FDR's Recession
    by Phillip A. Schuman

Bart Cop wrote:

> Phillip,
> You know me, not one to argue, but please inform me
> about the recessions during the terms of Johnson,
> JFK and FDR - I'm not familiar with them.

> bc

Hey, Bart!!!

Not one to argue!!
That's a Koresh-damned lie, from a Koresh-damned funny boy, LOL!

Yes, Bart, you sorta caught me with my facts down around my ankles.
But so are yours, worse, nyah-nyah.

I was wrong on JFK and LBJ. Heard it somewhere that Clinton would be
the lone exception I claimed he was, the only one to avoid a recession in
his term. That source was wrong, or I heard or remembered it wrong.
Business Week discussed Clinton's avoiding a recession as the first
**since LBJ**, so I was quite mistaken on those two.

Score two more Democrats for your score, added to Clinton, totalling 3
Democratic presidents who avoided recessions in their terms.

But you didn't quibble with my naming Carter, and implying Truman had a
recession. Both did have recessions. Carter's occured too late in his term
(and after 2 years of strong growth) to be inherited. Truman could have only
inherited it from FDR if anyone. Now it turns out FDR had his own recession.
Here are the numbers from a government site, showing the annual percentage
changes in real gdp.

I hope the table lays out and doesn't get compressed (hard to read then).
To summarize, the year FDR was elected saw the gdp drop 13%.
It stabilized, but still shrank a little the next year. Then it expanded strongly,
averaging double digit annual gains for 3 years. Growth slowed in '37 to half
that torrid pace, and then 1938 saw the economy turn downwards,
losing 3.5% of its real value from '37.

  Gross domestic product

1930 1931  1932  1933 1934 1935 1936 1937 1938 1939
  -8.6  -6.4  -13.0  -1.4  10.8    9.0  12.9    5.3   -3.5   8.1

So you say Republicans uniquely have recessions, but 3 Democratic
presidents out of 6 from FDR through Clinton, including the sainted FDR
himself, also had them. I was wrong to claim 5 of 6 (84%), but 50%
still blows you rhetorically to Koresh.

The ones they had weren't inherited, but arose out of the business
cycle, the fiscal policy of the government, the monetary policy of the
Fed, and world economic conditions (tripled oil prices anyone?). A
president's policies generally have to be reactive to all those other
factors, which dominate domestic economic trends by sheer 800 pound
gorilla status. And a president is limited by what he can get Congress
to pass, and by time, because by the time a recession is announced
(about 3 quarters into it), and the legislative calendar ticking, the
average recession would already be over by the time any law could take
affect (the next calendar year). Presidents can help or hurt around the
edges, but neither start or end recessions. That's above their pay
grade, and goes to the Fed chairman if anyone.

But remember, I agree with your premise of Republican presidents being
historically worse for growth. That was because of how they reacted to
worsening deficits during recessions. They'd look to slash domestic
spending. Nixon did it by recissions, simply not spending authorized
sums. Ford did it with his veto pen. Eisenhower was so tight on fiscal
policy he had multiple recessions. Bush did it by massively raising
taxes (a larger real figure than Clinton's) on a weak economy, while
committing to a 5 year hard cap on all discretionary spending including
military spending, meaning they'd shrink 1 or 2% every year in real
terms. $500 billion worth over 5 years between the tax hike and the
spending reduction.

Democrat presidents were more expansionary in fiscal policy. They
worried less about deficit spending. They figured if pump priming the
economy with some deficit spending would pick up employment, revenues
would increase, outlays for relief would decline, and the deficits would be
self-correcting as the economy approached full employment. That was
Kennedy's platform, and the reason for his tax cut proposal. It left the
green-eyeshade guys as the GOP aghast. It was reckless, and fiscally
irresponsible. What it was was effective. The Democratic presidents
average a better real growth rate, and better stock market gains.

Clinton is a puzzling case on economics. His high-tech investment
stimulus package was a classic Democrat policy, but it started at a puny
$15 billion request, and ended up never passing. He cut a deal with
Greenspan to hold interest rates at their then near-historical lows (he
kept them there 14 months) if he'd pass another $500 billion 5 year
deficit reduction. But the Democratic Congress insisted that the caps
be continued as part of the tax hike deal. A constantly shrinking
discretionary budget would mean Clinton could only get new programs if
he got the money from somewhere else, or raised new revenue to fund it.
He was hamstrung on fiscal policy. He swore, 'you mean some fucking
bond traders are going to determine the fate of my presidency?' He bitterly
told his people 'I hope you all realize that we've become Eisenhower
Republicans.' And being the genius he is, he was right. His new fiscal
policy would be contractionary even though the economy was still
sluggish, not helped by the hit from the previous tax hike and spending
restraint, and this would be on top of that burden, which was still in
effect. Shades of Ike. Clinton was rolling his eyes and rolling the
dice on the magic of expansionary monetary policy and low rates, but it had
just helped Bush out the door. Hadn't worked that well. Another leech,
doctor, the patient isn't responding?

Oddly, after Reagan's 2nd year saw the total repeal of his business tax cuts,
and all 7 of his last years saw major tax increases,  (SS alone up 50%) and
then Bush raised taxes, followed by Clinton's tax hike in '93, with no
significant tax cuts, that was when we got that record-busting halcyon economy.
Nothing but tax hikes for 19 years. Reaganomics/supply side my ass.

I bequeath this to you. The answer to the right wing Jeopardy question,
what country has ever taxed itself to prosperity? The US, in the 10 year
expansion from mid-1991 to 2001. You deserve it if you've read this far,

Your pal,


Phil, thanks for that.

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