How Can We Recover Our Economic Freedom?

Just in time for tonight’s GOP presidential debate, a consortium of think tanks from nearly 90 countries has released its annual Economic Freedom of the World Report. The report has some good news for much of mankind — economic liberty increased slightly around the globe — but not such good news for the United States, which continues to tumble in the rankings. As recently as 2000, the United States had the second-freest economy in the world, trailing only Hong Kong. But throughout the Bush and Obama years, we have slipped further and further behind. Read more at National Review Read More......

Big Government as the New Terminator

Social observers from Aristotle and Juvenal to James Madison and George Orwell have all warned of the dangers of out-of-control government. Lately, we have seen plenty of proof that they were frighteningly correct.
The Environmental Protection Agency spilled 3 million gallons of toxic sludge into a tributary of the Animas River in Colorado. The stinky yellow flume of old mine waste -- rife with cancer-causing mercury and arsenic -- threatens to pollute the drinking and recreational water of three states.


Read more at Townhall Read More......

Gallup: Record high fear 'big government'

A record number of Americans think that “big government” is the biggest threat to the country, according to a new poll.  The Gallup survey released on Wednesday showed that 72 percent of people say that “big government” is a bigger threat to the country than “big labor” or “big business.”  That’s the highest percentage of Americans who have expressed the preference since the pollster began asking the question in 1965.

Read more at The Hill Read More......

Bessemer Farms calls it quits, says new farm rules too cumbersome

OHIO - “We don’t want to quit, we were forced out of the business. We can’t spend enough money to comply,” he said. “We’ve been farming for 117 years. I’m the third generation and we’re being put out of business by the government. We can’t comply with all of the safety laws. We haven’t poisoned anybody with an ear of corn for 117 years and we’ve shipped it all over,” he said. ✧ “I can fight the bugs, I can fight the lack of rain, but when the guy comes with a clipboard what are you going to do?” Bessemer said.

Read more: Akron Beacon Journal Read More......

'Boomtown' Special Assails D.C. for 'Extracting' Wealth from Taxpayers

BREITBART: BIG GOVERNMENT - In a blockbuster one-hour investigative special that aired on Fox News' "Hannity" on Friday, Peter Schweizer, Steve Bannon, and Sean Hannity exposed how Washington, D.C. has extracted power and money from the United States into a centralized location to become the country's greatest "boomtown," despite not creating anything. ✧ Schweizer, the president of the nonpartisan Government Accountability Institute, highlighted how the permanent political class that relies on lobbying and influence peddling makes more money by "growing the size of government," which leaves no incentive on either side of the aisle to limit government. ✧ As a result, he noted the three richest counties and seven of the top ten wealthiest counties in the nation are in the Washington, D.C. region. The District also consumes the most fine wine in the nation. He asserted the business in Washington is now "not politics" but "money."

Video: Watch Hannity's BoomTown... Read More......

The Obama vetting begins

Before his surprising death on March 1, Andrew Breitbart promised that 'this time' Barack Obama would be vetted.  In recent speeches, interviews and gatherings, Breitbart indicated that he had video tapes to show just how radical Obama really is.  The first tape was released today on Breitbart TV.  See The Vetting: Obama Embraces Racialist Harvard Prof...

Related video ca 1990: Thomas Sowell Hammers 'Despicable' Derrick Bell; Compares To Hitler Read More......

SOTU: Obama's January Surprise

AEI/THE ENTERPRISE BLOG, 1/25/2012 by James Pethokoukis - Obama pulls trigger on January Surprise: a mass refinancing plan for U.S. mortgages. Read more at The Enterprise Blog... Read More......

AEI: Can the Middle Class Be Rebuilt?

What Should Government Do? Less
By Andrew G. Briggs - As a foundation for the middle class, good jobs, stable families and individual creativity are hard to beat. America didn't generate the strongest middle class in history by having lots of bureaucrats and rules but by having few of them, creating a chaotic economy in which college dropouts become C.E.O.'s and seemingly only political offices are handed down father-to-son. Read more at American Enterprise Institute

Andrew G. Biggs is a resident scholar at AEI. Read More......

Van Jones' Contract for the American Dream

Remember Van Jones, self-avowed Communist and President Obama's former Green Jobs Czar? Apparently he is focusing his attention on children. Is this indoctrination? Is it child abuse? Do these children know how Jones' ideological dream will be paid for? (Comments for this video have been removed and closed on YouTube. I'm guessing that they weren't going the way Jones and fellow travelers had hoped.)

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VDH: Behind the D.C. Slugfest

NATIONAL REVIEW ONLINE/CORNER, Victor Davis Hanson - "Barack Obama will be remembered not so much for being the nation’s first African-American president, or even the man who ordered the killing of Osama bin Laden, or even for his Obamacare, but as the president who grew government the largest, ran up the largest deficits during any presidential tenure, and laid out most candidly and confidently the argument of why the United States is an intrinsically unfair society and how that must be remedied by government."

Read more at the Corner

Also: Astute comment by Robert Hanson Read More......

FARMAGEDDON

From the FARMAGEDDON website: Filmmaker Kristin Canty’s quest to find healthy food for her four children turned into an educational journey to discover why access to these foods was being threatened. What she found were policies that favor agribusiness and factory farms over small family operated farms selling fresh foods to their communities. Instead of focusing on the source of food safety problems – most often the industrial food chain – policymakers and regulators implement and enforce solutions that target and often drive out of business small farms that have proven themselves more than capable of producing safe, healthy food, but buckle under the crushing weight of government regulations and excessive enforcement actions.

See the FARMAGEDDON movie trailer
(Hat tip: Cascade Policy Institute) Read More......

Barone: To Get a Mandate, GOP Must Win Another Election

By Michale Barone
Those who consider themselves constitutional conservatives should take care to consider not only the powers that the Constitution confers on the different branches of government and reserves to the states and the people, but also the schedule that the Constitution sets up for sharp changes and reversals of public policy. Read more at GOPUSA... Read More......

Sunday surprise: Senate unanimously passes food safety bill

THE HILL, 12/19/2010 by Alexander Bolton - The Senate unexpectedly approved food safety legislation by unanimous consent Sunday evening, rescuing a bill that floated in limbo for weeks because of a clerical error. Read more at the HILL...

Unanimous? Unanimous! This is terrible! --bc Read More......

New Data Counters Half-Baked Claims of Food Safety Crisis

HERITAGE/FOUNDRY, 12/17/2010 - The incidence rate of food-borne illness in the United States is dramatically lower than previously estimated, according to findings reported Wednesday by the Centers for Disease Control and Prevention (CDC). The new data thoroughly refute the misleading claims of alarmists advocating for vastly expanding federal regulation of the food supply. Read more at The Foundry... Read More......

Dems: Don't read it, just pass our 1,924-page Omnibus spending bill

RWB NEWS, 12/14/2010 - One Last Binge! Dems Try To Dump A 2,000 Page $1.1 Trillion Spending Bill! No Reading Or Debating It (video)!

It’s hard to believe the election only ended a month ago as the Democrat leadership attempt to rush through a nearly 2,000-page spending bill with a price tag of over a TRILLION DOLLARS in the final days of the lame-duck session ignoring the clear will expressed by the voters this past November. This bill is loaded up with pork projects…..another “We must pass it so you can see whats in it”. I thought that kind of recklessness is what people were sick of in Government. How is Congress supposed to look out for the taxpayer when they only have 3 days to look over this 2,000 page monstrosity? Let’s rush it through and just stick it to the American people AGAIN! Congress should listen to the American people and stop this reckless spending." Watch videos at Red White & Blue News (includes partial text of Fox News report)

Comment by chris.williams at Fox News:
Re: Revolt: Republicans Angry About Omnibus Spending Bill Decry 'Total Mess'

For your information:

The FY 2010 budget for the Department of Education has been $50B. The FY 2011 budget is $55B. That increase was approved months ago. So, too were the budgets of every federal agency. To "hold the line" means to approve the increases. Obamacare includes 189 new federal agencies. Those agencies are part of the "hold the line on spending" mentality. Everywhere you turn, everywhere you look, government is getting bigger by staying the same; and, it's not spending more money today because [t]hat money was added to the deficit last summer.

The Code of Federal Regulations includes every regulation in force in this country. That document is nearly 150,000 (one hundred fifty thousand pages long, spread over 50 (fifty) different volumes. The Small Business Administration puts the total price tag of complying with federal regulations at $1.75 Trillion in 2008. That amounts to $15,000 for each U.S. household. The EPA is advancing 29 proposed major rules and 173 others -- an unprecedented level of regulatory action. The massive health care law creates 183 new agencies, commissions, panels and other bodies and the financial regulatory reform bill creates nearly 500 regulatory rulemakings, 60 studies and 93 reports.

Where does the money come from to fund this Godzilla of a bureaucracy? Surprise it’s you and me our taxes. The job of the Congress -- the House and Senate --is creating, funding and overseeing it."

Read More......

Hard America/Soft America

Via email, INSPIRE AND IGNITE (Hat tip: Linda Weimer) - Earlier this decade, Michael Barone wrote a book entitled “Hard America, Soft America: Competition vs. Coddling and the Battle for America’s Future”. His premise was that we are becoming an America of soft people demanding entitlements at other people’s expense, unwilling or unable to stand on our own and looking to the government instead of ourselves to provide our every need.

Our school system typifies this softness. The system avoids competition and promotes instead a soft concept of self esteem that elevates how one feel’s above the reality of actual merit. Consequences are avoided at all costs...failure is so demeaning that we dare not even try. Passed along from grade to grade without the barest of essential skills, we are producing Soft Americans with no understanding of the real world.

Hard America, on the other hand, plays for keeps. People are not advanced because they “feel good” about themselves, but on the basis of solid performance. In Hard America there are real consequences to failure. But, Hard America is in danger of being overwhelmed by Soft America.

If you have any doubt about how soft we are becoming, consider the mantra, “Too big to fail”. The bailouts of the automotive industry, the banking and financial segments of our economy and the push for universal healthcare are all attempts to remove the consequences of poor choices and proof positive of the ascendancy of “Soft America” today.

But, the problem is, to quote Barone, “Soft America depends on the productivity, creativity and competence of Hard America, which protects the country and pays its bills”.

As we descend deeper and deeper into the “comfort” of a soft life of victim hood where no one is accountable for their choices and big brother will always ride to the rescue; we are destroying the essential American character. Our country was built upon character which is self reliant, courageous in the face of adversity and unwilling to trade away personal freedom for the government’s promise of security.

From the Pilgrims who faced long odds and hard times to pursue freedom regardless of the cost; to the signers of our declaration who pledged their lives, their fortunes and their sacred honor to bring freedom to these shores...from the rugged pioneers who overcame significant hardship to expand our borders from coast to coast; to our astronauts risking their lives to expand our borders to the moon and beyond…from the Minutemen at Concord to our brave soldiers buried across Europe, the American character has resisted the easy way...has stood firmly for personal freedom and rejected the idea that someone else owed us an easy life.

Elections Have Consequences

Soft America won an overwhelming victory in 2008. Soft America has savagely
attacked the concept of merit and competency. Soft America has undermined the free enterprise system that built the greatest nation in history and has denigrated success in favor of handouts and protectionism. Soft America has consistently mocked and discouraged the small business entrepreneur; preferring instead to “Spread the wealth around”. Soft America is attempting to void the consequences of bad choices and that will ultimately destroys character and the work ethic so critical to achieving the American dream.

If Soft America prevails, the impact on the American spirit and America’s future will be grim…the drive to turn us all into beggars dependent on the federal government’s benevolence for our daily needs will gain great momentum.

To overcome the accelerating trend lines of the last few years, Hard America must be willing to once again find the inner strength to stand firm for the bedrock principles of limited government, personal accountability and free markets. The cost to right the ship of state, restore fiscal sanity and rebuild the American dream for our children will not be easy and will not be accomplished without personal sacrifice.

ARE WE READY TO PAY THE PRICE TO RESTORE AMERICAN?

If we truly want a smaller government, balanced budgets and a free market
economy, we must decide what federal programs we are willing to forgo.

This is not a rhetorical question. The answer is NOT what others must give up; the answer is not a litany of bloated federal bureaucracies that we must shut down. The question is much more personal... if we are to be successful in restoring the America our founders intended, we must decide what price we are personally willing to pay. For example:

As a retired military officer, am I willing to have my retired pay and benefits frozen for 5 years?

As a social security recipient, are you willing to have your benefits frozen for 5 years?

As a federal employee, are you willing to have your pay and benefits frozen for 5 years?

As a public employee, are you willing to renegotiate your retirement benefits in order to make the program sustainable?

Will you willing to abandon your unemployment check and diligently seek work... any work to meet your financial needs?

Are we willing to allow sound fiduciary principles to guide a restructuring of our social security benefits to ensure the long term viability of the program?

Are we willing to live within our means, rejecting federal attempts to buy us off with a new car or make our mortgage payment or pay off our personal credit cards?

The list is surely much longer as we consider the personal sacrifices we must be willing to make to restore America. The critical point is that without personal sacrifice, all our proclamations of concern for the debt...for the future of our country...our public outcry demanding smaller government are hollow and empty.

Without a commitment to personal sacrifice, all our protestations are simply selfishly motivated calls for others to sacrifice for our benefit. If smaller government is to become a reality; if we are truly to have a government living within its means, then the sacrifice must be shared by all.

The only path to a smaller government is to reduce spending, reduce or eliminate wasteful programs and provide an environment where the free market can function without artificial barriers.

Once we have committed to the personal sacrifice needed to restore sanity in the federal government, then we have the moral authority to suggest major cuts in other parts of the federal government. Just a few suggestions:

Eliminate the Energy Department and the Education Department

Reduce the Dept of Defense, State Dept and Justice Dept by 10%

Reduce the IRS by 80% and replace the income tax with a fair tax

Reduce Federal employees by a minimum of 33% (from 2.1 million to 1.4 million)

Make earmarks illegal.

Obviously, this list can be expanded (I welcome you thoughts). But before we rise up and demand these kinds of changes, we must signal our willingness to bear our share of the sacrifice.

This email has not addressed increasing federal revenue... as President Reagan said, “Our government doesn’t tax too little, it spends too much.” If our goal is smaller government, then our attention must be on reducing spending and the overall size of the federal government.

That said, in principle, when the government is functioning properly, it creates an environment when business can prosper and grow. In so doing, the federal revenues will grow accordingly. We must resist the liberal’s first reflex to raise taxes to meet revenue needs. While it may seem counter intuitive, if you raise taxes, you ultimately lower revenue while if you lower taxes, you raise revenue (Google “Laffer Curve”).

With common sense and courage, and a renewed dependence on our Creator we can overcome the progressive’s agenda and restore America.

A young mother was being interviewed on a national network recently. She was expressing her concern that the government’s approach to the mortgage crisis was to bail out home owners unable to meet their financial obligations while she and her husband adjusted their life style, lived within their means and struggled from month to month to make their house payment. She asked where is the lobbyist standing up for my family and the millions like us. The interviewer asked her if she and her husband had ever considered missing a couple of payments so that they could qualify for the government assistance.

Her reply was striking, “NO, not ever...we weren’t raised that way.”

Thank God for Hard American willing to stand by their principles and make hard choices rather than being bought by a federal government bent on making us all beggars.

Hard America, we make a statement about what kind of nation we will leave future generation... one strong and free or one in debt and bondage? Make your voices heard!

Visit www.inspireandignite.com to contribute to the Second American Revolution.

For a strong reminder of who is really in charge visit: www.andiesisle.com/creation/magnificent.html

Jim Kinney Capt USN (ret) Read More......

ALERT: S-510 Food Takeover Act, S-787 Water Takeover Act

FREE REPUBLIC (Hat tip: Linda Weimer) - "Congress will convene November 15 to try to force into law all the things they didn't get done during the regular session. No one knows for sure just which bills will be on Nancy and Harry's agenda. It's Harry's agenda that is most important because the Senate - with 60 votes required to stop debate - offers the best opportunity to stop a bill.

S-510 - Food Safety Modernization Act - is one of the bills that must be stopped. Doreen Hannes has been following this bill for several organizations during its entire existence. Here's some of her reasons why the bill must be stopped. Doreen says:

"In a nutshell, S510 is effectively NAIS (National Animal Identification System) for everything. It is a tremendous amount of additional enforcement (fines and penalties, license revocations, further license requirements, control over processes and harvest) which are definite issues with the bill as it currently exists. However, not unlike the "Health Care" bill, they will have to pass this to see what it actually does.

"Here's why....In S 510, the FDA is instructed to follow all international agreements. One of the issues with international 'guidelines and standards' is "Good Agricultural Practices". Well those are not necessarily good. Most GAP certifying bodies have checklists about 25 pages long for growers to follow. They all require traceability (i.e., NAIS) they also require auditing, verifying and certifying the processes used to produce a consumable product for human or animal feed. Every step in GAP costs the grower of food money and a good deal of paperwork. What happens if you're better at growing food than filing forms? You will be penalized (i.e., more money). Sec 420 is exceptionally dangerous in my eyes. It subjects all farms that 'produce' milk to risk assessment and management (i.e., insurance).

"The idea that exemptions will be helpful is rose-colored-glasses thinking. Exemptions can easily be taken away or modified without Congressional oversight through the regulatory process. Most farmers aren't watching the Federal Register like hawks.

"The FDA has plenty of authority to protect the anonymous food supply already. But they don't. Instead, they put small entities out of business through Hazard Analasis & Critical Control Points (HACCP), also to be expanded in this bill, and heavier regulations that are not helpful to smaller economies of scale. The FDA inspects less than 1% of imported produce, has performed inspections on less than 25% of processing failties[sic] [facilities] that they are authorized to inspect (in a five year period) and they ALREADY have authority over live food animals on the farm. The USDA authority is over animal disease."

S-787 - Clean Water Restoration Act - will give the federal government jurisdiction over all water, everywhere, as well as jurisdiction over all activity that affects water wherever it may be. This would give to the federal government effective control over every square inch of land in the United States. It too, must be stopped. (see video 3:30)"

Please register your concerns with your senators:

Sen. Jeff Merkley (D) - DC (202) 224-3753, Salem (503) 362-8102
Sen. Ron Wyden (D) - DC (202) 224-5244, Salem (503) 589-4555

Read More......

The Rules of the Game and Economic Recovery

Amity Shlaes

THE MONOPOLY BOARD GAME originated during the Great Depression. At first its inventor, Charles Darrow, could not interest manufacturers. Parker Brothers turned the game down, citing “52 design errors.” But Darrow produced his own copies of the game, and Parker Brothers finally bought Monopoly. By 1935, the New York Times was reporting that “leading all other board games … is the season’s craze, ‘Monopoly,’ the game of real estate.”

Most of us are familiar with the object of Monopoly: the accumulation of property on which one places houses and hotels, and from which one receives revenue. Many of us have a favorite token. Perennially popular is the top hat, which symbolizes the sort of wealth to which Americans who work hard can aspire. The top hat is a token that has remained in the game, even while others have changed over the decades.

One’s willingness to play Monopoly depends on a few conditions—for instance, a predictable number of “Pay Income Tax” cards. These cards are manageable when you know in advance the amount of money printed on them and how many of them are in the deck. It helps, too, that there are a limited and predictable number of “Go to Jail” cards. This is what Frank Knight of the University of Chicago would call a knowable risk, as opposed to an uncertainty. Likewise, there must be a limited and predictable number of “Chance” cards. In other words, there has to be some certainty that property rights are secure and that the risks to property are few in number and can be managed.

The bank must be dependable, too. There is a fixed supply of Monopoly money and the bank is supposed to follow the rules of the game, exercising little or no independent discretion. If players sit down at the Monopoly board only to discover a bank that overreaches or is too unpredictable or discretionary, we all know what happens. They will walk away from the board. There is no game.

Relevance to the 1930s

How is this game relevant to the Great Depression? We all know the traditional narrative of that event: The stock market crash generated an economic Katrina. One in four was unemployed in the first few years. It resulted from a combination of monetary, banking, credit, international, and consumer confidence factors. The terrible thing about it was the duration of a high level of unemployment, which averaged in the mid teens for the entire decade.

The second thing we usually learn is that the Depression was mysterious—a problem that only experts with doctorates could solve. That is why FDR’s floating advisory group—Felix Frankfurter, Frances Perkins, George Warren, Marriner Eccles and Adolf Berle, among others—was sometimes known as a Brain Trust. The mystery had something to do with a shortage of money, we are told, and in the end, only a Brain Trust’s tinkering with the money supply saved us. The corollary to this view is that the government knows more than American business does about economics.

Another common presumption is that cleaning up Wall Street and getting rid of white-collar criminals helped the nation recover. A second is that property rights may still have mattered during the 1930s, but that they mattered less than government-created jobs, shoring up home-owners, and getting the money supply right. A third is that American democracy was threatened by the rise of a potential plutocracy, and that the Wagner Act of 1935—which lent federal support to labor unions—was thus necessary and proper. Fourth and finally, the traditional view of the 1930s is that action by the government was good, whereas inaction would have been fatal. The economic crisis mandated any kind of action, no matter how far removed it might be from sound monetary policy. Along these lines the humorist Will Rogers wrote in 1933 that if Franklin Roosevelt had “burned down the capital, we would cheer and say, ‘Well at least we got a fire started, anyhow.’”

To put this official version of the 1930s in terms of the Monopoly board: The American economy was failing because there were too many top hats lording it about on the board, trying to establish a plutocracy, and because there was no bank to hand out money. Under FDR, the federal government became the bank and pulled America back to economic health.

When you go to research the 1930s, however, you find a different story. It is of course true that the early part of the Depression—the years upon which most economists have focused—was an economic Katrina. And a number of New Deal measures provided lasting benefits for the economy. These include the creation of the Securities and Exchange Commission, the push for free trade led by Secretary of State Cordell Hull, and the establishment of the modern mortgage format. But the remaining evidence contradicts the official narrative. Overall, it can be said, government prevented recovery. Herbert Hoover was too active, not too passive—as the old stereotypes suggest—while Roosevelt and his New Deal policies impeded recovery as well, especially during the latter half of the decade.

In short, the prolonged Depression can be put down to government arrogance—arrogance that came at the expense of economic common sense, the rule of law, and respect for property rights.
Arrogance and Discretion

Consider the centerpiece of the New Deal’s first 100 days, the National Recovery Administration (NRA), which was in effect an enormous multisector mechanism calibrated to manage the business cycle through industrial codes that, among other things, regulated prices. The principles on which its codes were based appear risible from the perspective of microeconomics and common sense. They included the idea that prices needed to be pushed up to make recovery possible, whereas competition constrained recovery by driving prices down. They held that big firms in industry—those “too big to fail”—were to write codes for all members of their sector, large and small—which naturally worked to the advantage of those larger firms. As for consumer choice, it was deemed inefficient and an inhibitor of recovery. The absurdity of these principles was overlooked, however, because they were put forth by great minds. One member of the Brain Trust, Ray Moley, described the myopic credentialism of his fellow Brain Truster, Felix Frankfurter, in this way:

The problems of economic life were to Frankfurter matters to be settled in a law office, a court room, or around a big labor-management bargaining table . . . . The government was the protagonist. Its agents were its lawyers and commissioners. The antagonists were big corporate lawyers. In the background were misty principals whom Frankfurter never really knew at first hand . . . .
These background figures were owners of the corporations, managers, workers and consumers.

One family that was targeted by NRA bureaucrats was the Schechters, who were wholesale chicken butchers in Brooklyn. The NRA code that aimed to regulate what they did was called The Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York. And according to this code, the Schechters did all the wrong things. They paid their butchers too little. They charged prices that were too low. They allowed their customers to pick their own chickens. Worst of all, they sold a sick chicken. As a result of these supposed crimes, they were prosecuted.

The prosecution would have been comic if it were not business tragedy. Imagine the court room scene: On one side stands Walter Lyman Rice, a graduate of Harvard Law School, representing the government. On the other stands a small man in the poultry trade, Louis Spatz, who is afraid of going to jail. Spatz tries to defend his actions. But he barely speaks English, and the prosecutor bullies him. Nevertheless, Spatz is now and then able to articulate, in his simple and common-sense way, how business really works.

Prosecution: But you do not claim to be an expert?
Spatz: No.
Prosecution: On the competitive practices in the live poultry industry?
Spatz: I would want to get paid, if I was an expert.
Prosecution: You are not an expert!
Spatz: I am experienced, but not an expert . . . .
Prosecution: You have not studied agricultural economics?
Spatz: No, sir.
Prosecution: Or any sort of economics?
Spatz: No, sir.
Prosecution: What is your education?
Spatz: None; very little.
Prosecution: None at all?
Spatz: Very little.

Then at one point this everyman sort of pulls himself together.

Prosecution: And you would not endeavor to explain economic consequences of competitive practices?
Spatz: In my business I am the best economist.
Prosecution: What is that?
Spatz: In my business I am the best economizer.
Prosecution: You are the best economizer?
Spatz: Yes, without figuring.
Prosecution: I wish to have that word spelled in the minutes, just as he stated it.
Spatz: I do not know how to spell.

This dialogue matters because little businesses like Schechter Poultry are the natural drivers of recovery, and during the Great Depression they weren’t allowed to do that driving. They weren’t allowed to compete and accumulate wealth—or, in terms of Monopoly, to place a house or hotel on their property. Instead they were sidelined. The Schechter brothers ultimately won their case in the Supreme Court in 1935. But the cost of the lawsuits combined with the Depression did not go away.

Regarding monetary policy, it is clear that there wasn’t enough money in the early 1930s. So Roosevelt was not wrong in trying to reflate. But though his general idea was right, the discretionary aspect of his policy was terrifying. As Henry Morgenthau reports in his diaries, prices were set by the president personally. FDR took the U.S. off the gold standard in April 1933, and by summer he was setting the gold price every morning from his bed. Morgenthau reports that at one point the president ordered the gold price up 21 cents. Why 21, Morgenthau asked. Roosevelt replied, because it’s 3 x 7, and three is a lucky number. “If anyone knew how we set the gold price,” wrote Morgenthau in his diary, “they would be frightened.”

Discretionary policies aimed at cleaning up Wall Street were destructive as well. The New Dealers attacked the wealthy as “money changers” and “Princes of Property.” In 1937, after his re-election, Roosevelt delivered an inaugural address in which he described government as an instrument of “unimagined power” which should be used to “fashion a higher order of things.” This caused business to freeze in its tracks. Companies went on what Roosevelt himself resentfully termed a “capital strike.”

These capital strikers mattered because they were even more important to recovery than the Schechters. Consider the case of Alfred Lee Loomis, who had the kind of mind that could contribute significantly to Gross Domestic Product and job creation. During the First World War, he had improved the design of firearms for the U.S. Army. In the 1920s, he became wealthy through his work in investment banking. He moved in a crowd that was developing a new form of utility company that might finally be able to marshal the capital to bring electricity to the American South. But when Loomis saw that the Roosevelt administration was hauling utilities executives down to Washington for hearings, he shut down his business, retreated to his Tudor house, and ran a kind of private think tank for his own benefit. We have heard a lot about a labor surfeit in the 1930s. Here is a heresy: What if there was a shortage of talent brought on by declarations of class warfare?

Another challenge to the Depression economy was tax increases. While these increases didn’t achieve the social equality at which they aimed, they did significant damage by confiscating too much individual and corporate property. As a result, many individuals and businesses simply reduced or halted production—especially as the New Deal wore on. In the late 1930s, banker Leonard Ayres of the Cleveland Trust Company said in the New York Times: “For nearly a decade now the great majority of corporations have been losing money instead of making it.”

As for big labor, the Wagner Act of 1935 proved to be quite destructive. It brought on drastic changes at factories, including the closed shop—the exclusion of non-union members. Another innovation it helped bring about was the sit-down strike, which threatened the basic property right of factory owners to close their doors. Most importantly, it gave unions the power to demand higher wages—and they did. A wage chart for the 20th century shows that real wages in the 1930s were higher than the trend for the rest of the century. This seems perverse, considering the economic conditions at the time. The result was high paying jobs for a few and high unemployment for everyone else. The reality of overpriced labor can be seen in several stock phrases coming out of the Great Depression—“Nice work if you can get it,” for example, was the refrain of a Gershwin song performed by Fred Astaire in The Damsel in Distress, a film released in 1937 at the zenith of union power.

To return to the Monopoly board metaphor, the problem in the 1930s was not that there was no bank. It was that there was too much bank—in the form of the federal government. The government took an arbitrary approach to the money supply and made itself the most powerful player. It shoved everyone else aside so that it could monopolize the board. Benjamin Anderson, a Chase economist at the time, summed it up in a book about the period: “Preceding chapters have explained the Great Depression of 1930 to 1939 as due to the efforts of the governments and very especially the government of the United States to play god.”
Relevance for Today

It is not hard to see some of today’s troubles as a repeat of the errors of the 1930s. There is arrogance up top. The federal government is dilettantish with money and exhibits disregard and even hostility to all other players. It is only as a result of this that economic recovery seems out of reach.

The key to recovery, now as in the 1930s, is to be found in property rights. These rights suffer under our current politics in several ways. The mortgage crisis, for example, arose out of a long-standing erosion of the property rights concept—first on the part of Fannie Mae and Freddie Mac, but also on that of the Federal Reserve. Broadening FDR’s entitlement theories, Congress taught the country that home ownership was a “right.” This fostered a misunderstanding of what property is. The owners didn’t realize what ownership entailed—that is, they didn’t grasp that they were obligated to deliver on the terms of the contract of their mortgage. In the bipartisan enthusiasm for making everyone an owner, our government debased the concept of home ownership.

Property rights are endangered as well by the ongoing assault on contracts generally. A perfect example of this was the treatment of Chrysler bonds during the company’s bankruptcy, where senior secured creditors were ignored, notwithstanding the status of their bonds under bankruptcy law. The current administration made a political decision to subordinate those contracts to union demands. That sent a dangerous signal for the future that U.S. bonds are not trustworthy.

Three other threats to property loom. One is tax increases, such as the coming expiration of the Bush tax cuts. More taxes mean less private property. A second threat is in the area of infrastructure. Stimulus plans tend to emphasize infrastructure—especially roads and railroads. And after the Supreme Court’s Kelo decision of 2005, the federal government will have enormous license to use eminent domain to claim private property for these purposes. Third and finally, there is the worst kind of confiscation of private property: inflation, which excessive government spending necessarily encourages. Many of us sense that inflation is closer than the country thinks.

If the experience of the Great Depression teaches anything, it is that property rights must be firmly established or else we will not have the kind of economic activity that leads to strong recovery. The Monopoly board game reminds us that economic growth isn’t mysterious and inscrutable. Economic growth depends on the impulse of the small businessman and entrepreneur to get back in the game. In order for this to happen, we don’t need a perfect government. All we need is one that is “not too bad,” whose rules are not constantly changing and snuffing out the willingness of these players to take risks. We need a government under which the money supply doesn’t change unpredictably, there are not too many “Go to Jail” cards, and the top hats are confident in the possibility of seeing significant returns on investment.

Recovery won’t happen from the top. But when those at the top step back and create the proper conditions, it will happen down there on the board—one house at a time.

Reprinted by permission from Imprimis, a publication of Hillsdale College.

The preceding is adapted from a lecture given at Hillsdale College on February 2, 2010, during a conference on the New Deal co-sponsored by the Center for Constructive Alternatives and the Ludwig von Mises Lecture Series.

A version of this lecture was delivered as the Hayek Prize lecture in 2009.

Copyright © 2010 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College.

AMITY SHLAES is a syndicated columnist for Bloomberg and a senior fellow in economic history at the Council on Foreign Relations. She is a graduate of Yale University and pursued postgraduate studies at the Free University in Berlin. She has served as a member of the editorial board of the Wall Street Journal and as a columnist for the Financial Times. In 2009 she was winner of the Hayek Prize, a book prize from the Thomas Smith Foundation of the Manhattan Institute. In 2003 she was the J.P. Morgan Fellow in Finance and Economics at the American Academy in Berlin. In 2002 she was co-winner of the Frederic Bastiat Prize, an international award for free-market journalism. She is the author of two national bestsellers, The Greedy Hand: A Profile of the Tax Code and The Forgotten Man: A New History of the Great Depression. She is currently at work on a biography of Calvin Coolidge. Read More......

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