Friday, November 21, 2014

Comparing and Contrasting Obama and FDR Failed Policies (Part V)

Ironically, the liberals in the massive federal government do not like anything that big. The government and liberals see bigness as bad, especially big business. Unfortunately, attacks against big business and the wealthy hurt small businesses and the poor even more. Under FDR’s NRA small companies suffered. While big businesses were able to absorb the labor rules (wages, maximum work week hours, etc.), small companies could not. Unfortunately, it took several years before the Supreme Court ruled that the NRA unconstitutional (Schechter v. United States) – much damage had already been done. Liberals and FDR also despise the middle men in business (once again, ironically, liberals do not like Walmart even though they eliminate the middle guy and sell products cheaply). FDR wanted to help agriculture and to do so he needed to raise prices. He viewed this as a supply and demand problem – there must be too much supply so prices were low. Hence, the solution was to have the NRA pay farmers to withhold crops to raise prices (Agriculture Adjustment Act). To help pay for this they taxed the middle people in the agriculture process. It sounds crazy, but the administration actually paid farmers to withhold food when literally millions of people were starving. The FDR administration failed because they tried solving a complex macroeconomic problem using a simple microeconomic analysis. The same goes for ObamaCare and new EPA laws and regulations. Big companies can absorb the mandates, but smaller ones cannot. Another Obama example is the Dodd / Frank financial reform bill. The bill does not solve the “too big to fail” issue, but places ridiculous mandates on smaller businesses such as tracking all precious metals in products they use.

Both Obama and FDR were huge fans of government involvement and of ownership of public utilities. FDR spent eight years trying to privatize electricity. He used public money to fund the TVA to build dozens of dams to offer cheap electricity to people (remember government utilities were paid for using tax payer money and did not face the same tax burden as private companies). FDR passed the Public Utilities Holding Act and Guffey Coal Act to push his agenda. Once WWII hit, FDR found he had to put his personal agenda aside and team up with big companies (including utilities and ironically Andrew Mellon’s aluminum conglomerate) to win the war. Without WWII, FDR was on pace to place all energy under government control. Obama is not much different, he used the Recovery Act, and the EPA in an effort to move the U.S. towards renewable energies and off fossil fuels. Obama has enacted executive orders in the name of climate change to take down one of his biggest enemies – big oil.

At first the Supreme Court was not on FDR’s side and an attempt to pack the courts failed. But with intimidation and guaranteed salaries for justices to retire his agenda would soon hold up in the high court. The Labor Act and Wagner Act were huge wins for unions – it gave workers minimum wages and the right for unions to mobilize. Within a year the number of union members in the automotive business increased from 20,000 to nearly a half million. What followed were huge and violent demonstrations (hundreds on both sides of the picket line would die). Even WPA members were striking, but this made FDR irate and not what he had in mind when he passed laws to help unions (in other words it is okay to strike against big business but not the government). In 1936 the automotive companies sold more cars in their history but their profit margins suffered from higher taxes and higher wages. By 1937 another Depression within the Great Depression hit. The unemployment rate moved back above 20% and the stock market plummeted back down towards 100. Ironically, opposite happened under Obama when it came to union representation. Union representation decreased as companies moved to right to work states; Republican governors passed pro-work laws and anti-union laws; and the National Relations Board was losing cases in the high court. These moves actually helped to strengthen state economies as well as companies such as the automotive companies that declared bankruptcy shortly after Obama took office.

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