Political Economics Not To Be Mistaken For Economics
“The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all try something.”
FDR created this modern political economic cant. Democrats and Progressive Republicans alike have employed it resulting in extreme unintended consequences. FDR, for example, despite evidence that his policies deepened and lengthened the Great Depression, is still exalted by liberal America. FDR’s, Social Security System, has become a fragile entitlement program that is now a political third rail issue.
Presidential hopeful Rick Perry recently called Social Security a Ponzi scheme, and has received significant criticism for the statement. Yet in defending social security Nobel Prize winning economist Paul Samuelson wrote, “The beauty of social insurance is that it is not actuarially sound… with real incomes growing at some 3% a year… A growing nation is the biggest Ponzi game ever contrived.” Social Security not being actuarially sound makes it categorically not insurance. Relying on a growing base of investors makes it by definition a pyramid scheme, a Ponzi scheme unfortunately; this has not stopped many pundits and politicians from attacking Perry for statements of fact on the subject.
The second portion of FDR’s advice is never used, accept through memoirs like that of Progressive Republicans Richard Nixon, discussing decisions like gas price and wage restrictions. Nixon admitted in his memoirs “The piper must be paid and there was an unquestionably high price for tampering with the orthodox economic mechanisms.” It is wishful thinking to believe politicians will heed his ex post facto warning. Nixon was cheered for his economic tampering, and won a second term in a landslide. An outburst of Nixon’s to a White House Aid explains this perfectly “I don’t give a good god damn what Milton Friedman says, he’s not running for reelection.”
“Do something” politics has been invariably destructive and a detailed review of economic problems of the past one hundred and fifty years seem to show that regulation caused many destructive trends. While chief executives like Calvin Coolidge and Ronald Reagan survived deeper stock market crashes than what confronted FDR, they watched dramatic economic resurgences during their terms in office that were followed by eras of high employment and low-inflation simply because they did not intervene in the economic process. Despite both Coolidge and Reagan’s success, they have been questioned as presiding over times of “excess.” In contrast, FDR has been hailed as our greatest President despite prolonging the great depression, even being called more moral regardless of the unneeded suffering he forced on an entire population.
Economic incompetence is a very risky business. For most people, it is easy to be sucked in by lofty rhetoric and not bother to question economic legislation being offered, blindly hoping the desired goals will be achieved. It is easy to claim, “I am right! Those people pointing out that this economic policy won’t work only have an interest in hurting you.” The, us-versus-them theme is much more useful politically than true economic solutions which all contain trade-offs. Doing nothing so the economy can rebound simply is not palatable to citizens, neither are massive spending cuts or cuts in programs. These are political realities that will not change until people start taking their roles as voters more seriously. The “dismal science” is simply not much fun.
This economic political trend has come to a very visible head under President Obama. His policies have failed critically. The President’s healthcare bill has raised the cost of healthcare, despite assurances that it would not. The stimulus bill met none of the presidents stated goals, but on the political left it is deemed a success simply because he attempted to fix things, much like FDR’s debacles are viewed.
The President’s most recent “Jobs bill” is no exception. Despite showing him self to be economically ineffective, people still want him to do “something.” So he is doing “something” Much as FDR did. But America is different now; we have multiple news networks, talk radio and a resurgent pride in the things that made our country the most successful in history. Preach the “dismal science” to your friends and neighbors, for though reality is dismal, blind hope creates hell.