Republican Chairman & the American Dream

On the August 5, 2012 This Week with George Stephanopoulos the Republican National Committee Chairman Reince Priebus said – We have an opportunity in this country to save the very idea of America, to bring back the days of liberty, freedom and the American dream…I think this President has a problem with the American dream. When I grew up…in Wisconsin…we drove around town and passed a beautiful house on the corner, my parents didn’t point at that house and say look at these lousy people in their beautiful house, look at this guy in his new corvette; my Dad …turned around and said look pal if you work hard and go to school, Mom and Dad, we hope you live in that house, we hope it’s 2 times bigger than that house. That’s the American dream and this idea that - we’re spending all of our time just killing people because they’re living the American dream and made something out of nothing and made money - is just crazy talk. Since the past was brought up, I decided to look into it. 

The first Wealth Transfer happened from about the late 1800’s to 1929 when American workers and consumers were victims of the robber barons --greedy and ruthless businessmen and bankers who amassed incredible wealth by exploiting labor and a lack of government regulation.  In 1928 the top 1% of the population had incomes 650% greater that the bottom 10% of Americans. In 1929, 200 of the biggest corporations controlled 50% of the nation’s corporate wealth. Then came the Great Depression caused by the October 1929 Wall Street Crash; it began almost a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth and personal advancement. The usual explanations include: high consumer debt, ill-regulated markets that permitted over-optimistic loans by banks and investors, and the lack of high-growth new industries. Industries that suffered the most included: construction, agriculture (due to dust-bowl conditions – severe drought and high winds coupled with decades of extensive farming without crop rotation, uncultivated fields, cover crops or other techniques to prevent wind erosion), shipping, mining and logging as well as durable goods like automobiles and appliances that could be postponed. The economy reached bottom in the winter of 1932–33 (sound familiar). Franklin D. Roosevelt (FDR), president from 1933 – 1945, launched the New Deal, an economic recovery plan that instituted unprecedented programs for relief, recovery and reform, and brought about a major realignment of American politics. In the 1933-4 ‘First New Deal’ the National Recovery Administration (NRA) sought to stimulate demand and provide work and relief through increased government spending. To end deflation the gold standard was suspended and a series of panels comprised of business leaders in each industry set regulations which ended what was called "cut-throat competition" believed to be responsible for forcing down prices and profits nationwide. The NRA set minimum prices and wages and competitive conditions in all industries, it encouraged unions to raise wages in order to increase the purchasing power of the working class and it cut farm production to raise prices so farmers could earn a living. The NRA ended in March 1935 when the Supreme Court declared it unconstitutional. In 1934–36, during what was called the ‘Second New Deal’, FDR added social security, the Works Progress Administration (WPA) a national relief agency  and through the National Labor Relations Board, a strong stimulus to the growth of labor unions. Unemployment fell from 25% to 9% (1933–1937).

Corporations and investment houses again expanded and consolidated into too-big-to-fail megaliths. FDR launched a campaign against monopoly power which some said was the cause of the Recession of 1937. In February 1938 Congress passed a new Agricultural Adjustment Act which authorized crop loans, crop insurance against natural disasters, and large subsidies to farmers who cut back production. On April 2, FDR sent a new large-scale spending program to Congress which was split among PWA, WPA, and various relief agencies and the economy recovered. In most sectors, hourly earnings continued to rise throughout the recession which partly compensated for the reduction in the number of hours worked. The farm population had fallen 5% but farm output was up 19% in 1939. Although the American economy recovered in mid-1938, employment did not regain the 1937 level until the US entered World War II on December 8, 1941 after the bombing of Pearl Harbor. Economists blame the 1937 recession on: cuts in federal spending and increases in taxes (Keynesian), the Federal Reserve's tightening of the money supply (Milton Friedman) and more recently (Jonathan Catalan) a large expansion of the money supply that did not tighten until after the recession began; I think it was business’ response to FDR’s campaign.

With the war manufacturing employment leaped from 11 million in 1940 to just over 18 million in 1943 and productivity steadily increased. During World War II (1941-1945) the US population averaged 136.6 million people (133,402,471 on July 1, 1941 to 139,928,165 on July 1, 1945) and 16,354,000 men and women served in the Army, Army Air Corps, Navy, and Marines (11.7% of the population). In addition another 12-20 million (about 12%) were in factories producing tanks, planes, food, and ammo for the government. Government spending was up but unemployment was down.