Why FDR and Obama Cannot Fix US economies

Why FDR and Obama Cannot Fix US economies 

First of all, I might forgive FDR.  FDR did get us through the war and did you know that WWII for the US was less than 4 years?  That would be a record among today's presidents.  And even though I think FDR was awful at fixing the economy, he at least could claim to be the first one.  And of us can make a mistake on judgment.  But Obama and his financial University friends such as Paul Krugman should have been students of history.  It is just not bright for the US to make the same mistakes over and over again.  So what is wrong with the Obama approach? 

What many politicians and even commentators do not do are the simple things.  When they want to spend money, they should ask where does that money come from?  And the second thing they need to then ask is - does that money source they need have the money to supply to the location that we wish? 

Here are two simple more questions that this revolves around: 

  1. Can the government create jobs?  - YES
  2. Does that help the economy? - Not Often.  Most often it damages it even further 

To see why, take the following example.   Obama hires a government employee and pays them $100,000 a year, a nice salary, but not unheard of.  Now let us say that after deductions that that same person pays back $20,000 in taxes.  Okay.  So the government spent $100,000 and got back $20,000.   Where does the other $80,000 come from? 

The answer is that if the government is small and the private sector large and prosperous, the money used to come from the private sector who made many goods and services, and then sold them many places in the world, and gave part of their profits to the US government in taxes.  But if the government is too big or the private sector is damaged, then some of the money becomes a US deficit and the US takes out loans.  When the deficit as under Obama gets so huge such as $1500 billion a year, it can no longer be covered by either the private sector or by loans, and hence the US prints money - which can easily lead to inflation, huge interest rates, and the death of our economy. 

And so two things here.  The first is that the government cannot be over a certain size in a free country like the USA and economics still work.  The second is that one needs a prosperous private sector in order to ensure the bills get paid.  The reason for both is ... money must come from somewhere to run the government and to pay its employees.

But both FDR and then Obama think the answer is a huge government with many government employees and lots of regulations on the private sector.  This did not work in the 1930s and it aint working now.  While I might forgive FDR who might be the first US president to fall into this trap, there is no excuse for Obama repeating the misery of the past. 

How to fix the US economy?  Easier than most people think.  The US government must get smaller and it is the private sector that must be encouraged instead of  being damaged with constant new regulations and taxes.  In other words, a new president mostly would just have to .... stop the beatings ... of the private sector.  But that seems a solution few see.

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Comment by RNhunter on June 12, 2012 at 1:05am

Yep to much of what you say.  My family had a few stores at the time.  When the recession hit, I could explain some of the lost sales by the people out of work.  But sales fell off even further.  That was what I believe you refer to as the psychological effect.  Yes, if you tell people that the sky is falling, they will not spend.  In my area of the world, many stores became deserted and died.  Late at night used to be many cars but now it seemed a ghost town.  Few went out and spent money.  Yeah, that was often some of the psychological impact of Obama.

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