Thread: Who needs regulations?

Originally Posted by earcutter

You got that all wrong. The great depression lasted so long because the new deal policies weren't put in place fast enough! Moreover - that's not a regulation. Were the SEC (which was created after the great depression and does regulate) to have been in place and effective before the 20's - there is a strong argument that the great depression would not have occurred.

You are confusing economic stimulus with regulation there.

OUR ECONOMIC PAST
What Ended the Great Depression?
FEBRUARY 24, 2010 by BURTON FOLSOM

What finally ended the Great Depression? That question may be the most important in economic history. If we can answer it, we can better grasp what perpetuates economic stagnation and what cures it.

The Great Depression was the worst economic crisis in U.S. history. From 1931 to 1940 unemployment was always in double digits. In April 1939, almost ten years after the crisis began, more than one in five Americans still could not find work.

On the surface World War II seems to mark the end of the Great Depression. During the war more than 12 million Americans were sent into the military, and a similar number toiled in defense-related jobs. Those war jobs seemingly took care of the 17 million unemployed in 1939. Most historians have therefore cited the massive spending during wartime as the event that ended the Great Depression.

Some economists—especially Robert Higgs—have wisely challenged that conclusion. Let’s be blunt. If the recipe for economic recovery is putting tens of millions of people in defense plants or military marches, then having them make or drop bombs on our enemies overseas, the value of world peace is called into question. In truth, building tanks and feeding soldiers—necessary as it was to winning the war—became a crushing financial burden. We merely traded debt for unemployment. The expense of funding World War II hiked the national debt from $49 billion in 1941 to almost $260 billion in 1945. In other words, the war had only postponed the issue of recovery.

Even President Roosevelt and his New Dealers sensed that war spending was not the ultimate solution; they feared that the Great Depression—with more unemployment than ever—would resume after Hitler and Hirohito surrendered. Yet FDR’s team was blindly wedded to the federal spending that (as I argue in New Deal or Raw Deal?) had perpetuated the Great Depression during the 1930s.

FDR had halted many of his New Deal programs during the war—and he allowed Congress to kill the WPA, the CCC, the NYA, and others—because winning the war came first. In 1944, however, as it became apparent that the Allies would prevail, he and his New Dealers prepared the country for his New Deal revival by promising a second bill of rights. Included in the President’s package of new entitlements was the right to “adequate medical care,” a “decent home,” and a “useful and remunerative job.” These rights (unlike free speech and freedom of religion) imposed obligations on other Americans to pay taxes for eyeglasses, “decent” houses, and “useful” jobs, but FDR believed his second bill of rights was an advance in thinking from what the Founders had conceived.

Roosevelt’s death in the last year of the war prevented him from unveiling his New Deal revival. But President Harry Truman was on board for most of the new reforms. In the months after the end of the war Truman gave major speeches showcasing a full employment bill—with jobs and spending to be triggered if people failed to find work in the private sector. He also endorsed a national health care program and a federal housing program.

But 1946 was very different from 1933. In 1933 large Democratic majorities in Congress and public support gave FDR his New Deal, but stagnation and unemployment persisted. By contrast, Truman had only a small Democratic majority—and no majority at all if you subtract the more conservative southern Democrats. Plus, the failure of FDR’s New Deal left fewer Americans cheering for an encore.

In short the Republicans and southern Democrats refused to give Truman his New Deal revival. Sometimes they emasculated his bills; other times they just killed them.

Senator Robert Taft of Ohio, one of the leaders of the Republican-southern Democrat coalition, explained why he voted against much of the program: “The problem now is to get production and employment. If we can get production, prices will come down by themselves to the lowest point justified by increased costs. If we hold prices at a point where no one can make a profit, there will be no expansion of existing industry and no new industry in that field.”

Robert Wason, president of the National Association of Manufacturers, simply said, “The problem of our domestic economy is the recovery of our freedom.”

Alfred Sloan, the chairman of General Motors, framed the question this way: “Is American business in the future as in the past to be conducted as a competitive system? He answered: “General Motors . . . will not participate voluntarily in what stands out crystal clear at the end of the road—a regimented economy.”

Taft, Wason, and Sloan reflected the views of most congressmen, who proceeded to squelch the New Deal revival. Instead they cut tax rates to encourage entrepreneurs to create jobs for the returning veterans.

After many years of confiscatory taxes, businessmen desperately needed incentives to expand. By 1945 the top marginal income tax rate was 94 percent on all income over $200,000. We also had a high excess-profits tax that had absorbed more than one-third of all corporate profits since 1943—and another corporate tax that reached as high as 40 percent on other profits.

In 1945 and 1946 Congress repealed the excess-profits tax, cut the corporate tax to a maximum 38 percent, and cut the top income tax rate to 86 percent. In 1948 Congress sliced the top marginal rate further, to 82 percent.

Those rates were still high, but they were the first cuts since the 1920s and sent the message that businesses could keep much of what they earned. The year 1946 was not without ups and downs in employment, occasional strikes, and rising prices. But the “regime certainty” of the 1920s had largely returned, and entrepreneurs believed they could invest again and be allowed to make money.

As Sears, Roebuck and Company Chairman Robert E. Wood observed, after the war “we were warned by private sources that a serious recession was impending. . . . I have never believed that any depression was in store for us.”

With freer markets, balanced budgets, and lower taxes, Wood was right. Unemployment was only 3.9 percent in 1946, and it remained at roughly that level during most of the next decade. The Great Depression was over.

Originally Posted by OCDshaver

OUR ECONOMIC PAST

With freer markets, balanced budgets, and lower taxes, Wood was right. Unemployment was only 3.9 percent in 1946, and it remained at roughly that level during most of the next decade. The Great Depression was over.

That was a great read! Thanks. Of course I am assuming that in the last paragraph lies what you are trying to say, "With freer markets..." Am I making the right assumption?

Originally Posted by earcutter

That was a great read! Thanks. Of course I am assuming that in the last paragraph lies what you are trying to say, "With freer markets..." Am I making the right assumption?

Well yes....to an extent. But more important is refuting the notion that the New Deal helped end the Depression. And more important is dispelling the notion that government spending, meddling in the markets, and diverting the economy's resources is a productive tool toward increasing the standard of living. There is a need for govt regulation. Unfortunately that regulation is usually designed NOT to fine tune the economy but to push an agenda. We can debate the economy of 60 or 70 years ago but all we need is recent history to see the folly of govt regulation in the wake of the last economic meltdown. None of the main culprits were even recognized, never mind regulated - ensuring that we are bound to repeat the same disaster. Govt regulation has failed us but the evidence has not yet surfaced. As is often the case when considering the inefficiency of govt, you have to ask yourself if you want more of it or less? The New Deal was an example of govt wasting our resources, regulating prices, spending insane amounts of money, only to keep the economic distress alive and well longer than it should have been. And only through the suspension of those programs does the economy rebound. And yet 70 years later we repeat these so called remedies yielding similar results with the promise that things would have been worse if we didn't take these similar, ineffective measures. And why? To further political agendas.

Originally Posted by OCDshaver

Well yes....to an extent. But more important is refuting the notion that the New Deal helped end the Depression. And more important is dispelling the notion that government spending, meddling in the markets, and diverting the economy's resources is a productive tool toward increasing the standard of living. There is a need for govt regulation. Unfortunately that regulation is usually designed NOT to fine tune the economy but to push an agenda. We can debate the economy of 60 or 70 years ago but all we need is recent history to see the folly of govt regulation in the wake of the last economic meltdown. None of the main culprits were even recognized, never mind regulated - ensuring that we are bound to repeat the same disaster. Govt regulation has failed us but the evidence has not yet surfaced. As is often the case when considering the inefficiency of govt, you have to ask yourself if you want more of it or less? The New Deal was an example of govt wasting our resources, regulating prices, spending insane amounts of money, only to keep the economic distress alive and well longer than it should have been. And only through the suspension of those programs does the economy rebound. And yet 70 years later we repeat these so called remedies yielding similar results with the promise that things would have been worse if we didn't take these similar, ineffective measures. And why? To further political agendas.

Thanks! Great insights!


Well in my world - so long as the Fed and Government continue to believe in Keynesian Economics, then I am not sure anything is going to change. And though history does prove its weaknesses, it does show some incredible strengths as well - and generally speaking, every person alive has benefited from it. Alas, the only way to cure a Keynesian "hangover" is to drink more, and that'll age anyone lol. Eventually it'll crumble. That's my take on that - there is just no middle ground. You're all in, or you are all out.

I am not 100% sure I buy in to everything you are saying with respect to the New Deal - some of the models I have seen seriously imply the infusion of gov works and moneys via the New Deal did provide the basis for the recovery. Of course no model (yet) can account for anything and speaking in absolutes makes one vulnerable to looking like an idiot. So I'll take some time and revisit some of my assumptions.

Though I am not the biggest fan of the system as it is - I am no Tea Bagger and think Libertarians are loopy lol - so note that when I say what I do.

Originally Posted by earcutter

Thanks! Great insights!


Well in my world - so long as the Fed and Government continue to believe in Keynesian Economics, then I am not sure anything is going to change. And though history does prove its weaknesses, it does show some incredible strengths as well - and generally speaking, every person alive has benefited from it. Alas, the only way to cure a Keynesian "hangover" is to drink more, and that'll age anyone lol. Eventually it'll crumble. That's my take on that - there is just no middle ground. You're all in, or you are all out.

I am not 100% sure I buy in to everything you are saying with respect to the New Deal - some of the models I have seen seriously imply the infusion of gov works and moneys via the New Deal did provide the basis for the recovery. Of course no model (yet) can account for anything and speaking in absolutes makes one vulnerable to looking like an idiot. So I'll take some time and revisit some of my assumptions.

Though I am not the biggest fan of the system as it is - I am no Tea Bagger and think Libertarians are loopy lol - so note that when I say what I do.

As a Tea Party guy myself, I take a mild level of insult at the jab. And why is the Tea Party such villains? Because they want Constitutional govt, fiscal responsibility, reduced taxation, smaller govt, and court justices that recognize original ism as the only reliable basis for administering law? In short, they are a threat to a growing, out of control, and unrepresentative govt that is Washington. A govt that is evolving into the very form of govt that we fought a revolutionary war to break free of.

Originally Posted by OCDshaver

As a Tea Party guy myself, I take a mild level of insult at the jab. And why is the Tea Party such villains? Because they want Constitutional govt, fiscal responsibility, reduced taxation, smaller govt, and court justices that recognize original ism as the only reliable basis for administering law? In short, they are a threat to a growing, out of control, and unrepresentative govt that is Washington. A govt that is evolving into the very form of govt that we fought a revolutionary war to break free of.

Lol - I can't say anything lately without people getting upset or having a "mild level of insult at the jab."

Why would you even be mildly insulted? I never took a jab at the tea party at all - I said I wasn't one. If you were a libertarian and took offence to me calling them loopy I guess I could see it. I mean if you told me you weren't a *insert party here* - and I was a card carrying member I wouldn't be insulted.

Let's refrain from using words like 'tea bagger', ok?
We don't need to insult people just because they have a different political opinion.

I am a card carrying caffeine sieve. Is that all right?

Just one thought on regulations today,,,

Why do we have so many different Blends of fuel across the US ????

We all know that one blend, with one Federal regulation to burn this blend in all cars would lower the price of fuels but one State in particular and a few others that followed suit have added costs for all of us...

Why ???

Thinking of fuel today for a reason, as you can only buy ULSD including for offroad use, so I have to buy Red Diesel then add a "Slick Pack" to it so it doesn't burn up my Tractor's engine, which in turn adds all the pollutants back into the fuel, that I paid more for in the first place because it costs more to take them out when they make the stuff...

Yes this makes perfect sense

One thing I know for sure. The burdens of massive regulations in the US is eliminating the little business guy. You know, the guy that backs the little league team or local youth endeavors. Only large corporations can afford the teams of lawyers, EPA experts, huge HR departments, and every other group of professionals that are needed to run a company. Talk about unintended consequences.

Naked capitalism is very undesirable but Naked uncontrolled governmental power is far less desirable, in my book. Let us not forget that capitalism in the past couple of decades has raised more people out of poverty than any of the other social systems combined. Perfect no, but we certainly know that Socialism doesn't work and all welfare does is create a particular type of slavery that is just as bad as any other type of slavery.

Later,
Richard