Workers Puttering Around....AGAIN!

It seems as if we never learn from the past. During the Great Depression, FDR, his economic team, and the then-Congress thought that "road building" and "public works projects" would get the economy back on its feet. So, they implemented the WPA (Work Progress Administration) to employ the unemployed in things like building roads and bridges and other public works activities. But, after years of failing to provide tangible economic recovery, the term WPA, instead, became jokingly known as Workers (just) Puttering Around.

When Obama and his Democratic majority pushed through the Stimulus Package, they, too, advertised that "shovel-ready" road-building and other public works activities would bring America back to it's feet with jobs-a-plenty. Now, a year later, we have an unemployment rate in double digits at 25 percent higher than what Obama had promised; and, that rate could possibly increase further. Also, there is no significant indication that any"shovel-ready" public works activities have made a single dent in the continued loss of jobs (Click to See the Full AP/CNBC Story: "What Stimulus? Road Projects Aren't Boosting Jobs Much").

The stupidity of the so called "shovel-ready" stimulus plan was that it ignored all that had been written about how ineffective the WPA was during the Great Depression. Almost every job created by the WPA turned out to be short-lived, temporary employment. As a result, there was no ripple effect throughout the rest of the economy.

To revisit the WPA again, during this recession, shows how absolutely ignorant Obama and his economic team are of history. Even this lone blogger predicted failure when I wrote the entry "The Lessons of the WPA and the Great Depression" in October of 2008 -- three months before Obama got into office and four months before the Stimulus Plan was enacted. I will say it once again: The only purpose of the Stimulus Package was to pay back the labor unions (teachers, police, fire fighters, SEIU, AFL-CIO, etc) for supporting an Obama run for the White House and to gain a Democratic control of Congress in the last election. Getting the economy back to work was the last thing on Obama's mind when he signed the Stimulus Plan into law. And, every day that goes by just proves me right!

And So...The Recession Is Really Here!

Last month, in this blog, I thought we could see a mildly positive Gross Domestic Product ("GDP") for this last quarter that ended in September. However, this morning's numbers proved me wrong with a small contraction of our economy and a GDP number that fell 3-tenths of one percent (See Full Story) . In an economy that is so big and is so diverse as ours, a 3-tenths of a percent fall in growth is a big thing. Normally, a weakness in one or two or more areas of our economy can be covered up by by strength in others. Up until now, our weak U.S. dollar had kept our economy going with increased exports of American-made products. But that all changed in September as the dollar started to strengthen. The strengthening drove oil prices down but, at the same time, it made our products more expensive in the world. Previously, our export strength had masked the weakness in our own consumer's buying habits. Now, as that referenced news article points out, the drop in GDP is clearly seen as being driven by a fall in consumer spending as our export advantage is being reversed. I don't think that anyone can deny that September's revelations of the extent of the credit crisis took its toll by scaring the hell out of America's consumers and the rest of the world.

As a clear example of this, yesterday, I went to one of those big-box-store anchored shopping malls to pickup some prescriptions. At 10:30 in the morning, the parking lot was pretty empty in comparison to just a few months ago. Consumer's are afraid. They are afraid to buy because they just don't know what is happening to the economy and their jobs. I live in Las Vegas and the jobs here are almost exclusively driven by non-essential entertainment spending from consumers visiting from all over the world. More than anywhere else in this country, travel to, and spending in Las Vegas, becomes expendable when the consumer gets spooked. It happened after "9/11" and it is happening now. While the national unemployment is 6.1 percent, the unemployment here is over 7 percent and climbing. To some extent, Las Vegas is truly the canary in the coal mine and this canary is definitely looking sick.

Some experts predict this recession could be deep and very prolonged. Others seem to think that the efforts put forth by the Treasury Department and the Federal Reserve and other world banks will kick in and confine it to a short-lived, two or three quarter event. I don't think anyone really knows what will happen because we don't know what will happen with our new government in January. If taxes are raised in the midst of a recession, it could be a very prolonged event; possibly even a depression. If the Congress and new President show restraint, and possibly provide another stimulus to the consumer, alone, this along with the massive bailout spending could make a less hurtful economic crises. However, if the Democrats decide that "infrastructure spending" would be a good stimulus, then forget it. That is being done for union jobs and nothing else. New projects for infrastructure will literally take months to develop, engineer, bid-out, start, and complete. To think a 1930's style WPA program of infrastructure rebuilding/building will kick-start an economy that is already in recession is totally mindless. These are the "same" politicians who claim drilling for oil will take "too long" to bail us out of an energy shortage! I've got a clue for these people. Excessive taxes and massive federal spending delayed the recovery from the Great Depression and it will delay the recovery from any economic downturn we find ourselves in in 2009.

The Lessons of the WPA and the Great Depression

One of Franklin D. Roosevelt's Administration's schemes to get our country back on track in the midst of the Great Depression was the WPA or Work Progress Administration. Basically, it was a big, government welfare program to get people working on selected infrastructure, arts/media, and other social programs. Thousands of unskilled and unemployed workers were taken off the streets and given jobs on public works projects. Many of these projects took 2 or 4 times longer to be completed because of "slackers" (people knowing that they were just getting a guaranteed government pay check) and because they didn't have the true skills to get the jobs done. There was a widespread joke in America that "WPA" actually meant "Workers (just) Putting Around".

The government also funded film making and a continuation of the arts and drama; as if those items would really help this country get back on its feet. If you watch old movies from the 1930's and early 1940's (as shown on Turner Classic Movies), you will still see the WPA insignia/symbol being displayed on the credits for those movies. Like every other government program, it was political payback, cronyism, and political loyalties that got all the funding for the WPA projects.

If you listen to a lot of Democrats, like Barack Obama, it is public works and infrastructure rebuilding that will get this country going again. Often, they will point back to FDR's WPA as the mechanism for pulling this country out of its economic morass. However, the WPA didn't actually pull this country out of anything. To think this was the case is to literally rewrite history and not understand the economics of that time. WPA just put a lot of people on government welfare under the guise of working. It just burned through tax money and didn't really grow our economy. It was World War II and workers like Rosie the Riveter who were put to work by a wartime economy and were appropriately trained and utilized by major corporations like Chrysler, General Motors, Remington, McDonald Douglas, etc. that brought true economic recovery. There was no true unemployment reversal that could be attributable to the WPA before the war. The marjority of those employed by the WPA in public works went elsewhere as a result of the war and leading up to the program being dissolved in 1943. Unemployment in America was still around 14% just before the war. During the war, unemployment fell under 2 percent as America was near fully mobilized for the war effort. After the war, it moved up to a more normal rate of 6 percent by 1949. There wasn't a return to pre-depression GNP (Gross National Product - see note below) until 1946; a year after the war ended. We had 17 years of economic doldrums from 1929 to 1946. It wasn't public works or arts that got this country going. It was World War II and corporations hiring and training people for our war effort that was responsible. Maybe the Democrats should "completely" follow history have another World War to get us out of the next depression?

You should think about the realities of the WPA when Barack Obama talks about spending billions on wind, solar, and infrastructure projects and how that will falsely create 5 million new jobs. Also, think about the true recovery from the Great Depression when you hear of his plans to hamper our large corporations and small businesses with excessive regulation and new taxation. Maybe I'm wrong, but I just think Obama has his priorities all back-assward! Again, he is being the socalist and not the capitalist.

Note: Today, we measure this country's economic output in what is called the GDP or Gross Domestic Product Report. Back then, that measurement was calculated differently, using the GNP or Gross National Product. The change was made due to the fact that most of our products were being imported and not domestically produced.

Also note: This blog entry was accidentally published when it was still in draft form with some significant errors in GNP during the depression.