Does America Need Another ‘New Deal’ To End The Great Recession Of 2007-2009, Or A Completely New Deal?

As Congress and President-Elect Obama debate exactly what kinds of “economic stimulus measures”–public works projects, tax cuts and credits, etc.–will end the current “recession” [1], President Lincoln might be smiling and thinking of the time when an office seeker claimed that he was “one of those who made you President,” and Mr. Lincoln replied: “yes, and its a pretty mess you got me into!”

In fact, since Mr. Lincoln personally defined “conservatism” as the “adherence to the old and tried, against the new and untried” [2], Mr. Obama and his economic advisers “new Deal” like economic stimulus proposals look more like the “conservative” approaches of the Hoover administration to The Great Depression rather than the innovative proposals of FDR‘s “New Deal.” [3]

But more importantly for Mr. Obama and his advisers searching for solutions to The Great Recession of 2008-09, did FDR’s New Deal legislation actually result in the ending “The Great Depression” of 1929 to 1933 [4]?

Although no historian has denied that New Deal programs certainly provided millions of unemployed Americans renewed hope, a sense of purpose and food and shelter for their families and began the construction of a regulatory system aimed at protecting the earnings of working Americans from unscrupulous bankers, investment firms and speculators–no small accomplishment by any means, the current consensus among American Great Depression era historians is that the massive re-industrialization resulting from America’s entry into World War II and  four continuous years of full employment and factory wages ended The Great Depression. [5]

And regardless of whether we call the current economic crises a “recession” or a “depression,” the “social contract” between Americans and their government today, as it was in 1932, is not just “torn,” but is in “shreds:”

  • Between 2000 and 2007 median household income decreased by .6%–and, that, of course, was before the economic collapse of 2008. [6]
  • Both the income gap between 80% of working men and women and the other 20% and the concentration of wealth in the United States are at historical highs; [7] and
  • Senators now spend over 30%, and Congressmen and women up to 40%, of their professional time raising money for their, and their respective party’s, re-election campaigns–instead of attending to the People’s Business. [8]

Consequently what Americans really need is not just “another New Deal” but a completely “new New Deal” with its government that promotes steady, significant annual income growth–especially among the first 80th percentile of the American work force; and instead of a “reactive” economic policy trying to alleve the symptoms of the nation’s current economic disease–primarily unemployment, declining property values and erosion of retirement capital– the Obama Administration needs to design a “pro-active” national economic policy which “cures” the disease and acts as an antibody to its re-occurrence.

So what would an entirely new “New Deal”–or perhaps more appropriately  a renewal of TR’s “Square Deal“– for the average American worker involve?

1.  A Complete Overhaul Of The Federal Income Tax [FIT] System. All triteness aside, the current FIT is literally a giant  millstone around the nation’s economic neck.  It discourages savings and investment by the average working American by taxing their earnings from saving and investment.  It taxes the retirement income and benefits of persons who most need that extra income.  It taxes the income generated from family owned and start up businesses even during the most critical time frame of launching a new business–the first five years.  To entreprenuership the FIT is an anchor dragging on the bottom just when the business is trying to leave the dock.  The FIT system needs to be entirely replaced by the simple progressive income tax originally proposed and enacted by the GOP. [9].

2. Re-industrialization. As we have previously noted history shows us that massive industrialization, not New Deal economic stimulus programs, finally ended The Great Depression, and therefore, it stands to reason that only comprehensive re-industrialization of America’s economy will ultimately end the current “Great Recession.”  Re-industrialization would:

  • Replace predominantly “minimum wage” service sector jobs with “living wage” high tech and manufacturing jobs;
  • Replace service workers with minimum education, training and skills with skilled workers having significant education and training [with a consequential increase in the quality of products, support services and productivity]; and
  • Replace our current predominantly “mercantile economy”–i.e. the business of selling–and as we see almost everyday now in the media frequently re-selling–securities and related banking and investment services–the historical hallmark of every declining national economy since at least the 1700s with a primarily manufacturing and manufactured products support service economy–the historical hallmark of every rising and/or healthy national economy [10].

And with the worldwide general recognition–now finally even including most governments–that humans can no longer widely and systematically pollute our planet and/or use up its increasingly diminishing resources without causing a global catastrophe, what better time for America to re-industrialize to provide sound resource utilization, environmental protection and aerospace machinery, equipment and processes and their required technical support services?

3. Public Financing Of All Federal Election Campaigns. The “Great Recession” of 2008 is the second occasion within the last 80 years where  reduced, if any, oversight of the American banking, real estate and investment industries has resulted in wiping out a significant portion of America’s investment and retirement capital–the first, of course, being the ‘laissez-faire” policies of the Harding, Coolidge and Hoover administrations between 1920 and 1932. [11].  And their is general agreement among both economists and historians that the “roots” of that lack of oversight during the last several decades was the same as it was during the 1920s and 1930s–i.e. that the financial, real estate and insurance industries, cumulatively, were then, and still are the biggest donors to candidates for federal office. [12].  Consequently, it seems logical that the only “proactive” national policy for preventing that national tragedy from re-occurring is public financing of all Congressional and Presidential elections so that–finally–America’s elected representatives are “beholden to none”–except to the citizens they represent.


1.  “Obama Advisors: Plan Would Create 4.1 Million Jobs” Philip
Eliot, AP, 1-10-2009.

2.  “The Life and Writings Of Abraham Lincoln,” P.V.D. Stern,
Modern Library, NY, copyright 1999 at page 581.

3.  Wikipidia: “Calvin Coolidge,” “Herbert Hoover,” and “Franklin D.

4.  Wikipidia: “The Great Depression.”

5.  Ibid.

6.  U.S. Census Bureau “Table H-8: Median Household Income…

7.  CNN Money “Income Gap Widens” Tami Luhby 4-9-2008; U.S.
Dept. of Labor, Bureau Of Labor Stastics: “Labor Force Statistics
From The Current Population Survey, Multiple Job Holders,
Minimum Wage Data [and] Characteristics of the Employed;”
and “The Distribution Of Wealth In America” Survey Of Consumer

8.  “More Raise $1 Million In Congress Races,” USA Today, Mon.
12-15-2008; “Money in Politics…Clean Elections For Congress”
Common Cause (web site).

9.  The GOP Congress of 1862 enacted the very first federal income
to help finance the Civil War which by 1864 consisted of three
flat tax brackets of 5, 7.5 and 10% on annual incomes above
$600. “History of the Income Tax in the United States” at Info
Please (web site); and Tax History Museum “The Civil War 1861
-1865 (web site).

10. “Wealth and Democracy,” Kevin Phillips, copyright 2002,
Random  House Inc.. N.Y., N.Y.   is an entire book devoted to this

11. Wikipidia: “Warren G. Harding,” “Calvin Coolidge,” and “Herbert

12. 2008 Election Contribution Statistics (By Industry)
(web site).  The “Finance-Insurance-Real Estate” industries–
the ones who received virtually all of the approx $350 billion
in “bail out” funds distributed so far–gave a collective total of
approximately $462.5 million. The next largest group of
contributors were “Lawyers-Law Firms-Lobbyists” at $318.5
million [and no surprise there either].


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