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Big Government: Pendulum or Runaway Train?

Ever since FDR “saved” the economy – either through his welfare and public works programs if you like his fiscal model or by entering World War II if you believe the country was going to turn around on the basis of a business cycle anyway – despite his inept handling of the Depression – the size and role of the federal government in the business life of America has continued to grow.

Truman was too busy fighting wars and dealing with new international realities with our Soviet allies to leave a huge mark on America Inc., but conservative president, DDE, built the interstate highway system with a heavy dose of liberal spending, a symbolic and tangible symbol of a more federally driven America economy.

JFK we hardly knew you. We’ll never know his spending agenda based on his short tenure, though his activism in other areas might lead us to believe he would have been big government in all ways.

Inspired by political activists like author John Steinbeck – and in a well-documented strategy to secure minority votes, LBJ attempted to build a ‘Great Society’ – a phrase he borrowed from Steinbeck – to further expand the government’s role and responsibility as the provider and protector of the people’s welfare.

Let’s break from this historical free for all for just a second. Everyone, including politicians of all stripes, is concerned with the welfare of “the people” and individual persons. Whether one cares is not what is being debated, though in the political world it is posited by big government proponents that if you don’t want government to take responsibility for people’s welfare you don’t care about people’s welfare. The fiscal conservative or political libertarian will argue that he or she cares just as much about the welfare of individuals, he or she just does not think government does a very good job of supplying it. They want an old school model that limits the role of government to good laws and national defense – and leaves individual welfare up to individual effort, which will be much more productive and efficacious in a free enterprise system the thinking goes.

But what happens when that doesn’t work, big government proponents ask? Some free enterprise advocates agree with having clearly defined and limited temporary aid measures in place – others argue for the “family and friends” need to save you program. But based on what we’ve seen so far in our historical foray, there really haven’t been too may free enterprisers in control, no matter what we might assume from party affiliation.

RMN actually toyed with price controls, which would made him a hero among Marxist ideologues and an enigma to his independent, puritanical forebears, but ultimately, he poured his attention on foreign policy and then shifted his focus to another set of problems that were a little more personal in nature.

JC. We hardly knew you. Stagnation and malaise were the order of the day. The result of bad business or too much government intervention? Carter wasn’t sure there was a possible solution from the government or private sector and suspected we might be headed for leaner days. He spoke about those suspicions a little too forthrightly and the electorate lost as much confidence in JC as in the country’s future.

That ushered in the reign of RWR, who was sure it was the latter, too much government intervention, that was the problem. No one in the media and not even his vice president believed in his “voodoo” economics, but he get elected. He cut capital gains taxes, eliminated and simplified regulations to doing business, and cut income taxes for the middle and upper middle classes. (He would have done the same for the lower and wealthiest classes but it is impossible to cut anything from nothing.) It can be argued that he restored America’s business star, setting the stage for the largest capital growth campaign in history and the rise of Bill Gates. What he didn’t do, however, was cut government spending. And it wasn’t just because he built up the military. Liberals and columnists – I would have said Liberal columnists but why be redundant? – bemoaned all the benefits he cut from the poor. Not true. He did occasionally cut government program increases but never spending.

GHB (W’s dad). We hardly knew you, either. I do recall H was kinder and gentler than Reagan – at least he said he was – and raised taxes to prove it despite the protests of lip readers to the contrary.

WJC got his butt kicked on socialized medicine early in his first term. His solution? Keep Hillary away from Congressional hearings and enjoy Reagan’s promised ‘peace dividend.’ Then he started experiencing the joy of balancing the budget and reducing the federal deficit so much he went out and tweaked some welfare policies so that they became workfare policies. For the first time in 60 years people were involuntarily cut from welfare rolls. Bill might be the last and the only fiscal conservative of the past 100 years. Deep down, I suspect that still bothers him.

GWB. Or just W. A man of principle, faith, and profligate spending habits. He and the man who followed him, BHO, are architects and builders of an expanded role for government through TARP(s) that might have made FDR’s head spin. Even the German socialists are confused. When they throw money at economic problems it is at least to save unnecessary jobs. In America’s iteration of corporate welfare, it is to eliminate jobs and save companies.

The latest Obama move has been to appoint a ‘Special Master for Compensation’ to oversee executive and employee pay at companies that accepted government bailout money. Any wonder so many are fighting like crazy to give this ‘free’ money back? Any wonder Hugo Chavez, left-wing socialist president of Venezuela, claims he is more right wing than Obama?

So is the size and scope of the federal government cyclical – a pendulum that is simply on a high note of growth? Or is it a runaway train navigating hair-pin turns as adroitly as possible?

If these economic days are tough on your personal welfare and you see a bright shining light ahead, it might mean there is hope at the end of the tunnel for you. Or it might mean you better jump off the track in a hurry if you don’t want to get hit!

Overheard at the Gym: Prices are Soaring

She said “hi” but I was on minute-28 of an elliptical workout at the YMCA so I was red-faced and could barely breathe. It was pretty obvious I wasn’t going to be good for a conversation that included formed words and thoughts. I guess she forgot her ear buds and was bored and wanted to talk so she looked the other way and started a fairly loud conversation with the person to her left. I kept trying to breathe – and since I forgot my ear buds, too – I couldn’t help but eavesdrop.

The key revelation I picked up was that she had asked for two tea bags at a coffee shop that afternoon and was charged $2.25 each, which somewhat angered her and led to a sharp exchange with the waitress that ended with her telling the waitress, “I’m drinking your tip.”

I’ve always thought it was unfair to punish a waiter or waitress when a dining problem is clearly outside of his or her control. Like prices posted on the menu. Or a grease fire in the kitchen. And all that begs the question of why she was ordering tea in a coffee shop in the first place.

But what most caught my attention was that she was at least the fifth person I had heard in a 24-hour time frame that was complaining about how high prices are. If you’ve checked costs on homes and many commodities you already know it’s a seller’s market out there – if you can find someone that can actually afford what you have to sell!

What I think I was overhearing was actually a micro example of a fundamental psychological shift occurring on the macro level in America. We’ve always complained about prices – except when bragging about how much we paid for something – but I think now people really mean it.

Could it be that we are shifting from being consumers to conservers again? A lot of pundits will say it’s about time. That sounds as good and right as saying you’re only going to help people who can’t afford their homes because of bad luck rather than those who can’t afford their homes because they were greedy. But many economists will remind us that the Great Depression was caused in large measure because people stopped spending and investing. Consumer spending does create the magical process of turning a company’s inventory or services into cash, which is usually a requisite for staying in business.

But that doesn’t mean we haven’t been incredibly greedy and overspent on the aggregate – and as individuals. This seeming personal course correction – possibly nothing more than a temporary dip in our mad spending ways – is undoubtedly overdue but we shouldn’t be naive that there won’t be more corporate casualties. Whatever you think of companies – unfair, unfeeling, unscrupulous or anything else unflattering – they are entities that provide jobs.

So what’s the takeaway in all this for me? First of all, I’m not going to forget my ear buds again. And secondly, I’m limiting myself to one tea bag!

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