Economics Part 5

Economics Part 5 ( Economic History from 1945 to 2018)

From 1945 to 2018 would include some of the most important economic developments in human history. After World War II, there was the start the post-World War II economic boon. It lasted from 1945 to the early 1970’s. There was the $200 billion in war bond maturing. The G.I. Bill funded a well-educated work force. Immediately after WWII, the middle class grew, GDP increased along with productivity. Across many economic classes, the growth was distributed fairly. By the end of World War Two, Harry Truman was President. He tried to follow liberal positions on some issues like health care, but he was also a stone Cold War follower. He had an antipathy towards the Soviet Union and carried out the Korean War and supported the Greek monarchy in the Greek civil war during the late 1940's. Cold War liberalism emerged at a time when most African Americans were politically and economically disenfranchised. Beginning with To Secure These Rights, an official report issued by the Truman White House in 1947, self-proclaimed liberals increasingly embraced the civil rights movement. In 1948, President Truman desegregated the armed forces and the Democrats inserted a strong civil rights plank in the party platform, even though delegates from the Deep South walked out and nominated a third party ticket, the Dixiecrats, headed by Strom Thurmond. Truman abolished discrimination in the Armed Forces, leading to the integration of military units in the early 1950s. However, no civil rights legislation was passed until a weak bill in 1957. There was the strength of labor unions during this period as labor union membership peaked historically in America by the 1950’s. Many people in towns and the cities experienced better paying jobs by 1960. Still, society wasn’t a Utopia back then either because of the obvious reasons. Back then, black people and people of color were denied basic human rights from voting rights to educational opportunities. Women back then in many cases couldn’t even enjoy full rights and Jim Crow plus lynching back then were in epidemic levels (Lynchings continue to this very day in the 21st century as exposed by many incidents in America alone). The Congress created the Council of Economic Advisors to promote high employment, high profits, and low inflation. Keynesianism was even embraced to some extent by the Eisenhower administration (1953-1961). Many people embraced public works programs, easing credit, and reducing taxes. Keynesian economic policies have been embraced by John F. Kennedy and Richard Nixon back in 1969. The nation still experienced recessions of 1945, 1949, 1953, and 1960 with a decline in GDP. The Baby Boom saw a rapid increase in American births from 1942 to 1957. It was caused by delayed marriages and childbearing during the depression, more economic prosperity, and the growth of suburbia. This economic growth was influenced by technological developments. Fertilizer and farm machinery were modernized. The Green Revolution of the 1940’s and beyond increased yields of corn, soybean, and wheat. New Deal policies continued from then to this very day. The New Deal assisted farmers in their policies like farm loans, commodity subsidies, and price supports. The farm population declined and food stamp programs were used to help urban communities. World War II saw air transport heavily utilized. After WWII, America had the leading producer of combat aircraft and commercial aircraft. The airplane manufacturing and maintenance personnel expanded with radar.

The aircraft industry had the highest productivity growth of any major industry, growing by 8.9% per year from 1929-1966. Automobiles, highways, and inexpensive housing expanded suburbia. There were problems during that era of time too. Many poor families lived in overcrowded apartments. Economic inequality was a serious issue. Richer families saw their family savings grow to be used for down payments on many items. Whereas an average of 316,000 new housing non-farm units had been constructed from the 1930's through 1945, there were 1,450,000 units built annually from 1946 through 1955. The G.I. Bill helped many veterans with low down payments and low interest rates. In 1956, the interstate highway system started to develop. Computer technology with transistors and other items helped to do accounting, billing, and payroll actions. Federal taxes on incomes, profits and payrolls had risen to high levels during World War II and had been cut back only slowly; the highest rates for individuals reached the 90% level.

President John F. Kennedy was inaugurated in 1961 and he gave an eloquent speech about the future. Later, in 1962, he called for progressive reforms in American society. He said the following words from his Annual Message to the Congress on the State of the Union (on January 11, 1962):

"...Finally, a strong America cannot neglect the aspirations of its citizens--the welfare of the needy, the health care of the elderly, the education of the young. For we are not developing the Nation's wealth for its own sake. Wealth is the means--and people are the ends. All our material riches will avail us little if we do not use them to expand the opportunities of our people. Last year, we improved the diet of needy people--provided more hot lunches and fresh milk to school children built more college dormitories--and, for the elderly, expanded private housing, nursing homes, heath services, and social security. But we have just begun. To help those least fortunate of all, I am recommending a new public welfare program, stressing services instead of support, rehabilitation instead of relief, and training for useful work instead of prolonged dependency. To relieve the critical shortage of doctors and dentists--and this is a matter which should concern us all--and expand research, I urge action to aid medical and dental colleges and scholarships and to establish new National Institutes of Health. To take advantage of modern vaccination achievements, I am proposing a mass immunization program, aimed at the virtual elimination of such ancient enemies of our children as polio, diphtheria, whooping cough, and tetanus. To protect our consumers from the careless and the unscrupulous, I shall recommend improvements in the Food and Drug laws-strengthening inspection and standards, halting unsafe and worthless products, preventing misleading labels, and cracking down on the illicit sale of habit-forming drugs. But in matters of health, no piece of unfinished business is more important or more urgent than the enactment under the social security system of health insurance for the aged..."

So, President John F. Kennedy wasn't a conservative. He was a liberal President. He called for universal health care for the elderly, investments in Social Security, and federal government civil rights legislation (after he was pressured by civil rights leaders like Dr. King, the Freedom Riders, SCLC, SNCC, and others who wanted him to take more militant tone in confronting Jim Crow). JFK also fired CIA Director Allen Dulles, Deputy Richard Bissell, and others. he signed the Test Ban Treaty, which decreased U.S./Soviet tensions during the height of the Cold War. Congress cut tax rates in 1964. President John F. Kennedy did have a tax proposal that wanted to decrease the top marginal tax rate form 91 percent to 70 percent, but that was only part of the story. He also wanted to end welfare and loopholes for the wealthy class, which in effect raised taxes or revenues. He also planned to have increased spending in 1964. He told his chief economic adviser Walter Heller, 11 days before his assassination that, he wanted the tax cut first, "then, we'll have my expenditures program." Kennedy called for cutting tax preferences for oil and gas industries by saying in 1963 that, "while these are complex as well as controversial problems, we cannot shrink from a frank appraisal of government policies and tax subsidies in this area." At that point, the richest 1 percent of households held less than 10 percent of the income share in 1962. Since then, the share of income going to the top 1 percent has more than doubled — even has the wealthy pay less in taxes. JFK believed in the separation of church and state. Also, JFK gave a speech to the Liberal Party back in September 14, 1960 in which he said that he is a liberal, so John F. Kennedy was a liberal.

President Lyndon B. Johnson (1963–69) dreamed of creating a "Great Society", and began many new social programs to that end, such as Medicaid and Medicare. The Great Society and other programs cut poverty in half from 1960 to 1970. The Great Society's Head Start, disability benefits, job training programs, have helped millions of Americans of every color for years and decades.

As for the Great Society programs, they were beginning to work until  budgets were cut and the economy began to shift from manufacturing. The data is clear: in the years between 1965 and 1973, poverty rates plummeted, and especially in urban areas, by about 38 percent. Even the Model Cities programs helped people, but they were ended in a less than a decade after its initial implementation. By the mid-1970's, many of the programs of the Great Society had been cut or eliminated, leaving only cash assistance (which began to decline relative to inflation and was never sufficient to pull folks from poverty), food stamps and limited housing support.

"...If by a "Liberal" they mean someone who looks ahead and not behind, someone who welcomes new ideas without rigid reactions, someone who cares about the welfare of the people — their health, their housing, their schools, their jobs, their civil rights, and their civil liberties — someone who believes we can break through the stalemate and suspicions that grip us in our policies abroad, if that is what they mean by a "Liberal," then I'm proud to say I'm a "Liberal."

-President John F. Kennedy

Eisenhower expanded nuclear technology. John F. Kennedy supported expansion into space travel and other investment. The South also had a transition from manufacturing to high technology. There was the Atomic Energy Commission's Savannah River Site in South Carolina; the Redstone Arsenal at Huntsville in Alabama; nuclear research facilities at Oak Ridge, Tennessee; and space facilities at Cape Canaveral, Florida, at the Lyndon B. Johnson Space Center in Houston, and at the John C. Stennis Space Center in Mississippi. The Defense Department financed some of the private industry’s research and development in the decades like ARPANET, which would become the Internet. By the late 1960’s, manufacturing employment and nominal value added shares of the economy have declined since WWII.

Japan and West Germany grew its economy after World War II. They were rebuilt by the Marshall Plan and actions from U.S. investments to both of those nations. With the Vietnam War, there was massive inflation. The reason was that there was massive spending overseas for the war while by the late 1960's, the Great Society programs were beginning to be cut. The manufacturing jobs started to decline in America especially by the 1960's because of jobs moving outside of the U.S. cities and automation. Also, there was the rise of the service sector economy in replacing the private sector economy by the late 20th century. Technological innovations of the final third of the 20th century were significant, but were not as powerful as those of the first two-thirds of the century. These innovations include: international television, space shuttles, home computers, satellites, etc. Manufacturing productivity growth continued at a somewhat slower rate than in earlier decades, but overall productivity was dragged down by the relative increase in size of the government and service sectors. The Bretton Woods system in 1971 ended. That was when America made the dollar a fiat currency from ending the convertibility of the U.S. dollar to gold. By the early 1970’s, imported manufacturing goods came about like automobiles and electronics.

The 1965–1974 period was a major liberal activist era in Congress, with the Democratic-led Congresses during the presidency of Richard Nixon continuing to produce liberal domestic policies. They organized themselves internally to round up votes, track legislation, mobilize interests, and produce bills without direct assistance from the White House. A wide range of progressive measures were carried out, such as in Social Security (with a 20% benefit increase and linkage to automatic cost-of-living increases in 1972), public welfare (with expansion of unemployment compensation, food stamps, and supplemental security income additions to social security), workplace rules (with the passage of the Occupational Safety and Health Act in 1970), urban aid (with the addition of mass transit subsidies to highway construction enactments), environmentalism (with the passage of the National Environmental Protection Act of 1969 and the Clean Air Act of 1970), aid to education (including Title IX in 1972), civil rights (with the extension of the Voting Rights Act in 1970), and nutrition (with the establishment of the Special Supplemental Nutrition Program for Women, Infants and Children in 1972).

Also, it is important to mention that Nixon was involved in Watergate and other scandals that violated constitutional rights and other democratic human rights. So, Nixon was a person who used the conservative movement for his advantage until he caught violating the law (and resigning by 1974). The 1973 oil crisis was about nations like Saudi Arabia banning oil from importing into America. They did this in retaliation of American support of Israel (especially during the time of the Yom Kippur war). Henry Kissinger and Richard Nixon talked about this issue. King Faisal of Saudi Arabia's had the intention of cutting back on oil supplies over U.S. policies in the Middle East. The oil embargo started by 1973 and soon, many people had to wait in long lines to just get gas for their cars or trucks.

There was the stock market crash of 1973-1974. New economic theorists attacked the New Deal. They are monetarist economists from the Chicago School of Economics promoted the free market along with low taxes, less regulations and free trade (which is the essence of neoliberalism). Neoliberalism was tried in Chile after the coup of 1973. What resulted was a military dictatorship with cut wages and other economic problems. . One leader of this movement was Milton Friedman. These people promoted deregulation from New Deal style regulation. Milton Freedman's deregulation policies has harmed the economy for years and decades into the future. Friedman's views are similar to the views of Friedrich von Hayek and the Chicago School. America became dependent on OPEC. Stagflation (which is an economy situation with a combination of high inflation with a stagnant economy) harmed America. President Gerald Ford introduced the slogan, "Whip Inflation Now" (WIN). In 1974, productivity shrunk by 1.5%, though this soon recovered. In 1976, Carter won the Presidency. Carter would later take much of the blame for the even more turbulent economic times to come, though some say circumstances were outside his control. Inflation continued to climb skyward. Productivity growth was small, when not negative. Interest rates remained high, with the prime reaching 20% in January 1981. Inflation started to grow in 1973 for the next 15 years because of the Vietnam War. During that time of the mid to late 1970's, money inflation expanded and unemployment grew causing stagflation.

Unemployment dropped mostly steadily from 1975 to 1979, although it then began to rise sharply. This period also saw the increased rise of the environmental and consumer movements, and the government established new regulations and regulatory agencies such as the Occupational Safety and Health Administration, the Consumer Product Safety Commission, the Nuclear Regulatory Commission, and others. As early as 1976, the deregulation movement took ground in America. Carter promoted deregulation in the Airline Deregulation Act, was cleared by Congress. Transportation deregulation accelerated in 1980, with the deregulation of railroads and trucking. Deregulation of interstate buses followed in 1982. Reagan ended many government regulations, but worker productivity didn't grow no faster in the 1980's than during the late 1970's. Reagan's tax cuts were passed in 1981 and were already in effect by 1982. 1982 was the year of the recession. Tax cuts for the rich can't make strong economic growth since some of the rich just will pocket the savings. In addition to transportation deregulation, savings and loan associations and banks were partially deregulated with the Depository Institutions Deregulation and Monetary Control Act in 1980 and the Garn–St. Germain Depository Institutions Act in 1982. Incoming President Jimmy Carter instituted a large fiscal stimulus package in 1977 in order to boost the economy. However, inflation began a steep rise beginning in late 1978, and rose by double digits following the 1979 energy crisis. In order to combat inflation, Carter appointed Paul Volcker to the Federal Reserve, who raised interest rates and caused a sharp recession in the first six months of 1980.  In March 1980, Carter introduced his own policies for reducing inflation, and the Federal Reserve brought down interest rates to cooperate with the initiatives. During the 1980 recession, manufacturing shed 1.1 million jobs, while service industries remained intact. Employment in automotive manufacturing in particular suffered, experiencing a 33% reduction by the end of the recession.  Collectively these factors contributed to the election of Ronald Reagan in 1980.

The Federal Reserve caused another recession when it raised interest rates in 1981. By December of 1982, unemployment was about 10.8%. Reagan promoted Reaganomics. This was about promoting tax cuts to the wealthy, cutting the marginal federal income tax rates by 25%.  Inflation dropped dramatically from 13.5% annually in 1980 to just 3% annually in 1983 due to a short recession and the Federal Reserve Chairman Paul Volcker's tighter control of the money supply and interest rates. Real GDP began to grow after contracting in 1980 and 1982. The unemployment rate continued to rise to a peak of 10.8% by late 1982, but dropped well under 6% unemployment at the end of Reagan's presidency in January 1989. The economy grew by the end of Reagan’s 2nd term, but homelessness grew and much of the economic growth existed on the super wealthy. There was the War on Drugs and the crack epidemic harming urban and poor communities nationwide during the Reagan years. Large trade deficits existed. From 1982 to 1987 the Dow Jones Industrial Average gained over 1900 points from 776 in 1982 to 2722 in 1987 – about a 350% increase. An economic boom took place from 1983 until a recession began in 1990. Between 1983 and 1989, the number of people below the poverty line decreased by 3.8 million. Computers, cell phones, music players, and video games saw more popularity. Much of the economic growth on the 2nd term of Reagan was a product of low interest rates and more government spending not because of trickled down economics. In contrast, even more moderate Republican Presidents promoted some New Deal era government activism in the economy. President Dwight D. Eisenhower's interstate highway program connected an entire nation with highways and allowed middle class families to migrate from the cities to the suburbs. Nixon once said that "We are all Keynesians now" and he created the Environmental Protection Agency, the Food and Drug Administration, and the Occupational Safety and Health Administration. The poverty rate by the 1960's was in 20 percent and Johnson's Great Society programs reduced poverty into an all time low of 11.1 in 1973.

The early Bush Presidency's economic policies were sometimes seen as a continuation of Reagan's policies, but in the early 1990's, Bush went back on a promise and increased taxes in a compromise with Congressional Democrats. He ended his presidency on a moderate note, signing regulatory bills such as the Americans with Disabilities Act, and negotiating the North American Free Trade Agreement. In 1992, Bush and third-party candidate Ross Perot lost to Democrat Bill Clinton. Deindustrialization since the late 1960’s grew income inequality. In 1968, the U.S. Gini coefficient was 0.386. The Gini coefficient measures economic inequality. In 2005, the American Gini coefficient had reached 0.469. Globalization was upon by the world in a large level by the 1990’s.

During the 1990's, government debt increased by 75%, GDP rose by 69%, and the stock market as measured by the S&P 500 grew more than threefold. From 1994 to 2000 real output increased, inflation was manageable and unemployment dropped to below 5%, resulting in a soaring stock market known as the dot-com boom. The second half of the 1990's was characterized by well-publicized initial public offerings of high-tech and "dot-com" companies. Bill Clinton in the 1990's signed a law that increased taxes on top earners (i.e. those who made $250K + income annually). He increased the tax rate from the top earners from 31% to 39.6% on top earners. Later, there was 23 million jobs created under Clinton's time. Bill Clinton was heavily centrist on many issues. Democratic president Bill Clinton (1993–2001) worked with conservatives, against strong liberal opposition, to end some of the main welfare programs and to implement NAFTA, linking the economies of the U.S., Canada, and Mexico. Clinton pushed to extend modern liberal ideals especially in the areas of health care (where he failed) and environmental protection (where he had more success). There was a budget surplus from a budget deficit during the Clinton years. Economic growth was found from 1992-2000. Many conservatives predicted that Clinton's tax increases would harm America massively in economic terms, but they were wrong. This proved that trickled down economics doesn't work.

By 2000, however, it was evident a bubble in stock valuations had occurred, such that beginning in March 2000, the market would give back some 50% to 75% of the growth of the 1990's. The economy worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially, and triggering a recession that is often blamed on the September 11 attacks. Corporate scandals existed too. The housing market caused a false sense of security from 2001 to 2007. George W. Bush signed a tax law that cut the top capital gains and dividends. He reduced the taxes rate from top earners 39.6% to 35%. The economy barely grew. The housing bubble was caused in large part by reckless policies from many banking interests. The Great Recession was global. The bursting of the worldwide bubble in housing harmed millions of American lives. Many banks and hedge funds borrowed hundreds of billions of dollars to buy securities which were toxic. Many U.S. and Europe banks went bankrupt like Lehman Brothers. Also, payday lenders exploited many poorer African Americans in charging them more interests than white Americans. Both George W. Bush and Barack Obama passed bank bailout legislation. The Great Recession ended the Bush administration completely.  The government for the first time took major ownership positions in the largest banks.

The stock market plunged 40%, wiping out tens of trillions of dollars in wealth; housing prices fell 20% nationwide wiping out trillions more. By late 2008 distress was spreading beyond the financial and housing sectors, especially as the "Big Three" of the automobile industry (General Motors, Ford and Chrysler) were on the verge of bankruptcy, and the retail sector showed major weaknesses. Critics of the $700 billion Troubled Assets Relief Program (TARP) expressed anger that much of the TARP money that has been distributed to banks is seemingly unaccounted for, with banks being secretive on the issue.

President Barack Obama signed the American Recovery and Reinvestment Act of 2009 in February 2009; the bill provides $787 billion in stimulus through a combination of spending and tax cuts. The plan is largely based on the Keynesian theory that government spending should offset the fall in private spending during an economic downturn. Obama’s policies had mixed results. The policies prevented a return of the Great Recession. Also, much of the job growth came into the wealthy and upper middle class. In the U.S., jobs paying between $14 and $21 per hour made up about 60% those lost during the recession, but such mid-wage jobs have comprised only about 27% of jobs gained during the recovery through mid-2012. Barack Obama expanded taxes for the top earners to 39.6% along with more tax on capital gains and dividends. In contrast, lower-paying jobs constituted about 58% of the jobs regained. Under the Obama years, the unemployment rate continued to decline. By the Trump years, the economy has remained stable with challenges. One was Trump’s recent tax bill that benefited massive corporations and limit taxes on the super wealthy. Tax cuts for the rich won't work to help end poverty or radically grow the economy because of many reasons. Since the 1980's, the tax rate of the wealthy has already been cut from 80% to less than 40%. During that time, wages for workers have been stagnant.

Wages continue to not rise massively among Americans and the U.S. economy is not where it needs to be. Right now, the unemployment rate is about 3.9%. It is also true that some of the wealthy grown by private banks and private industries deprived from cruel evil of slavery. There is still a lot of poverty in the world. The progressive social movements brought us unions, the 40 hour work week, civil rights legislation, women's rights legislation, environmental standards, and other blessings that some take for granted. During that time of these forms of legislation from the early to 20th century to the late 1970's, the economy has grown in unprecedented levels. After the late 1970's, neoliberalism has grown economic inequality. The wealthiest 1 percent take home about 20% of the national income. That is why investing directly to the American people is necessity in growing the economy comprehensively. We need more educated, skilled workers which are productive to any economy. More workers having a living wage will buy items which built industries and those industries in term hire more people. Also, we need to help the poor and the working class as well. Funds in healthcare, education, and job training are key.  Donald Trump is clear on slandering the media, coddling authoritarian dictators, supporting torture, making racist including misogynistic statements, kicking people out of national security clearance for political reasons, and make habitual lies. He or Trump is a threat to democracy and freedom itself. Yet, the American people are very resilient and we shall overcome the extremism from the Trump regime.

*We live in a time where people want economic solutions and people are entitled to them. Trickle down economics doesn't work because of many reasons. One reason is that large corporations will not typically send billions of dollars to address economic inequality. Large multinational corporations with tax cuts will spend the money globally in favor of their interests irrespective of altruistic motivations. Also, the wealthy pay less of their income as a percentage than the poor or the middle class. Therefore, if you want more demand for goods and services, you have to send more income to the middle class and the poor, which makes up the majority of the American people. Many workers are consumers and consumers make up the majority of economy activity in the U.S. Most Americans aren't rich. Most Americans are either poor or middle class. Building the economy for the poor and the working class including the middle class is from the ground up. That is why any economic policy ultimately must address our healthcare, education, and infrastructure. A strong education with job training skills will in term help to grow the economy more comprehensively in America. This revolves around public investments since studies already document that public investments grow the economy. For example, the New Deal and Great Society programs cut poverty in half from 1960 to 1970. Also, these programs increased the amount of Americans in college.

We must strengthen our social safety net like Social Security, Medicare, and Medicaid. Before these three programs existed, millions of Americans suffered poverty, starvation, and some Americans unfortunately died because of a lax of resources. When Social Security was created in 1935, half of America's seniors were in poverty. By 1966, that poverty rate declined to 28.6%. Medicare existed when LBJ was President. JFK gave speeches in support of it like in NYC (at Madison Square Garden), but he passed away before it was made into law. Medicare guarantees health care for older Americans (which was opposed by Ronald Reagan back then too. Back during the 1960's, Reagan gave a speech where he explicitly opposed Medicare). In 1966, half of seniors had health care and today about 98.9 percent of seniors have health care. Medicaid was used to help the elderly and the poor in very compassionate ways. We, as workers, pay money into Social Security and Medicare everyday we work. This is our money and these social programs must be strengthened. These programs must be expanded and improved upon without cuts.

Universal pre-K is always beneficial. Investing in infrastructure is common sense. An economy can't function without an infrastructure. Without a ROAD you cannot TRANSPORT goods, WITHOUT POWER you cannot have a FACTORY. Therefore, resources to build structures, to create jobs, and to establish wealth are necessary in any civilization. Progressives and even some conservatives rightfully believe in investments in infrastructure like our roads, highways, public transportation, our hospitals, our schools, our bridges, etc. From 1945 to 1975, America made huge investments in infrastructure, education, and health care. Also, there was collective bargaining, union growth, and the growth of the civil rights movement which legitimately expanded rights for black people plus other minorities. That resulted in the lowest drop in economic inequality in American history, possibly world history. During that era of time, median income increased, but since the late 1970's, median income has stagnated because of neoliberal policies (like massive tax cuts for the wealthy, austerity, etc.). Heroes constantly are fighting for a higher minimum wage, a higher EITC (or an earned income tax credit), stronger unions, and lower taxes on the working class to be financed by higher taxes on the super wealthy). We, the people, should run our own government not Wall Street-backed large corporations.

That is why revolutionary economic policies must be fought for and defended.

By Timothy