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There are several reasons for someone to run against 3rd District Rep. John Salazar, but his voting for the stimulus bill is not one. When consumers are not buying and businesses are not investing there is only one sector left to fill the gap in the GNP, and that is government.
A dislike for government spending, especially for deficits, otherwise known as “fiscal conservatism,” was a hallmark of the Republican Party. Today, neither major party adheres to these principles.
If Martin Beeson is to take on the incumbent, he’d better have more than Hooverian philosophy that threw this nation into the Great Depression.
MURRAY TUCKER
Steamboat Springs
25 Responses to “Government spending fills in the GNP gap”
Posted May 19th, 2009 at 4:43 pm Login to Send PM Report this comment
Murray Tucker needs to check himself into a history class, or just pickup on page 87 of Tom Woods book Meltdown. That’s where ch 5 “great mysths about the great depression” starts. Paragraph 3 starts out, “Hoover sank the United States into the Depression, we’re told, by his callous ideologically blinkered fidelity to the laissez-faire economics favored by big business. FDR rescued us through massive government spending, public works, and regulation that saved capitalism from itself. The great Depression’s length and depth could not have been mitigated any further, and the fact that we escaped at all was thanks to the New Deal. None of this is even slightly true. Hoover was no free-marketeer. His unprecedented interventions took the 1929 downturn and made it into the Great Depression. And as more and more scholars are belatedly coming to recognized, FDR’s New Deal only prolonged it. Just as Austrian economic theory suggests, the Fed’s mischief was responsible for the Great Depression. Since that argument often invites the reply that boom and bust occurred in American history well before the Fed was created , we’ll start by looking briefly at previous busts to see how well they conform to the theory. We’ll also find it useful to compare what happened in 1920 when the government allowed the economy to readjust in the wake of an inflationary boom to what happened in 1929 when the government decided in the name of easing the pain to do whatever it could to interfere with the economic readjustment.
Posted May 19th, 2009 at 4:58 pm Login to Send PM Report this comment
Although most schoolteachers perpetuate this myth even now, it would be considered embarrassing in historical circles to repeat this version of event today.
Hoover expressly said that the laissez-faire approach to the economy was a thing of the past. No peacetime president in American history intervened in the economy to the extent Hoover did. Among other things he launched public works projects, raised taxes, extended emergency loans to failing firms, hobbled international trade, and lent money to the states fo$r relief programs.”
This is why Franklin Roosevelt accused Hoover, during the 1932 presidential campaign, of having presided over “the greatest spending administration in peacetime in all of history,” and derided him for believing “that we ought to center control of everything in Washington as rapidly as possible.” FDR’s runny mate, John Nance Garner, declared that Hoover was “leading the country down the path to socialism.”
Posted May 19th, 2009 at 5:15 pm Login to Send PM Report this comment
Get your history right Mr. Tucker. It was the Federal Reserve’s monetary expansion that led to the inflation of the market and subsequent crash. Then the actions of the Hoover and Roosevelt administration exacerbated events far beyond what would have transpired had the market been allowed to liquidate through bankruptcy proceedings and a lawful course of action. Check out the facts in “Meltdown” by Tom Woods
Posted May 19th, 2009 at 5:31 pm Login to Send PM Report this comment
And also, neither party adheres to fiscal conservatism because there aren’t two parties. There is one two headed beast, the Republicrats and it’s other uglier head, the Demublicans. If we want some credibility back we must vote the rascals out. (and hopefully not vote another rascal in)
Posted May 20th, 2009 at 7:45 am Login to Send PM Report this comment
The problem, Mr. Tucker, is not just with the “stimulus” package. The problem is what the president is proposing to spend over the next ten years. He was able to push an obscene budget through the Congress with little opposition because he has a super majority of his party in power. This budget is going to result in deficits averaging a trillion dollars a year for the next ten years. And that does not include a fix for either Medicare or Social Security.
The president acknowledges that this unbelievably high level of deficits is going to kill the economy for a long time to come. But he has yet to offer anything to compbat it. In other words, he decided to spend like no one ever has before and worry about how to pay for it later. That is the height of irresponsibility and the only reason he has gotten away with it is because there are too may Democrats in the Congress who think just like Mr. Salazar. And THAT is the reason this man has to be voted out of office ASAP.
Posted May 20th, 2009 at 8:00 am Login to Send PM Report this comment
Just for the record: Martin Beeson was the beneficiary of enormous work by many Democrats (and a couple of Republicans) who pulled off the recall of Colleen Truden. He just happened to be in the right place at the right time. If any Democrat in Colorado has a lock on their seat, it would be John Salazar. CD3 is his for as long as he wants it.
Posted May 20th, 2009 at 8:01 am Login to Send PM Report this comment
Mr. Cox gives us HIS version for the causes of the Great Depression which follows the libertarian point of view. Having just finished three books on the Great Depression I can see that the causes given vary with the political viewpoint of the author.
One thing that most people may not be aware of is that the recession that started in 1929 actually ended just about the time that FDR began his first term in office in 1933. FDR’s New Deal policies were hit and miss. Some worked and some failed miserably. The result of his policies was that the rate of unemployment remained vary high during the recovery which lasted from 1933 to mid-1937 before a second recession started which ended in mid-1938. It is the combination of these two recessions that formed the Great Depression. It was the war, not the New Deal, that finally got the economy moving ahead and brought the rate of unemployment down to pre-depression levels.
Mr. Cox claims that President Hoover was a big interventionist in the economy. I believe the facts dispute that claim. Mr. Hoover did very little to help the economy. He did very little to help the unemployed. Back in those days folks were ashamed of taking government help. Things have sure changed. The main cause of the 1929-1933 recession was an overheated bubbling stock market and adherence to the gold standard (the two were interrelated). Matters were made worse by an attempt at balancing the budget and by the killing of international trade following passage of the Smoot Hawley tariffs.
Mr. Cox has many times in the past shown his displeasure with the existence of the Federal Reserve and he holds the Fed responsible for most of the ills the economy has suffered since the Fed was founded. What Mr. Cox has yet to do, is tell us what he would do as a substitution for the Federal Reserve. I would be glad to read that.
Posted May 20th, 2009 at 8:30 am Login to Send PM Report this comment
Me, too.
Posted May 20th, 2009 at 8:13 pm Login to Send PM Report this comment
H.R. 4683: Free Competition in Currency Act of 2007
110th Congress
Posted May 20th, 2009 at 8:13 pm Login to Send PM Report this comment
any more questions gentlemen? Ron Paul will be happy to answer.
Posted May 20th, 2009 at 8:15 pm Login to Send PM Report this comment
bullish, how did the stock market start “overheating and bubbling”?
Posted May 20th, 2009 at 11:32 pm Login to Send PM Report this comment
Government has no bearing on the GNP. They produce nothing. The only ones that can spend money is the individual. Anything the government spends is stolen from someone and decreases the GNP.
Posted May 21st, 2009 at 1:32 pm Login to Send PM Report this comment
Excellent Point dgpgrove
Posted May 21st, 2009 at 2:00 pm Login to Send PM Report this comment
H.R. 4683: Free Competition in Currency Act of 2007
“Free Competition in Currency Act of 2007 - Repeals provisions of the federal criminal code relating to uttering coins of gold, silver, or other metal for use as current money and making or possessing likenesses of such coins. Abates any current prosecution under such provisions and nullifies any previous convictions.”
And how, Mr. Cox, does this answer the question posed which: was what to you do after you abolish the Federal Reserve?
As to what caused the market bubble of 1929, I suggest that speculation is something that abounds and hits different markets at different times. See: tulips, gold, houses, florida real estate, stocks, art, etc,, etc, etc.
Posted May 21st, 2009 at 2:01 pm Login to Send PM Report this comment
dpgrove: “Government has no bearing on the GNP”
That is incorrect. Government spending does, indeed, factor into the calculation of GDP (GNP is no longer used).
Posted May 21st, 2009 at 3:20 pm Login to Send PM Report this comment
bullishfrog, you appear to be a neo-conservative more and more all the time. What dpgrove was trying to communicate was that, previous to the nationalization of GM, the government did not PRODUCE any goods. His argument is rooted in the recognition that government spending, achieved through tax derived property confiscation, is a drag on economic output since government industry has continually been proven less efficient than private industry. Since our GNP factors in numerous different activities other than production of goods, the Government does factor in….heavily. I suggest you read America’s Great Depression by Murray Rothbard. You can get it online for free at
http://mises.org/rothbard/agd/contents.asp#contents
I respect how interested in current events you are and your intelligent analysis of propositions with which they are concerned, but am disappointed in your lack of faith in Freedom in general and Free Markets in particular. Why would anyone argue for a system, the federal reserve, that allows to a very small group of people the authority to autonomously control our entire economy? If we delegate the ownership of our means of exchange to them, what makes you think they won’t use it to their own unearned benefit? This is simply a bad idea.
Posted May 21st, 2009 at 3:58 pm Login to Send PM Report this comment
What we need is to rescind the Fed’s monopoly authority over currency. Ron Paul’s Free competition in currency bill would do just this, allow for people to accept whatever means of payment they believe acceptable. Obviously, this would tend, as has been demonstrated over thousands of years of historical record, toward precious metals. This is a good thing because it allows people to have a far more stable store of value. In most cases, using precious metals as a means of exchange leads to increases in the currency value instead of continuous depreciation. I wish I was an expert on this issue, unfortunately I’m not. I’ve read a lot on it and will read more but simply from a common sense position, I see problems with a central banking system. First, the whole centralized power issue. I don’t want a small network of people to control how much I can buy with the money I have and I don’t want them to be able to transfer my dollars buying power instantaneously to whoever they choose. This is dangerous. Second, I don’t believe that the increased availability of credit provided by a central banking system produces quality economic improvement. Many ideas that would not be approved under the more rigorous controls of a savings based capital market are undertaken. When it turns out that people didn’t really have a continuous desire for these enterprises products they go bankrupt, like krispy kreme or cold stone or any other good idea that didn’t have any long term demand. It doesn’t make sense to leverage the entire economy, by way of the central bank’s fiat currency, for the projects of the elite and the politically connected. It’s true that they have produced a brand of affluence for their subjects, but it isn’t sustainable…..perhaps because it isn’t desirable. The third reason I abhor the central bank is that I believe it enslaves people to debt. If people can collect trinkets that they momentarily desire by simply filling out a credit application while ignoring that they are accumulating enormous obligations then they will do so. Why? Because they are undisciplined and weak. They will continue to do so as long as the credit is available. Eventually they are enslaved to creditors who carry the force of law to collect their debts. Does it make sense that banks that never had a tangible asset to loan out are now in possession of the tangible assets that the people purchase through credit? This appears to me to be credit enslavement of the borrower. From the banks side of things, they become the owners through fiat wealth tranfer. They accumulate real tangible wealth by leveraging their monopoly controlled currency against your desired endeavor…. even if that endeavor is just another new pair of shoes. If we are all in debt and owe the banks every last penny of our productive capacity then we are in fact their slaves. Next, I oppose the central bank because it stops people from being able to relax. People can’t relax when they are bound and indebted by all their compulsive buying they did in the past. They must work and get more money to pay off their creditors. Next, we are missing out on a stable, peaceful, self-determined world. If the central bank can’t arbitrarily rob your wealth from you at any time then the world can grow and prosper through continuous, stable, innovation and effort. Property rights, absent in a system where the means of asset transfer are controlled by the elite, dictate a system of rational interaction and mutually beneficial commerce. I could think of more reasons for opposing the fed but really haven’t the time right now.
Posted May 21st, 2009 at 4:07 pm Login to Send PM Report this comment
David, when it comes to economics, free markets, and capitalism, I am about as conservative as you will find.
I have written here numerous times about how I deplore the Obama policies that are going to bring about a deficit so huge that it could truly endanger the future of this country.
My argument with you relates to the Federal Reserve. You are against its existance and all I have asked you is what would take its place. I have yet to hear your response.
The job of the Federal Reserve is extremely difficult. But for all its faults this country has prospered. The Federal Reserve is, in part, responsible for the current recession because it held interest rates too low for too long. But that, by itslef, would not have led to the problems we now have.
I believe that the actions taken by the Fed to avoid a complete financial collapse are the correct actions and they have kept the financial system from total collapse and a global DEPRESSION.
We are going to get a recovery but the heavy burden that this administration’s policies are putting on the economy, coupled with an inevitable huge increase in taxes, will weaken the dollar and could lead to very high interest rates and weak economy for a long time to come.
It is truly scary.
Posted May 21st, 2009 at 4:29 pm Login to Send PM Report this comment
A lot to digest, David.
“What we need is to rescind the Fed’s monopoly authority over currency. Ron Paul’s Free competition in currency bill would do just this, allow for people to accept whatever means of payment they believe acceptable.”
And who sets the price of gold? When you fix the price of fold, as was the case when gold was the standard, you had speculators move money from one country to another depending on where they found the strongest economy. That would lead some countries to lose their gold reserves while others accumulated them. If you read the history on this subject you will find how destabilizing this can become.
“Obviously, this would tend, as has been demonstrated over thousands of years of historical record, toward precious metals. This is a good thing because it allows people to have a far more stable store of value.”
You can have a stable store of value if inflation is contained. And if you look at inflation in this country over the last 30 years, you will see that it has come down to rock bottom levels.
“In most cases, using precious metals as a means of exchange leads to increases in the currency value instead of continuous depreciation.”
Not necessarily the case.
“I see problems with a central banking system. First, the whole centralized power issue. I don’t want a small network of people to control how much I can buy with the money I have and I don’t want them to be able to transfer my dollars buying power instantaneously to whoever they choose. This is dangerous.”
If by this you are referring to what is happening in an attempt to resolve the current problems in the financial system, I would argue that without the Fed the global economy would now be in collpase.
“Second, I don’t believe that the increased availability of credit provided by a central banking system produces quality economic improvement.”
Without the avaiability of credit, you would have to pay cash for your house and your car. Is that what you want?
“Many ideas that would not be approved under the more rigorous controls of a savings based capital market are undertaken. When it turns out that people didn’t really have a continuous desire for these enterprises products they go bankrupt, like krispy kreme or cold stone or any other good idea that didn’t have any long term demand.”
I don’t see where the Fed interferes with this unless it relates to the banks. And here, we need to see regulations that keep the banks from doing stupid things. There are regulators that are supposed to keep them out of big trouble. They did not do their job this time.
“It doesn’t make sense to leverage the entire economy, by way of the central bank’s fiat currency, for the projects of the elite and the politically connected.”
The dollar is the international currency of choice. No other currency has supplanted it.
“The third reason I abhor the central bank is that I believe it enslaves people to debt. If people can collect trinkets that they momentarily desire by simply filling out a credit application while ignoring that they are accumulating enormous obligations then they will do so.”
The Federal Reserve does not determine how much you put on your credit card.
“From the banks side of things, they become the owners through fiat wealth tranfer. They accumulate real tangible wealth by leveraging their monopoly controlled currency against your desired endeavor…. even if that endeavor is just another new pair of shoes. If we are all in debt and owe the banks every last penny of our productive capacity then we are in fact their slaves.”
I do not dispute that Americans became overleveraged. Savings rates came down to zero. That is now changing rapidly. That is not the fault of the Federal Reserve.
“Next, I oppose the central bank because it stops people from being able to relax. People can’t relax when they are bound and indebted by all their compulsive buying they did in the past. They must work and get more money to pay off their creditors.”
Again, the Federal Reserve is not responsible for irresponsible consumers.
“Next, we are missing out on a stable, peaceful, self-determined world. If the central bank can’t arbitrarily rob your wealth from you at any time then the world can grow and prosper through continuous, stable, innovation and effort.”
Not the Fed’s fault.
“I could think of more reasons for opposing the fed but really haven’t the time right now.”
When you have the time, come back and will go at it again.
Posted May 21st, 2009 at 6:05 pm Login to Send PM Report this comment
Bullish,
This is off topic but I just read this blog that disagrees with the new proposed CAFE standards. The writer of the blog is advocating your solution to the mpg problem.
http://i-r-squared.blogspot.com/
Posted May 21st, 2009 at 6:14 pm Login to Send PM Report this comment
The point isn’t that irresponsible behavior is forced on the innocent consumers or that we don’t need such a thing as “credit”, the point is that credit would be far more judiciously extended. Imagine what would happen if you allowed currency competition, there would be a initial period of slow change as businesses, already in existence, began attracting customers who wish to convert their Federal Reserve currency to a certain amount of gold. This system would not immediately replace the Fed because people are far more accustomed to their Federal Reserve notes, as the Fed continues to inflate it’s currency, the gold backed free market currency would become more valuable, attracting more people who wish to protect their value from government spending. If the Fed chose to be responsible with it’s currency it could avoid being eliminated, however, if it decided to continue to yield toward total government takeover of private industry, which will undoubtedly lead to lower production and increased dependency followed by more government services and more inflation, then people who are paying any attention at all will rush to a solid, less manipulable currency store of value. At some point you could expect a collapse of the Federal Reserve system and a dramatic, albeit short lived, depression. This would be followed by strong growth with decreasing prices and increasing production. Conjecture is fun because you can let your imagination run. The Fed creates the problem and then runs in to fix it. If you will answer this one question for me I think I may have gotten somewhere, do you want a small group of people to have the ability control the value of your currency after they have continually debased it?
Posted May 21st, 2009 at 6:32 pm Login to Send PM Report this comment
rm, I have advocated higher gasoline taxes as a means of decreasing oil imports. I also advocate increased domestic oil production for the same reason.
I am against raising taxes except for this one. And I would not mind if the extra tax was returned to consumers as a tax rebate.
The new CAFE standards will force consumers to purchase more fuel efficient cars (nothing else will be available) which will be more expensive to make. So the cost of a car will rise. US automakers cannot make small cars at a profir in the US. They can make them at a profit overseas but they are not allowed to import them to the US. That is a concession to the unions. It will be a boon to the Japanese auto makers who don’t have to deal with unions.
So the survival of the american car makers is questionable. Unless they remain government owned companies and the government (we the tax payers) subsidize them indefinitely.
Posted May 21st, 2009 at 6:40 pm Login to Send PM Report this comment
David, what you are talking about is moving to a gold standard. Plain and simple. You would have to peg the price of gold to a given price of $/ounce. The world has tried that. It didn’t work.
You keep talking about devaluation of the currency. What devaluation is that? Devaluation of the currency implies inflation. We have zero inflation right now.
Unfortunately, Obama is working on changing all that. But it will not be the Federal Reserve’s fault. The Fed will crank up interest rates, cut back on the money supply, and thus, cut back on credit, as the inflationary Obama programs begin to take effect. The economy will contract and it will be Obama’s fault, not the Fed’s.
Posted May 21st, 2009 at 6:44 pm Login to Send PM Report this comment
David, this is a good book on the subject of how the major world banks worked during the Great Depression and how they handled the gold standard.
Lords of Finance: The Bankers Who Broke the World
Posted May 22nd, 2009 at 1:27 am Login to Send PM Report this comment
“since government industry has continually been proven less efficient than private industry”
In re-reading this thread, I came across the above statement. Am I incorrect in understanding that this is not true for the health insurance industry, where Medicare and Medicaid deliver 97% of funds to recipients compared to no better than the mid-seventies for private health care?
Perhaps the answer lies near the fact that 1 of every 700 dollars spent on health care nationally went to the CEO of one company, United Health .
These numbers were part of testimony today on the House floor.
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