Saturday, December 27, 2008

Big Lie #6 -- Government Cures All

The weekend, I read through Michael Medved's new book The 10 Big Lies About America. Number six on his list is "government programs offer the only remedy for poverty. This one seems timely given the election of Obama and his plan to save us all with his new New Deal.

The general consensus is that FDR's New Deal programs of the 1930s got America back on its feet after greedy fat cats and speculators caused the Depression of the 1920s. The numbers don't back this up.

In 1931, unemployment was over 17 percent (Hoover was president). Seven years later, five under FDR, unemployment was still over 17 percent.

The Dow was at 250 in 1930. In 19941, after seven years of FDR's programs, the Dow was at 151. It did not recover to 1929 level until the 1950s.

Federal spending as a percentage of GDP went from 2.5 percent in 1929 to 9 percent in 1936 -- a 360 percent increase in seven years.

Prior to WWII, national income fell (13%), payrolls fell (35%), durable goods production fell (50%) and profits fell (78%).

Past recessions -- 1815, 1837, 1873, 1893, 1920, 1958 and 1979 -- that were addressed by cuts in government spending succeeded at reviving the economy much faster than increases in government spending.

Recently, a WSJ opinion from the editors, provided an example of how government spending increases is a bad plan for recessionary times. The piece described Japan's "problem solving" methodology for the past 15 years. It has spent time and time again billions on various programs only to get further and further in debt. Today, their debt to GDP is well over 100 percent. They are a disaster waiting to happen...a stack of financial cards waiting to come crashing down. This is not some Icelandic crash but a crash of the world's second largest economy.

Government social programs rarely work. They mean all 'good' liberal programs (compassion of spending other people's money on pet projects), but the records clearly show how they fail. Medved talks about school breakfast/lunch programs ($8.7 billion in 2007) and how poor children still suffer from inadequate nutrition as well as obesity. He references the Job Corps -- a disadvantaged training program for young people -- and how the statistics have shown that graduates fair no better than than a similar group of non-participants. We continue to fund this to the tune of $21,500 per student for the eight-month program. (Note, I have an uncle that spent the bulk of his adult career running a Job Corp program. Not surprising, he's as big of a liberal Democrat as I have ever have the privilege of knowing.)

Poverty is not going to be reduced at all by any government program. Quite the contrary. The more the government does to address it, the greater the problem will become. Poverty is eliminated in this country by every day efforts -- getting up every day, going to work, working hard, getting educated, making prudent financial decisions.

Obama's increase government spending plans will be a sure fired plan to fail. It will create enormous debt that cannot be repaid and it will enslave millions to the government's addictive and personally destructive programs of help.

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