Friday, October 07, 2011


Some historians have credited Herbert Hoover with the following political beatitude – “Blessed are the young¸ because they will inherit the national debt.” Hoover may or may not have said it, but I guess that’s not particularly relevant. Hoover has also been credited with doing nothing once the stock market crashed in 1929, but that may not be entirely true either. When the stock market crashed he blamed it on the Coolidge administration’s laissez faire, pro- business policy. By the time he left office the Hoover administration had passed the highest income tax increase in American history, doubled the estate tax, and secured passage of the Smoot-Harley tariff of 1930, which precipitated a worldwide trade war. In the aftermath of the speculative bubble that had caused the market to crash unemployment had gotten as high as 9%. By 1930 unemployment had been reduced to a little bit over 6%. By 1931, thanks to Smoot-Harley, unemployment reached 11%. When Franklin Roosevelt was elected in 1932 the unemployment rate had skyrocketed to 23.6%!
Maybe I’m looking at it the wrong way, but I don’t think Herbert Hoover did “nothing.” He did a lot and not much of it was good. Coolidge, the “Old Stone Face,” may have gotten it right. He had on occasion referred to Hoover as “Wonder Boy.”  He was also reluctant to support Hoover’s presidential bid in 1928 and had once remarked, “For six years that man has given me unsolicited advice—all of it bad.”
I started this essay writing about debt so I guess I’d better get back to it.  It’s interesting. Just about everyone in the country seems to agree that we have a national debt problem. Economists are telling government officials we have a crisis on our hands. Strangely, though, the message of debt reduction doesn’t seem to have a lot of appeal in some circles.
In a recent essay published by Time Magazine, Brad Tuttle opined, “While it is prudent for the individual to save more and scale back on consumption, the consensus is that, collectively, we need to spend to get the economy humming along once more. If the masses were to exhibit boring, responsible, debt-averse consumer behavior for a sustained period of time, that would be a recipe for continued economic strife.”
I’m not sure who is responsible for this consensus. My guess it’s a brigade of Washington think tankers. The average American isn’t that dumb. You know eventually the politicians are going to get a hold of this and, when they do, they’re gonna’ have a field day.
It gets even worse. It’s one thing for the Obama administration to blame the Bush administration for our current predicament. That may or may not be true. But it’s another thing altogether to blame you and me, and that’s what’s happening.  The argument, so it goes, is that, since consumer spending represents 70% of our economic activity, consumers who are scaling back on big ticket purchases and reducing debt load are “seriously hampering the economy’s recovery.”
Well, there you have it. It’s all our fault.
Why is it that bad ideas seem to get such traction? I find it mystifying. It seems, for example, that every time we have a national disaster, a tornado, a hurricane like Katrina or Irene, a flood, or a blizzard, the airwaves begin buzzing with the idea that maybe the tragedy wasn’t so bad after all because it will stimulate economic activity and bring on recovery. I understand that there is some economic activity that comes on the heels of a disaster, but does that mean that the solution to our economic problems is to mount tragedy upon tragedy to create the desired economic outcome. Really? I guess that means we’d do well to start burning our cities down, inventing machines to shake all of our houses like James Bond’s dry martinis, or opening the national spigots and flooding everyone out. Man, talk about stimulus! It’s too bad Herbert Hoover didn’t think of that. Had he been clever enough he could have adopted the mantra, “If it ain’t broke, break it” to market all the destructive energy.  We just may have avoided the Great Depression. We might have had a lot of scorched and flooded earth, broken buildings, and stratospheric casualty reports, but the lucky ones left standing would have been employed rebuilding everything.
I wonder what our young people are thinking as they observe the madness disguised as compassionate genius in action. Are they dreading the future? Surely, they must be thinking that the ruling generation has taken leave of its senses. Lord, I hope they don’t start thinking like their elders and begin breaking things. Maybe, for the sake of self-perseveration, I’d better suggest they just eat, drink, and be merry now, for tomorrow they will probably be broke!

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