Wednesday, January 5, 2011

Things the Tea Party is Deliberately Forgetting

The Tea Party is in power now. Their ideas about how economics work are about to be tested and they are going to be the people doing everything for the next two years. Here are some reminders of past Tea party movements in American History and how they ended up.

  1. Reconstruction. After the South was completely brutalized by the Civil War they had no infrastructure, no industry, and no economy. Their was nothing to get the economy started and the Republicans decided to jump-start the economy. They built infrastructure, rebuilt Atlanta, Montgomery, and other southern cities so that Americans could have the infrastructure of the north. This went on from 1866-1877, 11 years. Then the Democrats came to power under President Rutherford B. Hayes. The South which once was as industrial as the North has not been the same economically since. The only major project after reconstruction was of course the Tennessee Valley Authority bringing power to rural people and jobs to one of the country's most impoverished states.
  2. The Great Depression. People overspent and overlent until people didn't have enough money to keep the money flowing. President Herbert Hoover comes to power and seven months later Black Friday happens and the economy is in depression. He holds fast to the modern Tea Party's belief in Laissez-faire, that the government should be as far from the economy as it possibly could. The economy continued to shrink for the next four years until the Keynesian (the economic philosophy that government can boost the economy through spending) Democrats under President Franklin Delano Roosevelt bring on the New Deal creating jobs for people, keeping their resumes up to date and making the decelerating economy speed up for the first time in four years. The process was long, a good six years until WW2 created more jobs continuing the New Deal's good work. Some people would say that it was World War 2 that ended the depression. But may I ask the question, where would the United States have got the money to wage war on Germany, Japan, and Italy in 1933?????
  3. 1970s. During the 1970s big oil hiked the price up quickly once President Carter entered office and made the economy slow because we were (and still are) addicted to petroleum as was proved then. Reagan was elected following the Iran-Contra affair and Big Oil decreased the cost of gasoline. This is a different reason from the past two examples and may be discarded because of different reasons for the beginning and end.
  4. 2008. People overspent and overlent until people didn't have enough money to keep the money flowing. President Obama entered office and proposed legislation that was strong and would move the economy out quickly. Republicans viciously amended the legislation to the level of vandalism until the bills were barely powerful enough to do anything, blamed it on the Democrats, and then say it is the Democrats fault that the economy is not back to 2000 levels. They win in the 2010 election and expect the laissez-faire of President Herbert Hover to work in 2011.
Here are the reasons for why laissez-faire economics did not and will not work now in order of importance:
  1. It assumes that a populace whose vast majority (I estimate about 98% to be generous) do not understand what money is will act appropriately to bring the economy back to the levels required.
  2. It assumes that businesses are going to take risks that are almost guaranteed to fail with the first point will continue to expand and manufacture when they are in the red.
  3. It assumes that these two things are going to happen with practically no insurance, security, or any guarantee of money coming back to their investments. Basically, the economy is at a standstill at best, actually it is more likely to go into free-fall like the period of 1929-1933.
Here are the reasons why Keynesian Economics works:
  1. It gives businesses (large and small if it is done correctly) some extra cash to keep their employees so they can still be involved in the economy during a rough patch. It allows them to not have to cut jobs which makes unemployment better and then the economy more stable.
  2. It keeps banks open and stocks decent which make it so people don't lose their investments and continue to be productive members of society and active members of the economy. This also makes the rough patch smaller.
  3. It gives jobs the now smaller number of people who are out of work, which keeps people employed which is an essential part to any economy. This keeps the economy flowing with more people active.
These concepts are all based on the truth as seen by history and is agreed upon by any economist even President Bush's economic advisers.

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