In reading the Forgotten Man, one is struck by some parallels between our current economic times and the Great Depression of the 1930s.
Then: The Great Depression was preceded by the stock market crash of 1929. Prior to the crash people were borrowing money to buy stocks sure that stocks could only go up in value. Margin requirements were relaxed so that a buyer need only put 10% down.
Now: Prior to the housing crash Americans were borrowing money to buy houses sure that houses could only go up in value. Margin requirements were relaxed so that a buyer need not put anything down (the 100% mortage).
Then: “the New Deal had created thirty agencies, nearly all close to the executive, leaving ‘the average citizen bewildered’ … In the period of [one year under FDR], 10,000 pages of law had been created, a figure that one had to compare to 2,735 pages that constituted federal statute law. In twelve months, the NRA had generated more paper than the entire legislative output of the federal government since 1789.” Schlaes points out that a lot of business investment was deferred because nobody knew what the legal or tax environment was going to be.
Now: Federal and state legislatures constantly change and add new laws and regulations.
Then: “[in November 1929] Hoover pushed to expand an existing public buildings program by the healthy sum of $423 million on the theory that the spending would boost the economy”
Now: Government payrolls nationwide are expanding, with an ever greater percentage of Americans employed by federal, state, or local government. This comes on top of a huge expansion after September 11, 2001, when we began devoting a larger fraction of our labor force to security and many of those folks are government employees. Governments at all levels continue with massive building programs.
Then: “Roosevelt himself saw that while [Social Security’s] revenues might cover its costs now, the numbers from the actuaries suggested that there would not be enough money for old-age pensions for future generations.” Social Security was explained thusly: “You and your employer will each pay three cents on each dollar you earn, up to $3,000 a year. [That amount] is the most you will ever have to pay.”
Now: The impending bankruptcy of Social Security is a feature in newspapers every few months. Taxes are up to 14 percent of wages.
Then: Both Hoover and Roosevelt devoted a lot of attention to keeping food prices high. At a time when Americans were genuinely hungry, and some starving, Roosevelt introduced the new idea of paying farmers not to grow food. This was a boon to owners of farm land. It impoverished tenant farmers and other laborers who could not earn a living unless the land was actually farmed.
Now: Congress recently passed the most expensive agriculture bill in American history. At a time when people worldwide are struggling to pay for food, we pay farmers not to grow food and/or encourage them to turn food into SUV fuel. The government strives to keep food prices high.
Then: “Hoover’s humanitarian policy sent a signal nationwide: do not lower wages. In the end, businesses had to choose between lowering wages and shutting down. Often, they shut down.” Albert Wiggin of the Chase bank said “It is not true that high wages make for prosperity. Instead, prosperity makes high wages.”
Now: Congress has recently passed several minimum wage increases, one of which goes into effect on July 24, 2008. http://en.wikipedia.org/wiki/Minimum_wage notes that “minimum wage laws have been shown to cause large amounts of unemployment, especially among low-income, unskilled, black, and teenaged populations”. Barack Obama promises to “raise the minimum wage and index it to inflation to make sure that full-time workers can earn a living wage that allows them to raise their families and pay for basic needs such as food, transportation, and housing.”