Government Intervention in the Economy

Everyone knows the problems the are facing with health care and the economy - either they deal with them all of the time or surely heard about the problems in the news. I think it is appropriate to discuss this country's path down the welfare road. This is beneficial because for the vast majority of people, no one knows why they were brought into being much less their specific roll in our current debacle. The key to a successful future is an accurate understanding of the past.

Most of the country's welfare programs began, as one would expect, during and shortly after the Great Depression (which started in 1929). Whatever the real cause (which is still a topic of great debate today), ultimately the blame fell to the president at the time: Herbert Hoover. Franklin Delano Roosevelt defeated Hoover in the election of 1932 with an economic recovery plan called the New Deal, saying:

Throughout the nation men and women, forgotten in the political philosophy of the Government, look to us here for guidance and for more equitable opportunity to share in the distribution of national wealth… I pledge myself to a new deal for the American people. This is more than a political campaign. It is a call to arms.

-Franklin Delano Roosevelt, 1932 Democratic National Convention

Not only did Roosevelt beat out Hoover, but the democrats won in a land-slide, ousting the incumbent Republican majority in congress as well. Before I go into the New Deal, I think it is interesting to note that some economists of the time believed that the US economy was turning around in 1932 regardless of the next president.

President Roosevelt's New Deal was a significant shift in government policy giving the government more control over the economy and money supply, intervention to control prices, and agricultural production. The New Deal saw Roosevelt meeting with congress for the first 100 days he was in office. During these first 100 days, congress granted every request made by the President. This period also saw the creation of the Federal Deposit Insurance Corporation (FDIC). Wikipedia has a good list of New Deal Programs - I'm not going to talk about all of them. This is where Social Security, Farm Subsidies, the move away from the Gold Standard, the National Labor Relations Act (NLRA - This allowed the formation of labor unions), and the foundation for most modern welfare programs came from. Basically the New Deal was an effort to give the government more control over areas that the Constitution expressly prohibits (see my arguments in this post regarding this topic). Clearly any problem of the complexity of the Great Depression has more than one solution - FDR's approach assumed the government would know best.

For those eagle-eyed readers out there, you noticed that my graphic above included a section called the "Recession in Depression." In FDR's second term in office, there was a sharp spike in the unemployment rate. By this time, the second stage of FDR's New Deal was in full swing, including federally backed Unemployment Benefits and Mandatory Minimum Wages designed to increase the spending power of working-class Americans.

Today there is still fierce debate as to whether or not the New Deal helped or hurt the economy. According to One thing that is certain is that there were still other recessions (haven't you read the news lately?). With these new recessions come a host of recurring events: the incumbent president and political party catch the blame, the opposing party wins the next cycle of elections in a land-slide based on a platform of giving the American people the support they need, followed by a fury of legislation designed to increase government control over the economy with the intention of preventing further recessions.

When do we (the American people) put our foot down? When does it become blatantly obvious that the government has tried this trick before with the same results repeated time and time again? When do we demand to the federal government to stop arbitrarily assigning value to our currency? When do we demand that the government give back our money so that we can do with it what we choose instead of seeing it thrown away on another policy that we know won't actually fix anything in the long term? When do we the people demand that our rights outlined by the Constitution and Bill of Rights are once again honored by our chosen representatives?