average American. Those who truly sit at home and collect checks are the investors who don´t do an ounce of work, yet reap pectacular profits merely because they can afford to risk their money. Secondly, those stimulus checks were distributed under Bush´s watch - they have nothing to do with Obama. Obama´s plan calls for tax relief (in the form of tax credits), not direct handouts to the general public. I personally take much more offense at the $3500 per child tax credit
that effectively encourages people to breed, increasing a family´s financial burden and making it more likely that they will seek state and federal welfare assistance. I would also like to ask, while we´re on the topic: is there something so terribly wrong with giving taxpayers a little bit of their money back (which they worked hard for in the first place)? Taxpayer relief is just that - easing the burden of the taxpayer. It shares nothing in common with the welfare payments that get libertarians in a bunch.
As for Reagan, perhaps there are some good things that can be said about the man...if you were able to benefit from his programs. Reagan didn´t just offer tax credits, he offered a tax rate decrease to the wealthiest Americans (from 70% down to 28%), nearly eliminating progressive taxation based on income. His tax cuts to the wealthy totaled almost $200 billion for his first term, and the richest 1% of Americans saw an 87% increase in their after-tax income from 1980-1990. At the same time Reagan cut Social Security disability for hundreds of thousands of people. He cut social programs by $140 billion his first term. During his last term, hunger in the US increased by 50% (only in the US and in
sub-Saharan Africa did hunger increase during this period). He increased defense spending by $180
billion. During Reagan´s tenure, the US was the only vote (out of 155 countries) against a ban on
weapons in space. The US was the only vote (out of 136) against a ban on the development of WMD´s. The US was one out of three votes (out of 140) against a nuclear test freeze. Much acceleration of the arms race can be attributed to Reagan´s lavish defense spending -- a legacy that has been left for us to deal with today.
Yes, Reagan was always very fond of the free market concept, yet he certainly didn´t abide by it. He
was well known for stifling free trade and for pouring huge amounts of public money into industry.
Many major (inefficient)industries in this country would have been decimated by foreign competition
had he not done so. The government had to step in and regulate to ensure the survival of industry (déjà vu?). Reagan was nothing less than a shill for corporate America. Sure, other presidents can be held accountable (many Democrats and Republicans). But Reagan was by far one of the worst. The public debt of the US increased 300% during the Reagan years.
I´m not saying that I think Obama´s policies are necessarily correct. I personally would love to witness the collapse of capitalism in my lifetime and see it replaced with something far more cooperative, humane, and sustainable. Obama is doing what is necessary to keep American capitalism afloat (or at least what he thinks is necessary). Only time will tell if his policies will work as he expects them to.
Reagan certainly had a lot of detractors during his time in office, and many of them were notable, prize-winning economists. Yet Reagan did pull us out of a severe recession, the side-effects
notwithstanding. Obama will likely do the same - and will at least pretend to take people of all races and social classes into consideration when formulating his policies.
As for Buchanan´s article, all I can say is that the US economy would likely never have recovered
from the Great Depression if government hadn´t stepped in. What raised us out of the Depression if
not government intervention? World War II? Probably, but who can argue that WWII wasn´t government-sponsored stimulus, even if (or especially if) it was opportunistic? Federal Reserve policy might have hastened the Great Depression, but ultimately it was the unsound structure of the economy and the whim of the investor that brought it down. And so it keeps repeating. It would have never happened in an economy built upon human need rather than speculation.
This is actually from Laila (not Marc)…
So I’m really curious why republicans say no one should be “forcing government down our throats”, but when it comes to something like gay marriage they are all for the government stepping in and stopping that. It’s a bit of a contradiction, no?
Laila,
Your arguments are interesting and with merit but I am wondering if they come from a broad base of knowledge on the subject. This article lays out the two main schools of thought currently at battle in the United States. Wikipedia entry on Economics
The first one is Keynesian economics and the second one is based on the writings of Milton Friedman and listed in the article under "Chicago School of economics". If you read the Wikipedia entry on Keynesian Economics you will see that the Obama administration is following it to the T. However if you read the Wikiepedia article on the Chicago School of Economics you will see that there is a stark contrast here and that in fact Friedman blames the Federal Reserve for the Great Depression and the governmental response for prolonging it. This school of thought harkens back to Classical economic theory of private selfish interests ending up being good for the economy as a whole since the market is free to react to the demands of the market. Government, according to this school of thought should get out of the way and taxes should be minimal across the board; not just low for the poor. This actually works out for the betterment of society as a whole as it is generally thought that under this school of economic theory that depression is impossible. Investment is spurred which then leads to higher GDP which then leads to a higher employment, a greater range of goods at a higher quality, and a better standard of living.
These basic principles are generally unknown by the public at large. This is why such decisions should be left to people who are specifically educated to understand such matters instead of letting matters of economic principle fall into mob rule as Obama seems to be trying to do right now.
Marc said...
Bryan,
I think what we have here is not so much a difference in economics as a difference in politics. Friedman and Keynes, despite their many contributions to the field of economics, produced theories that were rooted in their respective political ideologies. To my knowledge, there has been no substantive evidence to date that wholly vindicates either man’s theories (or the theories of any economist). I think if such were the case, that there would be no debate today over monetary policy. But in fact, there is much debate, and I suspect that it is fueled not by a disagreement in economics so much as it is a product of the ongoing feud between differing political parties. This makes an objective analysis difficult. Obama’s most vocal critics are, of course, also his most aggressive antagonists. I doubt any of them have, as you say, a broad base of knowledge on economic matters beyond what their political and religious convictions will allow them. Some of his critics are in fact quite gleeful at the prospect of his failure. I think that such people are not qualified to offer economic advice, nor should their analysis be trusted.
I’m curious given the present state of things, or maybe even a far worse economic climate, what you would suggest to remedy the situation. So let’s get government out of the way and allow market forces to take over. What then? We’ve seen what “private selfish interests” have done – not even Alan Greenspan (who was first appointed by Reagan) could understand what went wrong. Here’s a tidbit of his 2008 Congressional testimony from Wiki:
“Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity -- myself especially -- are in a state of shocked disbelief.” Referring to his free-market ideology, Greenspan said: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.” Rep. Henry Waxman (D-CA) then pressed him to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Waxman said. “Absolutely, precisely,” Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
I think its important that we move beyond worn-out theories and step into the real world, where it becomes clear that laissez-faire doesn’t work. Government acts to satisfy vested interests. Business leaders and financial gurus don’t donate to political campaigns out of sheer goodness. They expect government to work in their best interest. During the past year government has acted to the tune of over a trillion dollars in their interest, with more to come. And this is aside from the substantial amount of subsidies that are regularly budgeted. I don’t think any of them complain when government disrupts market forces. Are any business leaders calling for an end to government intervention? If it was in their best interest, don’t you think they would be? Some of them may disagree with Obama’s approach, but I doubt any of them want to be left fending against Chinese or Mexican labor without protective tariffs. I know that GM and Chrysler sure are thankful for government assistance. Farmers are grateful that government buys their surplus and keeps commodity prices artificially inflated. I’m sure oil companies feel the same way. There’s hundreds, if not thousands, of similar scenarios.
Marc,
What you are failing to understand is that raising taxes on the productive and lowering taxes on those who sometimes don't even pay taxes is an emotional response. Lowering taxes across the board however is a logical response. Let me explain.
By incentivising the productive to invest more in their future, they in turn create jobs which grows the economy which helps out the poor because now they have jobs and the Government only had to get out of the way. Magical how that work right? But I know you will never see the logic because you are stuck in your emotional response.
Marc said...
Well, Bryan, I believe that the welfare of the many should come before the profit of the few. Call it emotional if you like; I prefer to call it ethical (something which, by the way, usually eludes traditional economists). Providing “more jobs” to help “grow” the economy is, at best, a short term fix to a much more profound problem that has been with us for a long time. When you consider that the US has the highest GDP in the world, yet fully one-eighth of its people live in poverty, it becomes clear that a robust economy doesn’t necessarily portend individual well-being. I don’t think that all of those 40 million people are lazy. Many of them are being exploited and simply don’t make enough money to live on no matter how hard they work. We need only to look to China, where US manufacturers are paying workers pennies per hour and engaging in sweatshop practices so they can turn around and sell a product at a 25,000% markup. But that’s free-market capitalism for you – unleashed in countries that have few, if any, laws to protect its victims.
I think the truth is that many who rail against the socialist elements of our economy are not at all interested in helping to improve the general standard of living for everyone. They’re concerned only with lifting people out of poverty far enough to make them able consumers. There is nothing magical about any of it. It’s all very much calculated.
It’s true that some people do expect free handouts, but I think that they’re in the minority. Furthermore, welfare reform in the mid-90’s (spearheaded by Bill Clinton) made it much more difficult for these people to get free money from the government – there is no longer an “entitlement” program, and there hasn’t been for 13 years. As the law now stands, a welfare recipient must either have children or be pregnant. Beneficiaries are limited to five years of lifetime cash assistance (or less, as may be determined by the state they live in) and usually have to be actively seeking employment to qualify. As a result, there are far fewer people on welfare now than there used to be (we’re at a 40-year low right now).
Marc said... (Quote)Providing “more jobs” to help “grow” the economy is, at best, a short term fix to a much more profound problem that has been with us for a long time.(end Quote)
Wow! I don't know what to say to that. You obviously don't believe in capitalism or a free market at all. Also I never ever once said there should be no regulation or no law. Obviously workers need protections. However you have to balance those protections with the costs they may cause for businesses which would then possibly force business to employ less people thereby actually hurting the worker.
You believe in an entirely different world though where the all encompassing arm of the government is the hand that feeds. I reject that thinking outright and I call on History to provide the lessons by which we determine that socialism fails every time.
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