Alternating Republican and Democrat Administrations is Good for the U.S. Economy
Darrell Williams
July 19, 2008
Whenever one political party with one narrow agenda remains in control of all three branches of government for too long a period of time, the fundamental economic system is shifted either too far to the left or too far to the right. Both of these conditions hurt the national economy. When there is too much government regulation, new ideas, new innovations and new investments are stymied. When there is too little regulation, a large gap develops between the rich minority and the majority of working people. This produces stagnating wages and a slowdown in consumer spending. Too little regulation results in increased corruption, unsound speculation and unhealthy business practices. Self-regulation of businesses never works in the real world because each company faces aggressive world-wide competition with other similar businesses and each wants to maximize profits by any means necessary.
Many U.S. administrations are able to maintain an internal balance when all three branches of government are not controlled by the same political party. When one party controls the White House and the other party controls the Congress, each party puts limits on the actions and policies of the other. This traditional check and balance method is usually the best system, especially when there is friendly cooperation and compromise on legislation. But when there is ideological partisanship, animosities and filibustering, this usually stagnates the entire government and nothing important gets accomplished. This produces a do-nothing Congress with a very low public approval rating.
The most devastating example of this shifting to the right on economic policies, occurred when the Republicans controlled the government from 1921 to 1933. The Warren G. Harding, Calvin Coolidge and Herbert Hoover administrations allowed and welcomed Big Business to completely take over the U.S. government.
President Coolidge said "The business of government is business". Coolidge believed that the leaders of Big Business were the best qualified to make all economic decisions for the entire nation. (This is naïve ideology because every wealthy business owner always puts their own success ahead of everything and everyone else). Coolidge´s Secretary of the Treasury was the extremely pro-business Andrew W. Mellon. Mellon promised a complete unity of Big Business with the U.S. government. While Mellon originally proposed the sound economic practice of balancing the U.S. budget, his tax-cutting policies, especially for wealthy Americans, soon eclipsed any serious attempts to balance the national budget. (This has been exactly repeated by the present polices of GWB). Mellon´s primary agenda was focused on reducing taxes for millionaires. Whenever his tax-cutting proposals were opposed by Congress or the public, Mellon used his position as Secretary of the Treasury to give rebates or refunds to millionaires. Many of these refunds were accomplished in secret without the knowledge of Congress. Many of these refunds went to his own companies, those of his friends and to secretly aid the Republican party. (The GWB administration has also been extremely secretive about almost everything). In his first eight years as Secretary of the Treasury, Mellon dispersed over $3.5 billion in cash refunds, credits or abatements. (See: ´The Crisis of the Old Order´ by Arthur M. Schlesinger, Jr. 1957).
Coolidge´s Secretary of Commerce was the pro-businessman Herbert C. Hoover (the next president) who became a millionaire as a mining engineer. Hoover also reaped huge benefits from Mellon´s tax cuts.
The Industrial Revolution in the 1920´s had dramatically increased production output in American industries. According to standard economic theories and naïve capitalistic ideology, this is supposed to result in reduced prices and increased wages. In the real world it doesn´t work this way. This unregulated free market theory is naïve because it completely ignores a fundamental characteristic of human nature: greed. When Big Business corporate owners are permitted by government policy to self-regulate themselves (all Republicans advocate this), these owners have a choice between raising the wages of their workers or raising their own incomes. They always choose the latter. They choose to increase their own wealth. Greed and corruption are the reasons that businesses must have basic government regulations. The wolf can never be completely trusted to guard the sheep.
This is exactly what happened during the Coolidge administration. Coolidge´s policies reduced or eliminated all government regulations on business practices. The appointment of W. E. Humphrey in 1925 to the Federal Trade Commission resulted in a reversal of President Woodrow Wilson´s (Democrat 1913-21) FTC policy of regulating business practices. The Republican policies of Coolidge encouraged industry-wide agreements on polices and also encouraged monopolies. Big Businesses swallowed up small businesses. More power and wealth was increasingly controlled by fewer and fewer individuals. This deregulation and monopoly of businesses steadily increased corporate profits. Through the administrations of Harding and Coolidge, business profits rose more than 80% while financial institution profits rose more than 150%. By 1929, the top 2.3% of the U.S. population had over 2/3 of all of the money in savings.
However, contrary to naïve economic theories, these increased profits were not passed on to workers or reinvested in expanding businesses. Instead, almost all of these increasing profits were invested in the continually rising Stock Market (unsound speculation). Profits skyrocketed and the Stock Market skyrocketed. The rich were getting obscenely richer and the working class Americans were taking home smaller paychecks due to increasing inflation.
Of course this Stock Market bubble eventually burst. On October 29, 1929, everything stopped. The Stock Market collapsed, banks closed, industries closed, small businesses closed and millions of people became instantly unemployed and thousands were homeless. Stunned and broke, dozens of stockbrokers jumped out the nearest window. The Great Depression had begun. The Hoover administration (1929-33) has been characterized by photos of soup kitchens and ´Hoovervilles´ - shack villages created by the unemployed and the homeless. A ´Hoover Flag´ refers to an empty pocket turned inside out.
This outcome was not only inevitable, it was predictable, and under the same conditions it will happen again. The Coolidge Republican economic policies had shifted the national economic system too far to the right. It benefited only the wealthy, the upper classes and the corporate owners. The gap between the super-rich and the working people became so great that the consumers could no longer afford to purchase the products that the industries were manufacturing. This is always the unavoidable outcome of unregulated capitalism. Productive capitalism always has two participants: the working people and the owners. Only when both of these groups share in the benefits of the process, can the system survive. This requires continuous supervision and continuous balancing of benefits. This is best accomplished by alternating political parties in the U.S. administrations. (The American voters might be wise to remember this every eight years).
After the Harding, Coolidge and Hoover administrations and the crises that their policies produced, the next 20 years the U.S. government was controlled by the Democrat administrations of FDR (1933-45) and Harry S. Truman (1945-53). FDR´s Democrat economic policies shifted the national system back toward the center. Most Republicans think that FDR went too far in this shift, but it was necessary because of the extreme shift to the right that had occurred during the previous 12 years of Republican economic policies.
All of the U.S. administrations since Truman, have generally alternated back and forth between Republican and Democrat administrations. Each party has averaged about eight years in the White House before the public becomes unhappy and votes for a change. This alternating of political parties and economic policies is good for our nation. (American voters also might be wise to demand a bipartisan Congress that is able and willing to limit any excesses or extremist policies by the Executive branch of either political party). Good government always requires an informed and participating electorate.
The Republican economic policies tend to help Big Businesses grow and the Democrat economic policies tend to help the working people and the majority of Americans who are not wealthy. Republican economic policies tend to widen the gap between the rich and the poor and the Democrat polices tend to narrow the gap.
The eight years of the GWB Republican administration (2001-09) have repeated almost all of the economic policies of the Coolidge administration (1923-29).
GWB has been just as pro-business and pro-tax cuts for millionaires and corporations as Coolidge was.
GWB has been just as opposed to government regulation of business as Coolidge was.
GWB has been just as opposed to labor as Coolidge was.
GWB has appointed cronies and pro-business people to all important economic positions in the government, the same as Coolidge did.
The similarities between these two Republican administrations is remarkable. They are almost identical. There is little evidence that any present Republican economic policy ideology has changed in any substantial way since the 1920´s.
Unfortunately for the American people, these two like-minded administrations have also produced the same unavoidable and predictable outcomes. After eight years of GWB´s pro-business anti-labor policies, the entire nation is facing the same economic conditions that existed in 1929.
The present U.S. home mortgage crisis, the banking crisis, the financial market crisis, the energy crisis, the increasing inflation crisis, the national debt crisis, the health care crisis and the generally low approval rating of the administration. All of these were central issues in 1929 and they back again in 2008. The present situation is actually worse than the conditions in 1929 because the GWB administration is spending $440 million a day on the Iraq war, with absolutely no way to pay for it. This war is causing the OPEC nations to steadily raise the price of oil (from $27 per barrel to $137 per barrel today). This will inevitably cause skyrocketing inflation.
Have the GWB Republican policies pushed the U.S. economic system so far to the right as to create another Great Depression? Maybe so and maybe not. This depends on whether or not these same right wing policies (including the Iraq war) are continued or reversed. In order to return to a healthy national economy, the pendulum must swing back to the center as it did after 1933. (Hoover continued the policies of Coolidge for four more years: 1929-33). (In 2009, a continuation of Republican economic policies would be a rerun of the Hoover administration). Another four or eight years like the last eight years would probably push the system to the breaking point, a national economic collapse and another Great Depression. It´s time for a change.
Print
Email
