How Should We Handle Pretend History?

by Burt on July 9, 2012

Earlier this week, President Obama gave listeners a history lesson on why he was running for higher office. “The reason I ran for president,” Mr. Obama said, “the reason I ran the first time for a state senate seat [in 1996] on the south side of Chicago, was because . . . we had gone through a decade where people were working harder and harder but we didn’t see an increase in income. . . . Jobs weren’t growing fast enough. And the cost of everything . . . kept going up faster than people’s income.”

Was high unemployment, high inflation, and low growth what the U.S. was experiencing in 1996, or in the decade before that? No. That describes the 1970s–a decade of big government with price controls, the war in Vietnam, price fixing in oil, and massive inflation of the currency by the Federal Reserve. The Dow Jones Industrial Average, which topped the 1,000 mark in 1966, was at about 800 fifteen years later. The 1980s, however, began a change. We saw a more stable currency, tax rate cuts, decontrol of oil prices, and relative peace abroad (and the collapse of the Soviet Union).

In 1996, the year President Obama ran for the Illinois state senate, President Clinton downsized government through welfare reform. By cutting welfare benefits, the welfare rolls were cut by almost 50%, and President Clinton had budget surpluses his last two years in office. In 1996, the U.S. saw 2,500,000 new jobs created and only 3% inflation. Americans, contrary to the president’s statement, experienced massive job increases, and they watched their growing incomes outpace inflation. The U.S. economy had strong decades in the 1980s and 1990s.

So, why the pretend history? Because pretend history is the only way to make increases in debt and in the size of government appear to be the correct political move. In this case, President Obama is copying what President Roosevelt did in the 1930s. President Roosevelt also criticized the limited government of the previous decade (the 1920s) even though during those years, American incomes sharply rose and the standard of living improved: not just through inventions of the radio, sliced bread, and talking movies, but also in medical advances such as the treatment of diabetes and tuberculosis. Life expectancy increased more in the 1920s than in any decade of the 20th century; and it declined more in the 1930s than in any decade of the 20th century. And FDR’s programs to stimulate the American economy promoted stagnation, not prosperity. Even Henry Morgenthau, FDR’s hand-picked secretary of treasury, lamented in 1939 after almost seven years of FDR’s spending, “We have tried spending money. We are spending more than we have ever spent before and it does not work.” Morgenthau was right–unemployment stood at 20.7% when he made that statement. Not until after WWII, when Congress slashed federal spending and cut the tax rates, did the American economy begin to pull out of the Great Depression.

Because so many historians and politicians promote a version of pretend history instead of the real history, Americans become confused. Thus, they fall prey to politicians who are eager to support massive federal programs, borrow from the Chinese, and go heavily into debt. As a nation, we can keep doing that, but let’s stop kidding ourselves with pretend history. Massive federal spending and debt has not created jobs or prosperity in the past, and it’s not doing so in the present.

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House of Eratosthenes
July 9, 2012 at 10:48 am
DYSPEPSIA GENERATION » Blog Archive » How Should We Handle Pretend History?
July 9, 2012 at 10:12 pm

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