Obama's New Deal

President Obama recently submitted a 3.8 billion dollar budget to Congress which includes $100 billion for job stimulus programs.  This is on top of the nearly $800 billion that he set aside for creating jobs several months ago.  Added to the $700 billion that George Bush provided for bailouts in the TARP program, the government has now spent or will spend $1.6 trillion in efforts to save the economy.  As the great Yogi Berra once said, "Its deja vu all over again".  We as a nation have been down this road before.

FDR's administration tried the same thing and for years was given credit for bringing the economy out of the Great Depression.  It was a myth.  The New Deal worsened the situation.  One year after the stock market crash of 1929, the unemployment rate stood at 5%.  One year after the Hoover-FDR New Deal went into effect, the unemployment rate was 15%.  In May of 1939, it stood at 20%, prompting Henry Morgenthou, Secretary of the Treasury to complain, "We have tried spending more than we have ever spent before and it does not work.....We have never made good on our promises.....I say after eight years of this Administration we have just as much unemployment as when we started.....And an enormous debt to boot!".

The fact is, that every federal dollar that goes into creating jobs takes money out of the private sector, reduces spending by consumers and lessens the creation of jobs in the private sector.  Most economists are now convinced that if government had just gotten out of the way and let the economy correct itself that recovery would have occurred years earlier.

Another downside to the New Deal was that once he had brought about massive unemployment, FDR found it necessary to raise taxes to astronomical levels to pay for all of his federal programs.  The top marginal tax rate became 79%, then 90%, which discouraged investors who had already been crowded from access to funds due to massive government borrowing.  If the present economy ever starts a recovery, look for the Democrats to enact massive tax increases on the "rich" to pay the expenses of the "poor".

The current so-called stimulus package is nothing more than an updated version of FDR's New Deal, only worse in that it is not designed to stimulate anything, only to give away money that the government doesn't have in order to curry political favor.

The Dutch theologian, Abraham Kuyper, developed the idea of sphere sovereignty.  What that means in this case is that God has granted a sphere of control to government and a sphere of control to the private sector.  When government steps out of its rightful sphere and meddles in the private sector, disastrous results are sure to follow because it violates the Divine order.  All I know is that unemployment was below 8% before the stimulus and now is at 10% and not forecast to come below that for the foreseeable future.  Go figure.