Friday, July 8, 2011

Deja Vu all over again

In 1937, the U.S. was making progress in its recovery from the Great Depression. F.D.R. had just been re-elected and it looked as though things would be getting much better in the future, both short- and long-term. Roosevelt then made what many saw as the biggest mistake of his Presidency, a mistake that almost became fatal to the recovery -- he began to listen to advisers who urged him that appeasing his Republican opponents by balancing the budget was now necessary since the economy was making strides in recovery. Roosevelt and the Democrats proceeded to cut spending while ignoring the revenue side of the equation, just as is being insisted upon by the Republicans today. What happened? The economy didn't just stumble -- the recovery stopped dead in its tracks, did an about-face and began to decline again. Keynesian economists blamed the recession on the decline in government spending while Republicans and big business claimed the recession was the result of union power and attacks on big business. Sound familiar?

Forward 74 years. The U.S. economy is beginning a slow recovery from the worst recession seen since the beginning of the Great Depression. Unemployment is seeing no improvement, although profits are at record-setting levels for business. Income inequality and the gap between rich and poor is the greatest since the Depression. So what is being proposed as the solution to our nation's economic woes? You're right -- cut spending without looking at the revenue side. If you have listened to President Obama's speeches over the last week or so, you would think he had brought Eric Cantor's economic adviser (that may be an oxymoron) onto his team.

Paul Krugman explains all of the better than I possibly can in yesterday's New York Times. I urge you all to read this, think about it, and post your thoughts.

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