Color-fiscal-cliffBy John Hendrickson

In the closing days of the 1932 presidential election, President Herbert Hoover stated that “this campaign is more than a contest between two men. It is more than a contest between two parties. It is a contest between two philosophies of government.”  resident Hoover was referring to the policies and philosophies of his Democrat opponent, New York Governor Franklin D. Roosevelt, who proposed a New Deal to a nation that was suffering from the Great Depression. Hoover understood, and indeed predicted, that Roosevelt’s New Deal would not only move the nation away from traditional constitutional limited government, but also create a “profound change in American life” and a “radical departure from the foundations of 150 years, which have made this the greatest nation in the world.  Hoover lost the election of 1932 in a landslide, but his warnings about the New Deal proved correct, and Roosevelt’s program changed the nature of government.

The New Deal strengthened the administrative state as well as ushered in the welfare state, both of which have had drastic effects on constitutional government. President Roosevelt promised the nation that he would use bold experimentation in formulating public policies that would attempt to end the Great Depression and the catastrophic levels of unemployment. After massive levels of government intervention and Keynesian-style spending, the New Deal failed to bring the nation into economic recovery. Today, in his attempt to fight the “Great Recession,” President Barack Obama is following policies similar to those of President Roosevelt. President Obama has utilized Keynesian stimulus spending, massive levels of new regulations, and pushed for the creation of new entitlements with the Patient Protection and Affordable Care Act.

President Obama’s policies are failing to lead the nation back into economic recovery and the consequence is more uncertainty and the good possibility of even falling back into a recession in the coming year. Unemployment remains at 7.9 percent, and if those individuals who have quit looking for work because they are discouraged or those who are under-employed are taken into consideration, the actual unemployment rate would be at least 12.8 percent.

The fiscal outlook of the nation is also causing a massive threat of financial collapse as symbolized by the $16 trillion national debt and the annual trillion-dollar deficits that the federal government is running. Although blame for the out-of-control spending can be shared by both political parties, President Obama has set an unfortunate record of adding $5.4 trillion to the national debt.  The United States Senate has also failed to pass a budget in over 1,200 days.  This fiscal problem must also take into consideration the rising costs of entitlement programs such as Social Security, Medicare, and Medicaid. It is estimated that “the unfunded liabilities of Social Security and Medicare run between $50 trillion and $110 trillion.”

The economy is also burdened by the possibility of a massive tax increase that will occur in January 2013 unless Congress and President Obama act to delay what is known as the “fiscal cliff” or “taxmageddon.” The pending tax increase would result in the expiration of the Bush Tax Cuts, as well as other new tax increases, which will result in a $500 billion tax increase that will jeopardize the slow economic recovery and possibly throw the nation back into recession. The continual high unemployment, slow economic growth, and the serious fiscal crisis that confronts the nation have all signaled to a failed economic recovery.

President Obama is emphasizing the same economic policies and asking Congress to spend more money to “invest” in infrastructure and education. President Obama has also “promised that he’d pursue ‘the kind of bold, persistent experimentation that Franklin Roosevelt pursued…’ ”

It is clear that the current policies have failed and only resulted in a worsening economy with record numbers of Americans being placed on relief programs such as federal food stamps.

The noted economist Thomas Sowell compared and contrasted the economic records of Presidents Warren G. Harding and Ronald Reagan who utilized limited-government approaches in solving an economic crisis, to President Roosevelt’s and President Obama’s approach. Both Harding and Reagan faced severe economic recessions that included high unemployment. In fact, Harding argued that “any wild experiment will only add to the confusion.”  The policies that Harding and Reagan followed were tax reduction and spending reduction (especially Harding), and it provided incentive for the private sector to expand and thus created economic stability and growth. “Four years is plenty of time to see a recovery. But it takes the right policies — more individual liberty and less government intervention,” noted economic historian Burton W. Folsom, Jr.

What is needed today is not just a pro-growth plan, but a return to the values of the American Founding. Thomas Sowell wrote that “both history and contemporary data show that countries prosper more when there are stable and dependable rules, under which people can make investments without having to fear unpredictable government interventions…”  Both Harding and Reagan brought that stability with their policies, but they also had a strong worldview that reflected the values of the Founding Fathers and the Constitution. The future of the republic rests on abandoning the current radical departure from constitutional government.

John Hendrickson is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa.  Reprinted by permission from INSTITUTE BRIEF, a publication of Public Interest Institute.

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