Colman: IT’S A DEPRESSION, FOLKS

In a mere thirty days, California and America has gone from the most successful society in the history of the world to a place where folks despair getting up the next day.  In two weeks, ten million unemployed., the Feds passed a rescue bill costing $2.2 Trillion—and total commitment of $6 trillion—without asking  how are we paying for it!  This is bringing smiles to the faces of Pelosi, AOC and Sanders.  As part of the rescue bill, the Feds are going to OWN a piece of many corporations—that is called socialism and few mention it.

Dr. Colman notes the issues, concerns and suggestions of “economists”.  In my college Economics 1 class I learned “that if you lined up all the economists, you could never reach a conclusion”.  So, we need to use common sense.  Even in a crisis you need to ask questions about who the “relief” will affect us in the short term and the long term. 

Bret Baier on Fox News just quoted Winston Churchill, who gives us good advice:

“When you are going through hell, keep going”  As Bret said, we are one day closer to the end.

Photo courtesy of kenteegardin, flickr

IT’S A DEPRESSION, FOLKS

By Richard Colman, Exclusive to the California Political News and Views   4/3/20 

      Most Americans are not old enough to remember the Great Depression, which lasted from 1929 to 1939.

 During that era, 25 percent of Americans lost their jobs.  An additional percentage was underemployed.

 Citizens also lost their homes and life savings.  Banks failed, and depositors lost their money.  Industrial production collapsed.  People had no money for food, rent, or the home mortgage.  Between 1929 and 1932, the value of stocks dropped 90 percent.

 In 1932, Franklin D. Roosevelt, the Democratic governor of New York State, ran for president, promising a “New Deal” for Americans.  Roosevelt was overwhelmingly elected president.  He went on to be elected again — in 1936, 1940, and 1944.

 Is the current economic crisis in America different from the Great Depression?

 In February 2020, unemployment was at 3.5 percent of the workforce — the lowest percentage in 50 years.  The stock market was booming.  Americans were buying homes, cars, and appliances.

       By March 2020, the coronavirus pandemic had set in.  Restaurants, bars, and movie theaters, closed.  Sporting events were canceled.  Long lines appeared at supermarkets and banks.  The stock market lost all the gains it had made since Donald Trump became president on Jan. 20, 2017.  Thousands of people with COVID-19, the disease caused by the corona virus, became ill or died.

      On Mar. 20, 2020, 3.3 million Americans filed claims for unemployment insurance.  One week later, on Mar. 27, 2020, another 6.6 million filed such claims, bringing the total number of claims to almost 10 million.  No one knows how high future claims will go.

What should America do?

Economics is not an exact science.  No one can run controlled experiments, such as giving half the population a tax cut and giving the other half no tax relief.  With a controlled experiment, one can see if the people getting the tax cut did better than those not receiving such a benefit.

Some economists recommend cutting interest rates.  This has already been done.  In March 2020, the Federal Reserve, the nation’s central bank, cut interest rates to about zero percent.  At some future time, observers will presumably be able to determine if the reduction in interest rates made a difference.  Low interest rates might mean that consumers can more easily buy homes and cars.

Cutting interest rates can be similar to having the federal government print more money.  (Actually, the printing is now done by some computerized method, but the effect is the same as turning on printing presses.) 

There are economists who believe that printing more money puts extra purchasing power into consumers’ hands.  One economist has said the effect of printing money is like throwing dollars, using a helicopter, to the people below.  There is a school of economists that believes that printing more money ultimately produces higher prices (inflation).

       Another group of economists recommends increased government spending to make up for the loss of consumer purchases.  General economic theory argues that total economic output, called gross domestic product or GDP, is made up of four factors:  consumer spending; business investment; government spending; and exports.  These economists argue that increased government spending can make up for lost consumer purchases.  The economists in this group are likely to call for personal tax cuts, putting more cash into consumers’ pockets.

       In today’s America, government is under huge pressure to do something to stop job losses.  In late March 2020, Congress passed and President Trump signed a bill to spend $2 trillion of federal money.  The hope and expectation are that the economy will return to normal.

       A possible problem with spending more federal dollars is that the nation is already $23 trillion in debt.  No one can be certain what a higher level of debt might mean.

       The year 2020 is a presidential-election year.  Presumably, no candidate for president wants to see something like 20 percent or 30 percent (or more) unemployment.

       The 2020 presidential election may be the most important election in decades.  One can ask the question:  Why, at a time like this, would anyone want to be president of the United States?

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. Really??? says

    Turmp reluctantly signed a $2 Trillion bill. Less than a week later Pelosi and the Democrats want the printing presses to add a minimum of another $2 Trillion.

    If you as a home owner and operator do not understand you cannot spend more then you earn then this is a lost argument.

    It goes from the farm subsidy, to heavy industry handouts.

    Understand you need to state clearly to every representative tighten the belt, and no more feel good spending. Basics that include emergency response, street repairs, and daily policing.

    You know what is going to happen, the minute the economy comes back the calls for Socialized Housing, more handouts to homeless (Santa Barbara give $1K per month), and why call for work for welfare?

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