Former Clinton labor secretary Robert Reich wrote a truly nonsensical piece for the Huffington Post Tuesday ironically called "The Republicans' Big Lies About Jobs."
MSNBC's Chris Matthews must have loved this tripe and its sophomoric title for he invited the Berkeley professor on Wednesday's "Hardball" so that the pair could put on a clinic in liberal economic fantasy (video follows with partial transcript and oodles of commentary):
REPRESENTATIVE ERIC CANTOR (R-VIRGINIA): We have adopted a two-track approach called cut and grow. Now, the first part, cut, is obvious. We know that we have to stop spending money that we don't have, and we have to begin managing the money we do have and spend it more wisely. The American people are tightening their belts and Washington should too. The growth part is about those gazelles, growing businesses that add new employees every month, keeping regulators from running amok.
CHRIS MATTHEWS, HOST: Welcome back to “Hardball.” That was House Majority Leader Eric Cantor Monday out at Stanford University. His speech on the economy prompted a reaction from former labor secretary Robert Reich in the Huffington Post. We all read it. Reich wrote about what he called, “Republicans’ Big Lies About Jobs.” Reich says there are five of them: deficit cuts somehow create jobs; tax cuts for the rich create jobs; corporate tax cuts create jobs; wage and benefit cuts create jobs; regulation killing creates jobs, and; regulations kill jobs. […]
Robert, you say what we were taught in school. So, is there somebody teaching something else? I mean, if you want people to spend more money, you give them more money in wages or whatever, you don't fire them and leave them as paupers, because they're not very good consumers then. When you fire people, take away their rights to bargain for higher wages you take away their ability to spend their wages.
So, what is this thing, this sort of religion course we’re getting, this primer we’re getting from Cantor? What is it, neo-classical from the 19th century? Where does he believe that stuff from?
From here, Reich repeated some of the nonsense in his piece concerning how spending cuts would be the end of the world now, and President Obama needs to push back to prevent this from happening.
However, what was stunning about this over eight minute segment was how Matthews and Reich admitted that the economy is in terrible shape while claiming it was caused by spending cuts that haven’t happened yet.
What they both totally ignored was the fact that spending has increased by 41 percent since 2007 while unemployment has risen from 4.4 percent to 8.9 percent as the country lost seven million jobs.
Sound to you like this massive increase in spending over the past four years has done any good?
But even better, towards the end of the segment, Reich let a really inconvenient truth slip: “This is the most anemic recovery we’ve had from a deep hole since the Great Depression.”
Please notice that Matthews agreed, as of course do I.
And that's the point, for we’ve increased federal spending by 41 percent without it resulting in much economic improvement. Yet Matthews, Reich, and their ilk believe cutting spending will hurt the economy.
In reality, we now have two distinct economic periods in the past 80 years when huge increases in federal spending were made to try to pull the nation out of a “deep hole,” and neither has worked.
From 1929 to 1939, annual federal outlays tripled from roughly $3 billion to $9 billion. Did it help?
Hardly. The unemployment rate was 3.2 percent in 1929. Having peaked at roughly 25 percent in 1933, it was still at 17.2 percent at the end of 1939.
Did a tripling in outlays end the Depression? Certainly not, which means that massive federal spending has not solved the worst two economic crises of the last 80 years.
But let’s take this a step further. The Left and their media minions always like to use the Clinton Era as an example of how raising taxes can actually spark economic growth.
Of course, we conservatives know that the early ’90s recession ended in the 2nd quarter of 1991, and that the economy was already booming before the former governor of Arkansas was elected. We also understand that the creation of the Pentium chip as well as internet routers sparked a technological and economic boom like nothing most baby boomers had ever seen.
Ignoring all that, the 90s was also a period of fiscal restraint in Washington. On-budget spending (meaning not including Social Security and Medicare) only grew by 42 percent.
In the ’80s, this rose by 115 percent, which was actually down from 184 percent in the ’70s. Spending grew by 107 percent in the ‘60s. More recently, on-budget spending in the ’00s rose 117 percent.
This means that if the Left and their media minions want to use the Clinton years as the blueprint for economic success, they should realize that government spending during that period increased at the slowest pace in the last five decades.
Putting even a finer point on this, spending in the ’90s grew at less than 1/3 the rate of the average of the other four decades – meaning that the four decade mean growth was three times the ’90s.
Add this to the failure of massive spending increases to get us out of the Depression and the most recent recession, and it’s clearly preposterous to claim that growth in government is at all economically stimulative.
What was that Matthews and Reich were saying about big lies?
*****Update: A great comment from NBer TheHistorian has led me to go further back in time to make a finer point about how wrong Matthews and Reich are. Spending rose 95 percent in the '50s, 366 percent in the '40s, 188 percent in the '30s, 814 percent in the '10s, and 33 percent in the 1900s.
I skipped the Roaring Twenties because as TheHistorian accurately pointed out, this was a unique decade in American history when spending declined by a whopping 48 percent.
You read that correctly: spending declined by almost half after World War I!
And why was this decade called the Roaring Twenties?
Well, let's let the liberal Wikipedia tell us:
The 1920s was a decade of increased consumer spending and economic growth fed by supply side economic policy. The post war saw three consecutive Republican administrations in the U.S. All three took the conservative position of forging a close relationship between those in government and big business. When President Warren Harding took office in 1921, the national economy was in the depths of a depression with an unemployment rate of 20% and runaway inflation. Harding proposed to reduce the national debt, reduce taxes, protect farming interests, and cut back on immigration. Harding didn't live to see it, but most of his agenda was passed by the Congress. These policies led to the "boom" of the Coolidge years.
One of the main initiatives of both the Harding and Coolidge administrations was the rolling back of income taxes on the wealthy which had been raised during World War I. It was believed that a heavy tax burden on the rich would slow the economy, and actually reduce tax revenues. This tax cut was achieved under President Calvin Coolidge's administration. Furthermore, Coolidge consistently blocked any attempts at government intrusion into private business. Harding and Coolidge's managerial approach sustained economic growth throughout most of the decade. However, the overconfidence of these years contributed to the speculative bubble that sparked the stock market crash and the Great Depression. The government's role as an arbiter rather than an active entity continued under President Herbert Hoover. Hoover worked to get businessmen to respond to the crisis by calling them into conferences and urging them to cooperate. Hoover's vigorous attempts to get business to end the depression failed.
When the income tax was established in 1913, the highest marginal tax rate was 7 percent; it was increased to 77 percent in 1916 to help finance World War I. The top rate was reduced to as low as 25 percent in 1925. The "normalcy" of the 1920s incorporated considerably higher levels of federal spending and taxes than the Progressive era before World War I. From 1929 to 1933, under President Hoover's administration, real per capita federal expenditures increased by 88 percent.
In 1920-1921 there was an acute recession, followed by the sustained recovery throughout the 1920s. The Federal Reserve expanded credit, by setting below market interest rates and low reserve requirements that favored big banks, and the money supply actually increased by about 60% during the time following the recession. By the latter part of the decade "buying on margin" entered the American vocabulary as more and more Americans over-extended themselves to speculate on the soaring stock market and expanding credit. Very few expected the crash that began in 1929, and none suspected it would be so drastic or so prolonged.
Of course, the excitement and excessive speculation toward the end of this extraordinary economic period indeed led to Wall Street's crash and the Great Depression, although the collapse actually began in Europe.
Regardless, the next time someone tells you that you can't cut taxes and spending at the same time, you should not only mention Warren Harding and Calvin Coolidge, but also how the economy exploded as a result.
As it pertains to Matthews and Reich, isn't it interesting that two of the strongest economic decades in the previous century occurred during periods of tight fiscal policy while the worst periods were when our elected officials spent like there was no tomorrow?
Exit question: why can't Americans learn from our own history what works and what doesn't?