Can We Credibly Compare the Current Economic Crisis to the Great Depression?

It's long been cliché to remark that our current recession is the worst economic downturn since the Great Depression. Indeed, President Obama, while a candidate and once in office, incessantly harped about how today's economy is the worst since the 1930s. While I think most people realize the magnitude of the current crisis --- my best comparison is to 1990-91, when I can literally recall people fleeing California's recession by the truckload --- it strains reason to endlessly hammer away at the Great Depression analogy. And that's why, as sympathetic as I am to the historical scale of our dislocation, I'm still not convinced by arguments like Joe Nocera's, at New York Times, "The 1930s Sure Sound Familiar." Nocera discusses Since Yesterday, a history of the 1930s by Frederick Lewis Allen. After a bunch of nostalgic whimpering, Nocera gets down to what's really bugging him:

What dominates “Since Yesterday” — as it must dominate any history of the Great Depression — is the government’s responses to the crisis. Herbert Hoover was “leery of any direct governmental offensive against the Depression,” writes Allen. “So he stood aside and waited for the healing process to assert itself, as according to the hallowed principles of laissez-faire economics it should.” Sticking to his convictions, Hoover allowed the country to sink deeper and deeper into Depression, becoming in the process one of its victims — “along with the traditional economic theories of which he was the obstinate and tragic spokesman.”

Then came Roosevelt, untethered to any economic theory and willing to try anything to get people back to work. Allen describes the alphabet soup of agencies he created, the deficits he generated, the regulations he enacted. The economy, which bottomed out in 1932, steadied and then began to grow until, by 1937, it appeared that the Great Depression had ended.

Allen then takes us through the terrible days of late 1937, when the economy collapsed again. “Roosevelt’s Depression,” businessmen called it, blaming it on a business tax they particularly loathed. In fact, Allen makes the convincing case that the real problem was that Roosevelt had tried to do something business wanted: balance the budget. Shrinking government spending dried up demand. And not until the following spring, when he reversed course and decided to “go in for heavy spending again,” did conditions begin to improve.

The tragedy of Washington today, as the supercommittee begins its task of finding $1.2 trillion in cuts, is that nobody seems to remember the lessons of “Since Yesterday” — and most other books about the Great Depression.

When I think back to the 1930s, I don't necessarily pine for the return of Franklin Roosevelt. Economists differ on the downturn of 1937, and from my recollection it wasn't until the economic mobilization of World War II that the American economy really recovered --- and hence it was war mobilization, and not Democrat industrial policies, that finally brought an end to the era. That said, I'm not an economist. But there was a good piece from Bradley Schiller back shortly after Obama took office, "Obama's Rhetoric Is the Real 'Catastrophe'." What's interesting is the incomparability between the scale of crisis then to today:

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression...

This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

It goes on like that (here). And Schiller argues that the administration's economic fearmongering is actually dangerous, in how it perverts economic expectations and consumer confidence.

But then again, things are bad, right? Just not as bad as the 1930s? Well, I'm interested in a different comparison being made, that the U.S. might be entering into a long period of sustained high unemployment, and that the American economy could be resembling the European economies after the oil shocks of the 1970s. The major industrial states like France and Germany became accustomed to long-term (secular) unemployment rates of often 10 percent or more. Thinking about that, David Leonhardt, at New York Times, gives us another reason not to compare the current era to the 1930. The economy of the Great Depression was in fact one of the most technologically productive ever, "The Depression: If Only Things Were That Good." The counter-intuitive economic innovation of the day, combined with the drastic shedding of dead weight bloat and over-appreciation in the economy, laid the basis for the sustained recovery by the 1940s:

UNDERNEATH the misery of the Great Depression, the United States economy was quietly making enormous strides during the 1930s. Television and nylon stockings were invented. Refrigerators and washing machines turned into mass-market products. Railroads became faster and roads smoother and wider. As the economic historian Alexander J. Field has said, the 1930s constituted “the most technologically progressive decade of the century.”

Economists often distinguish between cyclical trends and secular trends — which is to say, between short-term fluctuations and long-term changes in the basic structure of the economy. No decade points to the difference quite like the 1930s: cyclically, the worst decade of the 20th century, and yet, secularly, one of the best.

It would clearly be nice if we could take some comfort from this bit of history. If anything, though, the lesson of the 1930s may be the opposite one. The most worrisome aspect about our current slump is that it combines obvious short-term problems — from the financial crisis — with less obvious long-term problems. Those long-term problems include a decade-long slowdown in new-business formation, the stagnation of educational gains and the rapid growth of industries with mixed blessings, including finance and health care.

Together, these problems raise the possibility that the United States is not merely suffering through a normal, if severe, downturn. Instead, it may have entered a phase in which high unemployment is the norm.

On Friday, the Labor Department reported that job growth was mediocre in September and that unemployment remained at 9.1 percent. In a recent survey by the Federal Reserve Bank of Philadelphia, forecasters said the rate was not likely to fall below 7 percent until at least 2015. After that, they predicted, it would rarely fall below 6 percent, even in good times.

Not so long ago, 6 percent was considered a disappointingly high unemployment rate. From 1995 to 2007, the jobless rate exceeded 6 percent for only a single five-month period in 2003 — and it never topped 7 percent.

“We’ve got a double-whammy effect,” says John C. Haltiwanger, an economics professor at the University of Maryland. The cyclical crisis has come on top of the secular one, and the two are now feeding off each other.

In the most likely case, the United States has fallen into a period somewhat similar to the one that Europe has endured for parts of the last generation; it is rich but struggling. A high unemployment rate will feed fears of national decline. The political scene may be tumultuous, as it already is. Many people will find themselves shut out of the work force.

And if this is so, the solution is not to become more like the European Union nations. That is, the Obama administration's massive debt and deficit policies are more likely to turn the U.S. into France, or heaven forbid, Greece. And thus, back to Joseph Nocera pining for the governmental activism of the 1930s. He's wrong in his comparisons, and he's wrong in his proposals. We need to invigorate the private sector and productive individualism and innovation. We need to see 1000s of Steve Jobs bloom. I'm not so pessimistic that we won't see that happen. I expect the U.S. to have another decade of booming growth similar to the 1990s. We just need to let markets work and get the hell out of the way.

RELATED: At The Hill, "Obama wants $35 billion for teachers, first-responders first" (via Memeorandum). Sounds laudable, but more of the same, unfortunately.

The American Revolution Was Not About Wealth Redistribution

Toward the end of this ABC News report, reporter T.J. Winick suggests that Occupy Wall Street has "yet to attain tea party-like influence," and he poses the possibility that the protesters might have a comparable tea party-like impact on the 2012 elections. This comparison to the tea parties is interesting. The progressive political establishment did everything it could to discredit and destroy the tea parties. Now though the tea party movement has set the modern standard for successful political change. But Winick's comparison is inaccurate in a fundamental way. Tea parties call on the heritage of the American Revolution as a model to return to the rule of limited government. The Occupy Wall Street protesters, on the other hand, are demanding, in this modern age of the gargantuan state, an even larger government role in public life, and especially the expansion of government power to forcibly confiscate personal income and wealth and redistribute it to a relatively undefined strata of today's petit-bourgeois and mass proletariat. Not only do the Wall Street protesters have the backing of the International Socialist Organization, but radical progressives aligned with the Democrat Party are agitating for revolutionary change. Commenting on the "Declaration" from the Occupy Wall Street General Assembly, David Atkins of Hullabaloo writes:

The General Assembly in this well-considered document has hearkened back to a much older and more florid declaration that similarly began with a statement of principles and a list of grievances.

It is an important beginning. The General Assembly has lit the match. Now it's up to America at large to understand what is at stake, and turn a protest into a revolution.

Adkins' link takes us to the Declaration of Independence. But this is incorrect as well. The American colonists were rebelling against unjust taxation and the rise of British tyranny. In contrast, the protesters in New York, and their allies such as Michael Moore and Rosanne Barr, are really agitating for revolution based on a entirely different statement, The Declaration of the Rights of Man and of the Citizen. That declaration, issued in 1789, is a fundamental document of the French Revolution, and was heavily influenced by Jean-Jacques Rousseau. It embodied the Rousseauian concept of the "general will," which was a Counter-Enlightenment precursor to the forced collectivization of the 20th century's communist gulags. This is actually very elementary political philosophy. ABC News makes the comparisons to the American Revolution, which implies a more mainstream or reformist purpose. Adkins cloaks his revolutionary agitation, erroneously, in the Jeffersonian model. This is pure progressive lies and deceit, for what today's radical left really wants is regime change like the Russian Revolution of 1917, which led the the establishment of the Soviet Union in 1921, or the Cuban Revolution of 1959, which replaced Fulgencio Batista with the communist regime in Cuba. It won't happen any time soon. But as long as the economic crisis continues the hardcore progressive-socialists will gain increasing media attention, and the sympathies of the modern left's celebrity fifth columnists and useful idiots.

THEORETICAL BACKGROUND: David North, at World Workers Party, "Equality, the Rights of Man and the Birth of Socialism."

VIDEO CREDIT: Jane Hamsher's communist Firedoglake, "'To Express a Feeling of Mass Injustice': #OccupyWallStreet Hits a Tipping Point."

Commemorating September 11 on a Left Coast Liberal Campus

From former Long Beach City College student, and current UCLA senior, Barbara Efraim, at Human Events. An excellent piece.

Ford Drive One 'Press Conference' Commercial Rips Auto Bailouts

At Hot Air, "Wow: Ford ad blasts bailouts — and perhaps more."

The statement that America is about taking risks and enduring failure rather than expecting government to bail everyone out sounds more like a big thumb in the eye of the Obama administration, whose latest jobs bill keeps extending unemployment benefits, and which continues to propose spending billions on subsidies for businesses that can’t succeed on their own — like Solyndra.

No doubt. It also backhands Obama on his dismissal of American exceptionalism.

NASA Aerial Video of 9/11

Via Israel Matzav:

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Paul Simon Sings 'Sounds of Silence' at New York 9/11 Ceremony

Via Blazing Cat Fur:

President Bush Reads Lincoln Letter at 9/11 Memorial Service in New York

Via Althouse, who publishes the text of Lincoln's letter:

September 11 Memorial Ceremony in New York

Bloomberg took heat for excluding clergy and firemen, but I'm sad I wasn't able to attend.

At New York Times, "Bush and Obama: Side by Side at Ground Zero":

For the first time on Sunday, President Obama and former President George W. Bush stood together at the site of the Sept. 11 attacks, listening as family members read the names of lost love ones and bowing their heads in silence to mark the moment the planes hit.

In May, Mr. Bush declined Mr. Obama’s invitation to join him at ground zero after the raid that killed Osama bin Laden. But on this morning, they stood shoulder to shoulder — commanders in chief whose terms in office are bookends for exploring how the United States has changed since Sept. 11, 2001, particularly in its response to terrorism.

The tableau was striking: the president who spent years hunting Bin Laden next to the one who finally got him. The president defined by his response to Sept. 11 standing alongside the one who has tried to take America beyond the lingering, complicated legacy of that day.

Mr. Obama read from Psalm 46: “God is our refuge and strength,” which an aide said he chose because it spoke of perseverance. Mr. Bush, the wartime leader, read a letter from Abraham Lincoln to a widow who was believed to have lost five sons in the Civil War.

More at that link above, and at Memeorandum.

And at Althouse, "President Bush, reading Lincoln's letter at the 9/11 ceremony in NYC."

9/11 Tributes

From Bruce Kesler, at Maggie's Farm, "My Son, Age 11, Made This 9/11 Video For His 6th Grade Classmates."

RELATED: From Dana Loesch, at Big Journalism, "All Hail Salon, the 9/11 Tribute Police."

EXTRA: At Atlas Shrugs, "INFAMY."

MORE: From Glenn Reynolds, "SO HOW TO NOTE THE TENTH ANNIVERSARY OF 9/11?"

America's Taken a Hammering Since 9/11, But ...

From Richard Littlejohn, at London's Daily Mail, "America's taken a hammering in the decade since 9/11. But never doubt that it can rediscover its awesome self-belief":

My family connections with the U.S. stretch back almost half a century. I’ve been a regular visitor since 1969, the year of the moon landing and Woodstock.



Although it is a vast continent, there are ties which bind all Americans from New York’s wealthy Upper East Side to the kind of tumbleweed, one-horse towns familiar from movies like The Last Picture Show.



The proud patriotism which European liberals despise and mock is both genuine and sincere. It cuts across class, religious and racial divides.



Most people in the U.S. still subscribe to the notion of American ‘exceptionalism’: the idea that theirs is a unique nation, forged from revolution; underpinned by a properly functioning democracy and the rule of law; blessed with abundant natural resources, human ingenuity and endeavour; and insulated by geography and military might ...



The American Century may have come crashing to a tragic halt on 9/11, but we must all hope the U.S. soon recovers its sense of purpose and self-belief.



I still have faith in the American capacity for ingenuity, enterprise and reinvention. The idea of American exceptionalism may be battered, but it hasn’t been extinguished.



We need a strong, confident, optimistic, outward-looking America. It’s still the planet’s last best hope. If you doubt that, imagine living in a world dominated by those bastions of liberty, China and Russia. The EU is a basket case, riddled with corruption and duplicity.



The U.S. has always emerged stronger from wars and economic depression. Despite the traumas of the past decade, it still can.



As we prepare to remember those who died on 9/11, let’s pray nothing else bad happens.

Do RTWT.



I agree with Littlejohn entirely, and the something else bad happening would be Obama's reelection, so it's not as if things are outside of our control. The GOP has work to do, and I won't be sitting on the sidelines. When the going gets rough, Americans roll up their sleeves. But sometimes it feels as though only half the nation represents heartland America, which is the repository of our historical goodness. That other half just hates our exceptionalism and wants to destroy all that has held us together for so long.



More on this later, as always ...

The Invasion of Poland, September 1, 1939

I posted on this last September:

AP Interview With Former New York Mayor Rudy Giuliani

It's getting close to the 10-year anniversary, so expect lots of 9/11 coverage across the media-sphere over the next couple of weeks. See "AP Interview: Post-9/11 politics of Rudy Giuliani" (via Memeorandum).

'I Have a Dream'

Today's the anniversary of Martin Luther King, Jr.'s, speech:

I'll try to put something up on this later, but check USA today, "Prayer service pays tribute to Rev. Martin Luther King."



And check Linda Valdez, at Arizona Republic, for just how screwed up the left's vision of Dr. King is today: "Today's Dems, progressives would disappoint Rev. King."



The dream is alive. Blacks have squandered much of it, IMHO. Not all of them, but an awful lot have no clue on how much equality they enjoy today. But more later ...

The Gettysburg Address

Delivered by President Abraham Lincoln, November 19, 1863, at the dedication of the Soldiers' National Cemetery in Gettysburg, Pennsylvania. I spend time discussing the Gettysburg Address during my coverage of Chapter One in Bessette and Pitney's, American Government and Politics: Deliberation, Democracy, and Citizenship. Yesterday, as I pulled the speech up onto the projection screen, I asked students in class what they thought of it. Not a single student raised their hand. And this has been a pretty lively discussion group so far, so they honestly weren't familiar with it. That's why I spend extra time on it. I feel it's important and also that students are shortchanged by not knowing so powerful a statement on human freedom. It's such a vital affirmation of our liberty and the promise of equality. I love Abraham Lincoln. I'll be discussing the speech all day today:

Four score and seven years ago our fathers brought forth on this continent, a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.



Now we are engaged in a great civil war, testing whether that nation, or any nation so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this.



But, in a larger sense, we can not dedicate -- we can not consecrate -- we can not hallow -- this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth.

'Blue Suede Shoes'

Zilla mentioned she loves Elvis, and I'm throwing in some Carl Perkins too, and some rare 1955 footage with Johnny Cash and Buddy Holly as well:

More blogging tonight.

More Mark Steyn!

At Blazing Cat Fur, "John Oakely interviews Mark Steyn."

Bill Whittle in Newport Beach!

I have College Day at LBCC in the morning, so a big write up will have to wait. Note for now that the Newport Beach event was intimate and informative. Bill Whittle is a captivating speaker, very scholarly and counterintuitive on a number of points. And host Mike Munzing was welcoming and the guests energized and engaged. Great food too. More later!

The U.S. Still Has a Promising Future?

Well, I certainly hope so.



But check Michael O'Hanlon, at Los Angeles Times, "Despite Problems, the U.S. Still Has a Promising Future":

Amid all the talk of gloom and doom in the United States, with the stock market's near-crash and the renewed threat of a double-dip recession, it is worth pausing to remember that the United States remains the greatest country on Earth. It is also the country with the most promising future. I make these assertions not as a matter of national pride, but as an analytical conclusion.

And he makes an excellent argument. The problem --- and I know it's a problem, because I'm just like O'Hanlon on this --- is that his analysis is almost completely structural. That is, O'Hanlon's looking at all this recent turmoil from a comparative power analysis interpretation, which almost systematically excludes internal political determinants. We can extrapolate from past patterns of America's remarkable exceptionalism and global preponderance and expect things to flow along fairly well simply because for all our troubles, no single other nation matches America's bounty or prospects. But the debt downgrade, as Danial Henniger points out today, is the ultimate signal that American hegemony is shrugging. To use Mark Steyn's analogy, we're like a prize fighter who's been hammered, and the opponent's sitting at the opposite stool, counting the seconds until the bell rings to come over for another round of pummeling. That's to say, for example, when Britain fell from preeminent status after WWI, and most definitely at the conclusion of WWII, the mantle of global political and eocnomic leadership passed to a benign power across the Atlantic, the United States. The U.S. had not only resisted the hegemonic role during the 1920s, but after WWII we did just about everything in our power to restore the defeated European nations and Japan to economic vitality and competitiveness. As America declines now --- and I'm using decline now for the first time really in agreement --- there's is no commensurate situation of the leading power passing the baton to a friendly rising power, as we experienced in 1945. China and Russia cooperate where possible but will seek advantage from America's weakening position, as power politics dictates, and that's while at the same time China is paradoxically hemmed in further from America's debt problems (mutual vulnerability forms a trace element of U.S. power internationally). And of course toss into the mix President Obama's hellbent agenda of making the United States the unexceptional nation, and well, let's just hope he's out in one term, November 6th, 2012. And the key factor for the electorate is the massive Democrat debt overhang. We're heading into a double-dip recession, some say. The Fed, for example, promised zero percent interest rates until 2013 because it expects no growth. The only thing good about this is that it almost guarantees that the Democrat ticket will lose next November. Even then, Republicans have been nearly as addicted to spending as the Democrats, with G.W. Bush's Medicare prescription drug expansion being Exhibit A. And the debt overhang will accelerate the collapse of U.S. world leadership unless two things happen: (1) we cut spending, and (2) the economy grows at a sustained pace of growth, say at three percent annual GDP for a decade or two, and then some. I can't see things turning around unless we have a combination of those two things, and without that we'll see a steady erosion of both U.S. global influence and a decline in the U.S. standard of living at home.



So, yes, Michael O'Hanlon makes a good case for continued optimism, but a more thorough analysis must consider the current failures of the American political system, and most importantly, the epic failures of the Democrat Party's expansionist, economic-killing social welfare policies.



More on this later ...

America as Less Than No. 1

I've been thinking about this. I find myself losing my normal optimism on America, which is extremely unlike me.



See Danial Henniger, at Wall Street Journal:

The U.S. is far from finished. The private economy—from the biggest corporations to innumerable dreamers launching start-ups—is fit and eager. But make no mistake: The U.S. has taken a hard hit to its 65-year status as the world's pre-eminent nation.

RTWT.



I'll have more on this topic in upcoming posts.

A Short History of the Entitlement State

At Wall Street Journal, "The Road to a Downgrade":

Even without a debt default, it looks increasingly possible that the world's credit rating agencies will soon downgrade U.S. debt from the AAA standing it has enjoyed for decades.

A downgrade isn't catastrophic because global financial markets decide the creditworthiness of U.S. securities, not Moody's and Standard & Poor's. The good news is that investors still regard Treasury bonds, which carry the full faith and credit of the U.S. government, as a near zero-risk investment. But a downgrade will raise the cost of credit, especially for states and institutions whose debt is pegged to Treasurys. Above all a downgrade is a symbol of fiscal mismanagement and an omen of worse to come if we continue the same habits.

President Obama will deserve much of the blame for the spending blowout of his first two years (see the nearby chart). But the origins of this downgrade go back decades, and so this is a good time to review the policies that brought us to this sad chapter and $14.3 trillion of debt.

FDR began the entitlement era with the New Deal and Social Security, but for decades it remained relatively limited. Spending fell dramatically after the end of World War II and the U.S. debt burden fell rapidly from 100% of GDP. That changed in the mid-1960s with LBJ's Great Society and the dawn of the health-care state. Medicare and Medicaid were launched in 1965 with fairy tale estimates of future costs.

Continue reading.

Lyndon Johnson was once my favorite president. I used to be a Democrat, of course. I still admire him for signing the Civil Rights Act of 1964 and the Voting Rights Act of 1965, but his establishment of the paternalistic entitlement state is almost an unforgivable failure.

More later ...