We Must Not Repeat the Great Depression

Family Security Matters ^ | 20 September | Dick McDonald

[K-oneTexas]

 We Must Not Repeat the Great Depression

In 1929, men flew out of windows because they lost their highly leveraged bets (you only had to put up 10% to buy stock). In 2008, instead of dead bodies on the pavement we have the “financiers” retreating to the Hamptons to spend their millions. This time, instead of Republicans committing suicide, we have Democrat CEOs fleecing the public and laughing all the way to the bank – cleverly blaming Republicans for the fraud they have perpetrated.

Now enter the 1930s communist adherents to the debate in 2008. It seems like déjà vu all over again. The Democrats under Barack Obama want to raise taxes, raise interest rates, renegotiate trade agreement, eliminate outsourcing, raise tariffs and over-regulate business. Everyone on earth knows those policies are the prescriptions for an extended and massive depression just like the Great One FDR nurtured. The collectivist-inspired Democrats of the 1930s never righted the economic ship. It took a World War to do that. They extended at most a two-year economic downturn into a 12 year nightmare – 1929 to 1941 – and visionless Republicans like Herbert Hoover gave them an assist. We even had RINOs then.

 

Ordinary Americans have been fooled into believing that FDR was a great steward of America’s economic ship when in fact he was a collectivist who believed government was the solution, not the problem. His 91% tax rate on incomes over $50,000 proves how out-of-touch he and the Democrats were. Over the years that marginal tax rate has been lowered under the Republicans to 15% for investment income and capital gains. As a result during the last eight years the country has realized the greatest period of wealth creation ever experienced by any civilization on Earth.

 

Today what these latter-day socialists are peddling is a tax cut for 95% of the people. It amounts to nothing more than chump change. The $1,000 or $2,000 Obama claims he will save ordinary Americans will be gone in a nanosecond on deferred purchases. And while we are at it, did you get the middle-class tax cut the Democrats promised you in 2006? Of course not; and chances are they will be unable to give you one in 2009 either considering a projected $400 billion deficit.

 

In November, if the Democrats win, ordinary Americans will be no closer to the American Dream than they ever were. What ordinary Americans want is that dream – a dream of financial independence not some meaningless tax cut immediately spent on the increased costs of products and services.

 

The American people are not stupid; they just have been duped into believing that letting their Federal government takes 15.3% of their lifetime income in payroll taxes just to have no investment to show for that investment at retirement is somehow the best they can expect from their politicians. This is a tragic mistake for a country operating their economy under capitalism.

 

An average household in America makes more than $50,000 a year and have $7,500 withheld in payroll taxes. In 40 years that $7,500 amounts to an investment in the government of $300,000. If that amount had been invested weekly in the stock market it would have grown at average rates of return for indexed stocks into $4,004,000 nest egg in 40 years and generate a $33,000 a month retirement check. As Social Security now pays $1,400 a month and the taxpayer has no investment, Americans are being taken to the cleaners by those politicians wanting to retain these entitlements.

                                              

There is a way for John McCain and Sarah Palin to deliver the American Dream of financial independence to ordinary Americans. They can privatize Social Security and Medicare and annually invest the $1.4 trillion in payroll taxes in the American economy and let those funds compound into millions for each American taxpayer. That would mean we would scrap the present system and replace it with one that gives Americans the REAL CHANGE they are asking their politicians for – wealth that will enable them to retire affluently and buy the best medical care on the planet and build wealth for future generations.

 

I have written a book How to Make the Poor Rich and America Wealthier that outlines the way ordinary Americans can realize the American Dream. You can get a free copy on line at www.riseupamerica.us . It describes how Rise Up does for the poor and middle-class what “trickle down” has done for the rich.

 

By adopting the Rise Up America plan, America will avoid the tragedy that socialists will inflict on ordinary Americans in November with their deceptive plan to deliver change by draining money from those that fuel the American economy and retaining the entitlements that are draining the treasury each year.

FamilySecurityMatters.org Contributing Editor Dick McDonald is a career financial analyst, accountant and champion of establishing Personal Accounts for American workers in place of the outmoded, inefficient Social Security program. Dick maintains websites at www.dickmcdonald.blogspot.com and http://www.riseupwarrior.com/.

[TruePatriotsForever]

I wouldn’t doubt that Barack Obama is behind this somewhere. Look at his shady friends.

Watch this video...the Barack Friend List:

http://www.youtube.com/watch?v=s-a7mV6EO-8

[B4Ranch]

>This is a complex issue, let’s not simplify it with partisan politics.<

That’s a polite way of saying that you agree to accept some, just your share of the responsibility. I’d like to shake your hand. Not too many people are willing to look in the mirror these days!

Ping to #58

[B4Ranch]

Reread the last two sentences of #58.

[B4Ranch]

Lou Dobbs was never more correct than when he said this.

The Democratic and Republican Parties have become merely opposite wings of the same bird, and it’s the American people who are getting the bird as our elected officials serve their corporate masters and the special interest groups that dominate both parties.

[JLS]

There are some similarities and some differences.

1. The key is that as the names recession/depression imply GDP fell from 1930 to 1933. While of course we have not had GDP falling during this period yet.

2. A smilarity is that there have been financial/housing price instability in both periods. But of course in this period the government has stepped in to avoid a financial panic.

3. Another similarity is that there are real shocks in each period. The 1930s saw the dust bowl. Now we are dealing with oil price shocks, but unlike the dust bowl that seems to be at least partially reversing itself.

Here are the real and nominal percentage GDP changes in the 1930s:

Year Real GDP Nominal GDP
1930 -12.0 -8.6
1931 -16.1 -6.4
1932 -23.2 -13.0
1933 -4.0 -1.3

notice they are all negative including a 23% drop in 1932. Here are the same number for the last our years:

Year Real GDP Nominal GDP
2004 6.6 3.6
2005 6.3 2.9
2006 6.1 2.8
2007 4.8 2.0

notice they aer all positive. The implications of these numbers are if you had $50,000 income in 1929 and 2003, you would have had $27,217 in income in 1933 verses $62,299 in 2007. These are GDP growth rates not income growth rates but you can only consumed what is produced.

[Dust in the Wind]

Won't argue with any of these assessments, just would like to point out one thing. "The 1930s saw the dust bowl."

In this same area of the central plains the current conditions are as dry if not drier than the '30s. What has changed is farming technique's and crop varieties. This has lessened the droughts effects somewhat this time.

[TigersEye]

The collectivist-inspired Democrats of the 1930s never righted the economic ship. It took a World War to do that.

No problem. With the Democrat No Domestic Energy Policy we are virtually assured of having a world war that will make WWII look like a pillow fight.

[JLS]

Right and in 80 years another oil price spike may not affect the economy nearly as much. In fact, because of energy efficiency the recent oil price spikes have not hurt the economy as much as the original 1974 oil price spike. Similarly as you say farming technique improvements have caused droughts not to lead to dust bowls.

[K-oneTexas]

My point was, in classical economic terms and historical economic terms we are not in a recession or a depression right now. We are experiencing a financial downturn with these latest ‘bailouts’ however I don’t believe it foretells an economic downturn. There is more to the economy than these three companies.

[K-oneTexas]

I do believe you are right.

[K-oneTexas]

One of my fears is that with a Dem in charge and their lets give in attitude ... the next Word War will be fought on American soil.

[stylin19a]

um...we’re pumping money into circulation...FDR pulled money out of circulation.

Where would be the repeat ?

[K-oneTexas]

As I tried to say ... this is not the Great Depression no matter how much some would want us to believe that.

[P.O.E.]

Exactly - times were tough. My favorite scene from Grapes of Wrath movie is when they arrive at the camp. A little girl comes up to use the water spigot, and runs off leaving it running.

It was supposed to show the bounty & plenty the government could provide, but to me it just showed the wastefulness of those who get something for nothing.