Will all of the bailouts and stimulus programs make the situation worse?

Question

Historians have been studying the causes and effects of the Great Depression for years. There are many that have stated that government intervention in the 1929 Great Depression actually made the situation worse.

Bush has thrown money at the problem with the TARP money. Obama has said he is going to throw even more money at the problem.

My question here is - will throwing money at the problem only make the situation worse as FDR did during the great depression. There are many good articles and books on this topic and here is a link to one. What are your thoughts on this?

I think we are wasting our money and it will not help. Obama has called trillion dollar debts "ridiculous", but he plans on spending a trillion dollars anyway. So what gives?

http://www.cato.org/pubs/policy_report/v25n4/powell.pdf

Economic historian Burton W. Folsom exposes the idyllic legend of Franklin D. Roosevelt as a myth of epic proportions. With questionable moral character and a vendetta against the business elite, Roosevelt created New Deal programs marked by inconsistent planning, wasteful spending, and opportunity for political gain -- ultimately elevating public opinion of his administration but falling flat in achieving the economic revitalization that America so desperately needed from the Great Depression. Folsom takes a critical, revisionist look at Roosevelt's presidency, his economic policies, and his personal life.

Elected in 1932 on a buoyant tide of promises to balance the increasingly uncontrollable national budget and reduce the catastrophic unemployment rate, the charismatic thirty-second president not only neglected to pursue those goals, he made dramatic changes to federal programming that directly contradicted his campaign promises. Price fixing, court packing, regressive taxes, and patronism were all hidden inside the alphabet soup of his popular New Deal, putting a financial strain on the already suffering lower classes and discouraging the upper classes from taking business risks that potentially could have jostled national cash flow from dormancy. Many government programs that are widely used today have their seeds in the New Deal. Farm subsidies, minimum wage, and welfare, among others, all stifle economic growth -- encouraging decreased productivity and exacerbating unemployment.

Roosevelt's imperious approach to the presidency changed American politics forever, and as he manipulated public opinion, American citizens became unwitting accomplices to the stilted economic growth of the 1930s. More than sixty years after FDR died in office, we still struggle with the damaging repercussions of his legacy.

http://www.amazon.com/New-Deal-Raw-Economic-Damaged/dp/1416592229/ref=sr_1_1?ie=UTF8&s=books&qid=1231428572&sr=8-1

Answer 1

We already know what a further bail-out will do. Nothing. It may even make things worse because the money will go to companies who otherwise would go under. Sometimes an unprofitable company needs to die so that a profitable company can emerge. Sometimes the companies that are in trouble just need to reorganize and they can be made profitable. My federal tax dollars are already being spent at a tremendous rate and if we continue the next corporation that asks for a bail-out will the federal government.

Answer 2

I see one main difference between the policies of Roosevelt and those of Obama that could make things improve. During Roosevelt's administration, the money was put into government CCC programs that put people to work clearing trees, cleaning ditches and generally doing work that was not necessary...although nice to have done. It really did little to improve general conditions in the country, but provided subsistant wages to those that were out of work. Today, those dollars are earmarked to be spent on improving the infrastructure in the country which is NEEDED, and supplying good paying jobs to those that do get them. In the meantime, unemployment will be available to those who remain out of work...at least for a time. The only thing that will pull a failing economy out of a recession is personal spending. Spending increases the market for goods and results in putting more people back on the payroll. Those people who will be put to work on the infrastructure projects will make enough so that they will be equipped to spend...not just exist...so markets for goods and services will improve. In addition, the materials needed for the infrastructure repair will help keep some companies in good condition. It is not going to be a quick fix...but I do think it may help reinstate a certain level of confidence in the financial future in the country...which in turn will give those still employed the comfort level needed to allow them to start spending again...instead of hording their wages as they are doing right now. People will not spend if they are afraid that their job will be gone next week etc.



Roosevelts plan basically was a welfare plan for the unemployed...but it did not provide enough of an income to encourage spending for anything other than the basic necessities.

Answer 3

Intervention CAN help∙

unfortunately, it can make it worse too

The worst thing is that congress is gonna control it therefore they will be dipping - that certainly wont help



at this point, the #1 problem is the failure of the banking system - specifically, the loss of almost 50% of the available commercial credit. Our economy is credit based so if left alone, this would conceivably result in loss of 50% of the economy - that would be very bad



Since it took stupidity and greed on a congressional scale for decades to create the problem, it would seem the only solution would be a congressional intervention to UNDO their intervention.



The other solution is to lose half of the economy and wait for it to rebuild. I prefer taking 1 more chance that the government might be able to fix what they broke - this is so big that it's actually something that DOES require government intervention - but they have to be watched very closely to minimize the chances of them making it even worse.



I would rather∙they create a bank than give money to the failed banks. businesses that actually manufacture product should not be cut off from credit simply because the banks lost 50% of the available credit - -the BANKS should be cut off

Answer 4

Stimulus plans of FDR, Johnson, Nixon did not work. Going deeper in debt 1.5 Trillion a year will not work either. 400-500 Billion in Infrastructure spending 1-3 years down the road is too late. We need tax reductions for Working Individuals and Small Business, not a new huge Govt Program.

Answer 5

Would be cool if things were that simple, wouldn't it? It's not 1932, and anyone not completely blinded by ideology and who actually understands something about economics will agree that in these times, government intervention and investment is an absolute must. How exactly this should be done is of course debatable and there should be a much bigger debate.

Answer 6

Great research but it all comes down to one thing for the regular person and not the rich. If the government will give the regular guy a job so he can feed his family he doesn't give a damn about anything else. The only people that are complaining about the bailouts are the rich who have all the wealth already and are afraid they might have to pay for the bailout. Tough!!! a real American helps out his fellow Americans!

Answer 7

It is a short term "band aid" us all. It those buisness are not forced to change the practices that got them in the situation in the first place then all the money will do is tell people that if they screw up the gov will "bail us out". So it potentially could make things worse...Buisness has to chage or the same thing will happen again.

Answer 8

Gotta get the money flowing. The only way to do that, without enjoying the benefits of hyper inflation once the economy does turn around, is to tax the wealthy and redistribute the wealth that they're sitting on.

Answer 9

I can only go by what I had been told by my Grandfather who managed to support his family through it, and my Mother who grew up in the midst of it. FDR did make changes which brought the depression to an end.

The idea that Experts in economics are "infallible" and always correct is naive.

Here is proof that "Experts" in any field can be wrong:



"The bomb will never go off. I speak as an expert in explosives." - - Admiral William Leahy, US Atomic Bomb Project



"There is no likelihood man can ever tap the power of the atom." -- Robert Millikan, Nobel Prize in Physics, 1923



"Computers in the future may weigh no more than 1.5 tons." -- Popular Mechanics, forecasting the relentless march of science, 1949



"I think there is a world market for maybe five computers." -- Thomas Watson, chairman of IBM, 1943



"I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won't last out the year." -- The editor in charge of business books for Prentice Hall, 1957



"But what . is it good for?" -- Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip.



"640K ought to be enough for anybody." -- Bill Gates, 1981



"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us," -- Western Union internal memo, 1876.



"The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?" -- David Sarnoff's associates in response to his urgings for investment in the radio in the 1920s.



"The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible," -- A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.)



"I'm just glad it'll be Clark Gable who's falling on his face and not Gary Cooper," -- Gary Cooper on his decision not to take the leading role in "Gone With The Wind."



"A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make," -- Response to Debbi Fields' idea of starting Mrs. Fields' Cookies.



"We don't like their sound, and guitar music is on the way out," -- Decca Recording Co. rejecting the Beatles, 1962.



"Heavier-than-air flying machines are impossible," -- Lord Kelvin, president, Royal Society, 1895.



"If I had thought about it, I wouldn't have done the experiment. The literature was full of examples that said you can't do this," - - Spencer Silver on the work that led to the unique adhesives for 3-M "Post-It" Notepads.



"Drill for oil? You mean drill into the ground to try and find oil? You're crazy," -- Drillers who Edwin L. Drake tried to enlist to his project to drill for oil in 1859.



"Stocks have reached what looks like a permanently high plateau." - - Irving Fisher, Professor of Economics, Yale University, 1929.



"Airplanes are interesting toys but of no military value," -- Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre.



"Everything that can be invented has been invented," -- Charles H. Duell, Commissioner, US Office of Patents, 1899.



"The super computer is technologically impossible. It would take all of the water that flows over Niagara Falls to cool the heat generated by the number of vacuum tubes required." -- professor of electrical engineering, New York University



"I don't know what use any one could find for a machine that would make copies of documents. It certainly couldn't be a feasible business by itself." -- the head of IBM, refusing to back the idea, forcing the inventor to found Xerox.



"Louis Pasteur's theory of germs is ridiculous fiction." -- Pierre Pachet, Professor of Physiology at Toulouse, 1872



"The abdomen, the chest, and the brain will forever be shut from the intrusion of the wise and humane surgeon," -- Sir John Eric Ericksen, British surgeon, appointed Surgeon-Extraordinary to Queen Victoria 1873.



And last but not least...



"There is no reason anyone would want a computer in their home." -- Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

Answer 10

Yes I just Heard that China is going to stop buying USA DEBT to concentrate on its own country, this will cause hyper inflation as people lose faith in the dollar



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Answer 11

Ya FDR the socialist dictator that the libs just love to hold up as some benevolent god. If not for the intervention of WW2 FDR would have bankrupted the US Treasury in short order.

Answer 12

Yes, it will probably plunge us into a depression. Gov't intervention can never help capitalism. The gov't has infected us with this disease. Capitalism can cure us if we let it.

Answer 13

Without a doubt it will get worse. Now people like Hustler are trying to jump onto the bandwagon for bailouts. Yeah, like we'd crash is there was no more Hustler porn.

Answer 14

how can that be so.



we budget foreign aid limitless, regardless of our economy.



some of it is not repaid, so how can a stimulass have a negative effect on US