Michele Bachmann: The perils of spending like it's 1929

Source: http://www.startribune.com/opinion/commentary/38664952.html?elr=KArksc8P:Pc:U0ckkD:aEyKUiacyKUnciaec8O7EyUr

January 29, 2009

It's been almost one year and $1.5 trillion since the government began its historic slate of financial bailouts -- and all we have to show for it is red ink dripping from our nation's balance sheet.

Congress has been busy writing checks to everyone from Detroit automakers to Wall Street day traders. We're now nearing a historic $11 trillion debt. Each time Congress goes to the taxpayer ATM, it claims that this will be the bailout that gets the economy moving again.

For instance, on the night the Senate passed the $700 billion Wall Street bailout, the Senate's finance chairman, Max Baucus, confidently declared: "I'm very proud of what we did. This is going to mark the time when we've turned the corner. And we will begin to see this financial crisis beginning to abate."

But things got only worse. And despite the serious risks to our long-term stability, this failed strategy of big-government stimulus continues in full force. This week, in fact, President Obama and the Democratic Congress asked for another near-trillion in federal deficit spending.

Their plan promises an agenda styled after the economic policies of the Great Depression -- government jobs programs, enormous infrastructure spending, huge amounts of pork and a slew of government handouts. But before we return to the 1930s, we may want to review a little history.

The stock market collapse of 1929 brought a crashing halt to the Roaring Twenties. But President Herbert Hoover's response to the economic crisis ensured that it became a genuine catastrophe. Contrary to popular perception, Hoover did not respond to the downturn with inaction or indifference -- rather, he pursued a series of misguided big-government adventures that lengthened and deepened our economic woes.

Hoover not only dramatically hiked income and import taxes, but he instituted big-government spending programs all but identical to those being debated today. Hoover's Reconstruction Finance Corporation tried to ease economic pain by funneling tax money to state governments, local governments, banks and a variety of businesses. His Federal Home Loan Bank Act extended loans in an effort to increase low-income housing -- beginning the ill-fated history of federal intervention in the housing market.

These measures proved a dismal failure, and things got only worse. In the 1932 campaign, Franklin Roosevelt actually attacked Hoover for his big-government policies, decrying Hoover's presidency as "the greatest spending administration in peacetime in all of history."

Yet, once elected, Roosevelt not only maintained Hoover's programs, he used them as a foundation for his titanic New Deal expenditures. He even expanded Hoover's failed housing program and launched the now-infamous mortgage giant Fannie Mae. And even in the face of a staggering 25 percent unemployment, FDR held fast to the big-government philosophy -- jobs programs, handouts, tax hikes -- and, as a result, presided over a decade of economic misery.

FDR's own treasury secretary, Henry Morgenthau, had to admit as much in 1939: "We are spending more than we have ever spent before, and it does not work. ... We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started. And an enormous debt to boot!"

Instead of pursuing the tragic economic policies of Hoover and FDR, we should follow the model of presidents who successfully met the economic challenges of their times and ushered in prosperity. In recent memory, Presidents John F. Kennedy and Ronald Reagan dramatically cut taxes to stimulate growth and create jobs -- and their policies succeeded.

When Jimmy Carter left office, the economy was slumping, unemployment was higher than today and inflation was in the double digits. Reagan's economic policy, which included massive tax cuts, reversed a worsening situation, and the economy surged on every level -- 17 million jobs were created, employee compensation increased, inflation was conquered and the longest peacetime boom in our history was born.

So with two paths ahead -- one that emphasizes tax reform and one that emphasizes big government -- the right path is clear. We either learn from the mistakes of history or we repeat them.

Michele Bachmann, R-Minn., is a member of the U.S. House of Representatives.