I have often heard elderly people, like my dad before he passed away, talk reverently about FDR and how "he brought us through the Depression." Since the stock market crashed in late 1929 and the Depression didn't officially end until 1943, it has long been my contention that Hitler, not FDR, ended that financial crisis. Unemployment only started to decline when our country began selling materiel to our future allies. Columnist George Will's recent op-ed piece, "New look at New Deal" fleshes out that theory quite well.
In his piece, Will cautions our current and soon-to-be administrations that massive amounts of government spending by the Roosevelt administration did not prevent "America's biggest industrial collapse" in 1937, five years after the start of the New Deal. In fact, after constant government efforts, by 1939, unemployment was 17.2 percent. Some experts even argue that without the New Deal "the Depression would have ended in 1936, rather than in 1943."
Now, it seems, some are calling for a "new New Deal." Even now the president-elect is calling on Congress to pass a massive "stimulus" package to "jolt" the economy. Obama's adviser, Austan Goolsbee is quoted as saying, "...it must be big enough to 'startle the thing into submission," as if the economy is a patient on the psychologist's couch.
It is not. The root problems of our present crisis are real, they are deep, they are systemic. Throwing money at them is not the answer. Applying Band-Aids to save unprofitable industries and to keep unions afloat whose wages aren't justified by productivity is not the answer.
When Congress rushed through the "Troubled Assets" bill, $700 billion was intended to take those assets off the market until money began moving again. That plan has since been scrapped and the money is being used to buy failing financial institutions via stock shares.
Did anyone consider simply telling potential investors that if they would take the risk of buying the contaminated mortgage backed securities they would be charged no capital gains taxes if and when they went up in value?
There is so much uncertainty being fostered by the government at this time that none of them are willing to make a move. "...the only prudent policy is to wait to see what the government will do next."