Could Ahmadinejad Stop Health Care Reform?

This post was written by Dr. Art Pitz on June 18, 2009
Posted Under: Economic History

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As you may have witnessed, there have been a fair amount of comparisons of the current financial crisis with the Great Depression.  Recently, I attended a presentation on this topic by the well known American historian Dave Kennedy.  In his view, and I agree with his analysis, many of those comparisons are off the mark.

Why? The comparisons look at this crisis compared with the depths of the Great Depression in 1933.  Perhaps a better comparison would be from the start of each crisis (the 1929 Stock Market Crash and the collapse of Lehman Brothers) to a comparable date in 1930 with now.  If one does that, one can see that this crisis is actually worse than the one in 1930.  Unemployment now is higher, the decline in GDP is higher, the loss of home mortgages is worse, and more.

So, is this crisis going to wind up worse than what we had by the inauguration of FDR in March, 1933?

Probably not.  We have far more economic stabilizers in place and we have a willingness to use them.  We also have more knowledge of what it takes to deal with such a crisis.  The Federal Reserve is most unlikely to repeat its catastrophic mistakes in dealing with the Great Depression.  Congress is also not going to pass anything like the Smoot-Harley Tariff of 1930 which raised tariffs to the highest level ever and effectively shut down international trade.  Further, and perhaps most important, we are not dealing with Herbert Hoover’s unwillingness to unbalance the budget and to provide massive relief for those harmed by the Great Depression.  You might like to read the article on Hoover in the latest “American Heritage.” 

What we do have is an opportunity to address fundamental problems.  Given the nature of our checks and balances system, such opportunities come along rarely and don’t last long.  Rahm Emanuel is correct when he has been quoted as saying that we shouldn’t waste this crisis.  For example, Health Care reform ( “The protection of home life against the hazards of sickness, irregular employment and old age through the adoption of a system of social insurance adapted to American use;…”) has been an issue ever since the Progressive Party in 1912 made it an issue.  We have successfully provided for unemployment insurance and Social Security, but have yet to protect all “against the hazards of sickness”.  President Obama is probably right when he said that if we didn’t get health care taken care of now then we might have to wait a long time to get it done.

The trick will be to provide a government insurance option that doesn’t drive private health insurance out of business.  We’ve been able to do that with Medicare so we should be able to do that for all.  Further, President Obama is not going to repeat the errors that Hilary and Bill Clinton did in 1993.  It is worth adding that we have a bipartisan consensus that we need to help provide for those who are unable to provide health insurance for themselves.

President Obama has been heavily criticized for taking on so many issues at the same time.  But, he has read the history and knows that any willingess to resolve those issues will not stick around long.  If affairs in Iran, Afghanistan, or Iraq really go south, for example, then don’t count on much consensus on domestic issues.  Remember the Vietnam War?  The reform impetus of the 1890’s was drowned out by the trumpets of the Spanish-American War; the Progressive Era by WWI, the New Deal by the gathering storms of WWII; the Fair Deal by the Red Scare and the Korean War; and LBJ’s Great Society by Vietnam. 

Seems to be an obvious pattern here.  How do you think this will play out?

Dr. Art Pitz
The Professor’s House
Know the History–Understand the Choices

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Reader Comments

“Further, and perhaps most important, we are not dealing with Herbert Hoover’s unwillingness to unbalance the budget and to provide massive relief for those harmed by the Great Depression.”

Didn’t Hoover’s administration propose huge outlays? Wasn’t FDR elected on a platform of cutting spending and balancing the budget?

Written By Jonathan on June 20th, 2009 @ 6:36 pm

Dear Jonathan,

It is true that Hoover did more than any previous president to deal with a depression, but that still doesn’t change the fact that he would not unbalance the budget. As for FDR, I didn’t comment on his approach but you are correct. However, he also promised to provide direct relief which Hoover would not do. It is hard to imagine that FDR didn’t realize that doing so would unbalance the budget–as it did. He did try to balance the budget after the 1936 election since the economy was beginning to improve, but his actions promptly sent the economy into a tailspin. After that, he seems to have bought into Keynesian economics. The massive spending and deficit spending brought on by WWII solved the depression just as Keynes had predicted.

Written By Art Pitz on June 22nd, 2009 @ 4:54 pm

The pattern I was noticing was a successful President campaigning against an opponent, then using the policies of that predecessor and only taking credit (or historians giving credit) for them when they worked. Perhaps it’s a truism that in a time of crisis, the most readily available ideas become politically inevitable.

Great blog. I thoroughly enjoy reading a PhD blogger for once.

Written By Jonathan on July 6th, 2009 @ 1:16 am

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