Fist Of History

Posts Tagged ‘United States’

The Great Stagflation and Modern America

Tuesday, December 22nd, 2015

The-United-States-Energy-CrisisThe United States has faced a series of major economic issues in its history, the two most commonly discussed are the Great Depression (1929 to 1942 arguably) and the Great Recession (2008 – 2009 officially) but between those two is a lumpy, difficult to fathom, general economic decline that ran from 1971 until roughly 1982 which could be considered the Great Stagflation.  It was the hallmark of the 1970s United States economy, with a solid impact on the British economy as well.  Within the United States it was caused by an intersection of several different policy issues, economic impacts, and major events, such as the two oil shocks that took place in that decade as OPEC reduced oil production in response to the United States’ position towards Israel.

nixon-elvisNixon, who had a very loose concern for domestic economic issues, made the problems worse when facing the gold crisis of 1971.  Briefly the United States pegged the dollar to a fixed conversion rate and other currencies were fixed to the United States dollar.  During the early 1970s the dollar ended up being worth less in actual goods and services than its fixed gold value, leading to other nations beginning to convert their dollar holdings into gold.  Nixon nipped that problem by simply ending the gold conversion of dollars “temporarily” and then imposing price controls to take the sting out of the sudden devaluing of the United States dollar as foreign governments dumped their now non-convertible dollars.  This was fine for Nixon, he was facing re-election in 1972 and he simply wanted domestic voters to feel that their paychecks remained the same, it didn’t matter to him what happened to the economy post-1972 as much, he simply planed to fix it then.

win_sloganOne of the impacts of this, and other factors such as rising foreign competition that cut the United States share of global trade, spiked inflation rates.  This combined though with an unusual factor, as rising inflation eroded the buying power of domestic wages in the United States, organized labor was powerful enough to demand wage increases from companies to offset the inflation.  This reduced the amount of capital available for investment and the economic instability and uncertainty that rising inflation caused discouraged many businesses from entering into any major investments.  This led to economic stagnation, the production of goods and services simply didn’t expand to meet the growing money supply, which caused shocking inflation rates.  (During the height of the crisis inflation rates of 10% were not uncommon in a single year.)

prop13_ballotNormally economic cycles tweak the system, but the events of the 1970s reshaped the United States economic and political landscape.  First, rising inflation pushed up the tax brackets which working and middle class employees were taxed at, as the brackets were not indexed in the 1970s to inflation.  So although the relative buying power of a paycheck remained the same, the bite taken out by state and local taxes went up for many workers, reducing their overall net pay.  This combined with many states reporting record surpluses due to the revenues taken in, and a resistance by those state governments to return the surpluses to the voters.  (California was notorious for this, socking away much of the surplus for future anticipated shortfalls or new programs once the economy settled down.)  Property taxes shot up as well, as the paper value of homes skyrocketed due to inflation and people saw their property tax bills rocket upwards, further reducing their buying power.

prop13The result was a general tax revolt across the United States as citizens, in state elections and in 1980 with the election of Ronald Reagan and a Republican Congress, demanded their tax burden be lowered.  What made this shift particularly unique though was that prior to the late 1970s and early 1980s the United States populous had been less leery of inflation, and higher taxes, and more leery of the government reducing its safety nets.  By the height of this crisis the United States citizenry had changed their demands, inflation control and lower taxes were more critical to them than safety nets, especially safety nets that seemed to re-route funds from middle class pockets to the poor, minorities, and immigrants.

the-time-is-now-reagan-posterWhich state governments, and the federal government, responded to with great gusto.  The federal government, and state governments, slashed social welfare programs aggressively and changed the regulatory client to make the government more pro-business.  This combined with a focused effort to reduce the power of organized labor and allowing unemployment to spike, and a sharp early 1980s recession, to crush inflation.  In many ways since then the United States as a nation has not looked back, and other nations have followed its model, focusing on tight government services, reduced social support for the lowest portions of society, and keeping the tax burden controlled.

Sources:  Wikipedia articles on stagflation, the Nixon Shock, and the 1973-1975 recession, Investopedia article on the Great Inflation of the 1970s, Dollars and Sense article on the 1970s economic crisis, and chapters from The Seventies:  The Great Shift in American Culture, Society, and Politics by Bruce J. Schulman

Mexican “Repatriation” – an old idea surfaces again [Opinion]

Thursday, August 27th, 2015

Donald_Trump_by_Gage_Skidmore

The current election news is being dominated by the proposed plan by Republican Presidential candidate Donald Trump, who is calling for the deportation of between 11 to 12 million “illegal aliens” within the United States.  This policy is mainly targeted toward Hispanic individuals within the United States, overwhelmingly Mexicans, combined with a call for increased border security on the US-Mexican border, specifically a massive “wall” along the border.

Mexican_Repatriation1

Unsurprisingly this idea is not new and was actually attempted during the 1930s as a method of combating the impact of the Great Depression on several southwestern United States state economies, specifically Texas, New Mexico, Arizona, and California.  The process, now known as Mexican Repatriation, was undertaken as an organic process coordinated between local, state, and federal officials.  As deportation was solely the province of the United States federal government, a new term, “repatriation” was coined to allow states and counties to undertake these quasi-deportations.  The effort was done using a combination of scare tactics, mass roundups, and paid little regard for due process or legal requirements of existing immigration law.  Furthermore officials in these states worked on a simple principle, deport anyone who looked Mexican regardless of their legal status.

deportees

It is unknown how many individuals were deported, local and state governments get deliberately vague records, but the number ranges between 800,000 to 2,000,000.  A large number of those deported were legally within the United States, either as citizens or with permits to be within the country, but in the face of a massive economic disaster local officials simply pushed out a population easily targeted based on racial profiling.  The human and emotional cost was staggering, with families divided, property seized, and individuals being tricked into waiving their legal rights on vague promises they could “re-enter when conditions were better.”

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But bad ideas never crop up only once, during World War II the United States desperately needed additional cheap labor to fuel its war industry and struck a labor-sharing agreement with the Mexican government.  The two nations would work together, Mexico would provide laborers to the United States through a legal temporary residency program and also work to keep illegal immigration to a minimum.  Mexico agreed to this plan because of its own need for cheap labor to help develop its domestic economy.  However the higher wartime wages, and post-war prosperity, combined with United States agricultural companies ignoring the labor-contracting system to avoid government administration and oversight, led to another huge surge of illegal immigration.

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So in 1954 the United States undertook “Operation Wetback” – yes that was its real official government name – with the aim of deporting huge numbers of illegal Mexican workers back across the border.  This coordinated federal and local action resulted in around 1,000,000 Mexican workers being shipped back to Mexico, this time deeper into Mexican territory with the goal of making it both harder for their return and putting Mexicans into portions of Mexico in need of additional labor.

Mixtec Immigrant Picking Strawberries

The challenge is, each time such mass deportations occur, an interesting thing happens, United States agricultural companies begin to complain that they have no cheap labor force to harvest their products.  United States workers won’t take the jobs at the prices being offered and the agricultural companies have a driving need to keep their costs as low as possible.  Then, like magic, suddenly the border restrictions get looser and the United States federal government, along with state and local governments, suddenly lose their interest in “protecting American jobs.”

Till the next economic crunch comes along of course.

Sources:  Wikipedia entry on Mexican Repatriation, Wikipedia entry on Operation Wetback, Digital history entry on the Mexican Repatriation

Eugene V. Debs – Socialist Candidate Extraordinare

Wednesday, August 12th, 2015

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As the 2016 election cycle for the United States gets solidly underway the left is currently charmed with a Socialist-Democratic candidate, Bernie Sanders, a long-serving Senator and solidly left/progress candidate running for the Democratic nomination for President.  Many argue Sanders is not really a viable candidate, but it seems an excellent time to remind the nation of the great “unifying candidate for the Socialists” of the early 20th century, Eugene V. Debs.

Debs_1912_Poster

Eugene V. Debs began his political career with a short term in 1894 with a successful run as a Democrat for the Indiana State Legislature, but he grew disillusioned with politics under the conventional parties and slowly shifted towards support of Socialism as both a political ideal and a political party to support.  Debs had been on the radical side of politics for his entire life, as a founding organizer for various labor groups, a major leader in the Pullman Strike of 1894, and by 1900 a candidate for President running with the newly fledgling Socialist Party of the United States.

Debs_Button

Debs lost, of course, getting only around 89,000 votes or 0.6% of the total popular vote.  Debs ran again in 1904, 1908, 1912, and his last Presidential run was in 1920.  The number of popular votes he gained during that period rose, by 1912 he topped out at over 900,000 votes, winning approximately 5.99% of the total popular vote.  Debs all time high vote count was in 1920, when he again topped over 900,000 votes, an impressive vote total considering his entire campaign was run while he was serving a ten year sentence in federal prison for violating the Espionage and Sedition Act of 1918.

Debs_Prisoner_President

Debs overall was an unsuccessful candidate and was released from prison in 1921 by the winner of the 1920 election, Warren G. Harding.  Debs though throughout his campaigns was known as a fiery orator, a passionate believer in the cause of social equality, and with the Socialists Debs was able to put significant pressure upon both the Republican and Democratic parties to embrace reform in several key areas including:

  • Voting rights for women
  • Child labor laws
  • Workers right to organize unions

Overall Debs, and the Socialists, successfully performed the role of gadfly for the elections of 1912 and 1920, pushing both parties slightly more towards the left than they otherwise might have moved, and in the 1912 election taking part in one of the most complicated elections in modern United States presidential history.

Debs_Canton_1918

I’d like to close though by focusing your attention on the 1912 and 1920 elections – in which Debs got over 5% of the total popular vote.  According to the regulations of the current Federal Election Commission:

Minor party candidates and new party candidates may qualify for partial general election funding, based on their party’s electoral performance. Minor party candidates (nominees of parties whose Presidential candidates received between 5 and 25 percent of the vote in the preceding election) may receive public funds based on the ratio of their party’s vote in the preceding Presidential election to the average of the two major party candidates in that election. New party candidates (nominees of parties that are neither major parties nor minor parties) may receive public funds after the election if they receive 5 percent or more of the vote. The amount is based on the ratio of the new party candidate’s vote to the average vote of the two major party candidates in that election.

If Debs had run as successful a campaign today as he had run in 1912 and 1920, a period when his vote gains were based solely on public rallies, whistle-stop tours, and newsletters the Socialist party would have fun public support, and media access, under current rules.  Furthermore the Socialist Party was denied access to the mass media super-star of the day, radio, and still managed to gain enough votes with a progressive sharp-left platform to be noticed on a national level.

The moral of this entry – and the moral each entry in this series will return to – minor parties can make a difference, and more critically, can have a real impact in United States politics.

Sources:  FEC regulations, Wikipedia on Eugene V. Debs, entry on Eugene V. Debs in the Debs Foundation, PBS entry on Eugene V. Debs

 

Knights of the Golden Circle

Wednesday, June 10th, 2015

Knights_Golden_Circle

The Knights of the Golden Circle was an organization that existed in the United States from the 1850s through the 1860s which espoused the idea of a radical expansion, and realignment, of the United States into an extremely “pro-slavery” nation.  Their major goal was to promote the idea of the seizure, as part of Manifest Destiny, of additional territory for the United States in Cuba, Mexico, Central America, and the Caribbean, with the ultimate goal being that each of these new territories be added to the United States as “slave states” – those allowing slavery.  This planned goal also aimed at potentially creating a new super-Confederacy of states/republics, if necessary, encompassing the Southern states in the United States and the other new territories, with a capital centered in Havana, Cuba.

Golden_Circle_(Proposed_Country)

Now this new nation, (shown above in green), would have represented a major investment of military and cultural power by the United States to be achieved and probably was beyond the immediate capacity of the nation in the 1850s.  However the idea had many adherents in the American South and southern portions of middle states, mainly due to the economic possibilities it presented and concerns about the growing power of abolitionism as a political force in the United States.  The Knights of the Golden Circle were strongly pro-Southern as regional tensions increased in the United States and the organization supported the seceding states in 1861.  Many Democrats in the northern United States during the Civil War expressed support for some ideas purported by the Knights of the Golden Circle and members of the organization took part in some early military actions by the growing Confederate forces.

Knights_of_the_Golden_Circle_History_of_Seccession_book,_1862

The organization had less real impact during the American Civil War but it was a lightening rod for Northern concerns about Southern sympathizers acting as spies and saboteurs during the Civil War.  Members of the Knights of the Golden Circle were regularly targeted for arrest by United States law enforcement and its key leaders were expelled from northern territory when caught.  The image of the Knights of the Golden Circle in the United States as traitors was not helped by activities like the attempting to outfit a secret privateer boat in California to attack Pacific shipping by the United States.  The organization did not survive the defeat of the southern states in the American Civil War and its membership most likely dissolved after the war.

national-treasure

I say “most likely” because the Knights of the Golden Circle have become one of the darlings of conspiracy theorists who posit the group survived the end of the American Civil War and became a key player in efforts to prepare for a second American Civil War.  Such theories are grounded mostly in speculation than anything solid, but it does give the organization a lasting minor place even in modern United States history.

Sources:  Wikipedia entries on the Golden Circle and the Knights of the Golden Circle

Dred Scott and the modern take on the Civil War [OPINION]

Wednesday, May 27th, 2015

DredScott

One of the modern threads you will find in United States history is the debate on the causes of the Civil War, which mainly hinges on two major points of contention:  first that states had the right to secede from the union legally and second that the Civil War was fought over states rights.  On the second point the counter-argument brought up is “indeed, the right to have slavery in a state” – which sparks another round of debate.  Honestly though I personally find the argument about states rights as the key issue disingenuous as an argument when discussing the Civil War due to the reaction of many Southern radicals to the infamous 1857 Dred Scott Supreme Court decision.  In that Supreme Court case an African-American sued for his freedom, claiming that because he had lived and worked in both a free-state and later free-territory, he and his family should be free individuals.  (A gross simplification but it will do for now.)

Roger_Taney_-_Healy

The United States Supreme Court, under Justice Taney, found that Scott was not freed, they also found that the Supreme Court did not have jurisdiction to rule in the case technically and, as a “by the way”, Congress did not have the power to impose regulations in the territories regarding slavery.  Justice Taney had hoped his ruling would result in an end to the debates about the position of slavery within the United States, instead it sparked a massive uproar in the North and the South.

outrage

In the North it was felt that now the Supreme Court was only one ruling away from stating that individual states no longer had the right to outlaw slavery within the United States, on some vague notion it was “protected” in the Constitution.  In the South it was felt that Northern citizens should calm down and embrace the legal ruling of the Supreme Court on the matter.  It was also commonly felt that this ruling would open up the western territories to expanded slave ownership and create a new boom for economic development in the region, many Southern slaveholders after the ruling were excited about the idea of gaining access to cheap, productive land that could be tilled by slave labor.

Mini-BIO-Abraham-Lincoln-SF

Now to my eye the cornerstone problem with arguing states rights as a Civil War major cause occurs in this period, with Southern Radicals and their writing, whose ideas were upheld by many moderate Southern thinkers, that Dred Scott was the ruling that would pave the way towards a United States that allowed slavery to exist in every state, even those that had voted against it.  Some Southern Radicals called for the day that “slave auctions took place in Boston Commons” – ground zero for abolitionists.

To my eye, had the bulk of Southern opinion in response to those fears by the North been “What?  No, you have a right to not have slaves, we have a right to have slaves, calm down, lets pass a cross-sectional law that says as such.  We’ll hammer out the west out, the Supreme Court kind of pooped a biscuit here” – the Civil War would probably still have occurred but it might have been delayed or lessened in impact.  Certainly it would have sparked less paranoia in the North than the actual Southern reaction which could be summarized as “Hell yes!   Eat it North!  It’s SLAVING TIME”

The United States Civil War was a complex war, with roots resting in sectionalism, power balances within the nation, and economic impacts of slavery, along with the more common issues of property, role of national government, and states rights.  But as a common thread throughout all of that runs the solid line…of slavery.

Sources:  Wikipedia articles on the Dred Scott Decision, the Kansas-Nebraska Act, and Slave Power

Operation Plowshare and Operation Gnome – Atoms for Peace!

Monday, March 30th, 2015

nuclear_blast

So it is the 1950s and for the United States the Cold War has been humming along fairly nicely, both the United States and the Union of Soviet Socialist Republics are building an expanding collection of nuclear weapons, the first hydrogen bomb tests went well, but for the U.S. your government is running into a problem, the citizens are simply not accepting the awesome potential of atomic energy, and specifically atomic weapons, to remake the world into a better, more amazing place.  Instead they keep gripping about the possibility of utter devastation due to a potential nuclear exchange between the U.S. and the U.S.S.R.  So it was decided to put on a series of demonstrations of the fantastic peaceful applications for atomic weapons, mainly in the field of “massive construction projects involving making huge holes suddenly appear in the ground.”  Hence the creation of Operation Plowshare, a major U.S. initiative to develop a series of projects to improve America through the use of controlled peaceful nuclear explosions.

Project_Chariot_plans

An example of an Operation Plowshare sub-project is the idea above, Project Chariot, a plan to use five carefully timed atomic blasts to create a brand new harbor in Alaska for use in trade and settlement.  Concerns about radioactive contamination and environmental damage did not deter this program, what did derail the plan was first concerns that setting of five nuclear weapons in close proximity to each other might be harmful to the local Alaskan native populations living nearby.  More critically though was the problem of cost, building this shiny new harbor would be expensive and the region in Alaska did not really need a new nuclear created harbor.  Most of the ideas considered were not actually tried, such as using atomic weapons to dig channels between underground aquifers in Arizona, or leveling off mountain tops in California for road construction, or my personal favorite, using multiple nuclear weapons to dig a huge trench for a new highway project.

Project_Gnome

However Project Gnome was implemented, a nuclear blast in New Mexico in 1961 aimed at the idea of detonating the weapon inside a huge salt dome.  The plan was the melted salt would retain a great deal of heat from the blast, allowing water to be bumped into the cavity, heated, and steam produced.  This in turn could be used to produce electrical energy from a constructed power plant on-site.  Ideally the system would provide a steady and regular source of extremely low-cost energy and the success could be duplicated in other eligible areas of the country.

The actual plan did not work out as well as hoped, when the weapon was detonated it failed to seal the shaft that had been dug down to get the weapon in position and cracks in the surface from the blast, along with the open shaft, vented radioactive steam into the atmosphere.  This turned off the U.S. population to the idea, although a year later a team sent down to check on the results of the blast confirmed the salt was still hot enough for use in steam production.  The idea though was abandoned, as was Operation Plowshare as a concept by 1977 after numerous additional test blasts to play with other ideas.  (Including an alternative to fracking as a means of natural gas production – rock shattered by water or rock shattered by the power of the ATOM!  What sounds cooler?)

Sources:  Wikipedia article on Project Plowshare and Project Gnome, io9 article on Operation Plowshare

World War II, the GI Bill, Homeownership, and Racism

Tuesday, March 17th, 2015

a-levittown-street

One of the more interesting comments I read online these days is the argument that, although racist policies in the past boosted whites in the United States into a position of economic dominance, those events happened “long ago” and it is too late to really rectify them.  Most people who make those arguments look to the early to mid-19th century, and argue that modern African-Americans have benefited from the infrastructure improvements and land development that characterized the changes to the United States economically during that period.  Arguments about modern advantages are normally dismissed as “soft advantages” – unfortunate policies that since the 1960s have been changed and, therefore, African-Americans should be able to pull themselves up to economic parity with white Americans now that the “barriers are gone” and they can “unleash their potential.”

This, in my opinion, is hogwash and the post-World War II GI Bill (formally the Servicemen’s Readjustment Act of 1944) was designed and implemented in a way to give a massive federal economic boost to white Americans and deny African-Americans the same benefits.

Levittown-Sprawl

If you served in the United States military in World War II, and you were white, post-war the federal government opened the world of home ownership to you on a subsidized platter of low-interest loans.  White military veteran borrowers found themselves suddenly able, for the first time ever, to actually get affordable, longer-term, home mortgages that required minimal to no down payment.  Rapid development of new suburban neighborhoods allowed white veteran families to move out of crowded urban centers and gain new homes, homes that could become investments and gain value against inflation in the impending decades.  Combined with the more commonly known huge boosts in funding for white veteran educational benefits, including support for advanced technical certificate training and college bachelors degrees, and you had the combined elements to rapidly expand the middle class in the United States and raise millions of white families to the ranks of lower middle class.

AA_WW2

But the GI Bill in 1944 had been carefully written to respect the principles of federalism, and each state was able to administer the program as it saw fit.  This meant that states, in particular southern and midwestern states, had the freedom to implement a series of charming little “quirks” to their Veterans Benefits programs to keep African-American veterans from claiming their benefits.  Distant and hard-to-reach offices from black communities, employing only white office workers and enforcing policies that African-American benefit claim paperwork be “lost in processing”, lying to African-American veterans about their benefits, and ensuring that other systems implemented to keep African-Americans away from educational and housing opportunities were maintained.

The United States military helped these goals as well, often “losing” vital discharge paperwork for African-American veterans and rigging the discharge system to give African-American soldiers more dishonorable or non-military discharges than they were supposed to receive to reduce the number of eligible claimants.  These policies were seen as critical, because without them southern Representatives and Senators had threatened in 1944 to scuttle the entire bill and the “compromise” was seen as necessary.

1950s_family

This federal gift kept on giving post-World War II, with any drafted serviceman gaining access to these benefits and white America getting another major micro-boost of support for Korean War veterans.

I bring this up not to demand solutions – the problems of racial equality in the United States are too thorny and entrenched for a 500 word essay to properly attack – but I do bring this up in contrast to the arguments by many whites I’ve heard myself that any advantages whites gained were “too long ago” to be corrected today.  This benefit directly helped the grandparents of many readers of this blog, and their own access to middle class status rests upon the foundation laid for them in the late 1940s and early 1950s by the federal government.

A foundation African-American families were directly denied in the same period.

Sources:  VA History of the GI Bill, master’s thesis by Cyd McKenna on the GI Bill and the Homeownership Gap

Socialism with American Characteristics – World War II and Rationing

Friday, February 13th, 2015

ww2ration

For those unfamiliar the formal position of the Chinese Communist Party is that China is currently under a system of economic and political control formally known as “Socialism with Chinese characteristics” and is the inspiration for today’s historical opinion piece.  This piece was inspired by two recent articles run on Communism versus Capitalism with a focus on its potential impact in the United States (here) and some proposed economic reforms the millennial generation should support, which also smacks of Socialism (here).  Although this is an opinion piece I think I can prove solid ground that during World War II, specifically between 1942 to 1945, the United States undertook a series of economic reforms that can be categorized as how the United States might look under its own form of Communist economic management.

bf_gas_ration_envelope_reverse

My first point of proof was the 1942 creation by executive order of the Office of Price Administration (OPA), an organization of the federal government charged with imposing fixed price ceilings on nearly every good on the consumer market, with the exception of raw agricultural produce.  (So finished food products sold in stores were subject to price control, just not the raw ingredients that flowed into them.)  The OPA also imposed a strict rationing system to ensure that all consumers in a time of scarcity were ensured of a certain minimum standard of food no matter demand and, in turn, limiting consumer choice and the ability to freely exercise their own will in relation to the market.

Now some consumer choice remained, how you spent some classes of ration tickets were up to you, you could buy more lard or less butter with the same coupons, but overall that was picking how you spent a fixed allocation of resources.  What you could not do under this system was decide “this week I want to spend all my money on butter and become the BUTTER LORD!”  No matter how much cash you had in hand, that simply was not an option open to you because of the strict ration limitations.

allison_division_of_general_motors_1945-610x782

The War Production Board (WPB) covered the other end of the economy, taking control of raw materials distribution to United States industry, coordinating raw materials and production capacity, and imposing strict limitations on consumer good production.  The two entities combined forces on some consumer goods, including a system of rationing on items like typewriters that required those who wished to purchase one to file for a special permit to allow its acquisition.  The WPB wielded considerable authority over the United States economy, complete with the ability to grant exceptions to allocation allotments (Hershey’s) and starve other industries considered non-essential to the war.

Combine these two factors with high-employment on federally provided war contracts, a combination of restrictions on labor agitation and alliances with unions to prevent work stoppages, and sharp income taxes that compressed income inequality, and I would argue you have the combination of forces that worked together to create a distinctively North American form of Communism.

It even captured the odd balance in the United States between federal, state, and local authority – rationing limitations were handled by local ration boards – filled with state appointed local leaders who could adjust rations limits within broader guidelines and issue exceptions.  Even excess economic capacity in the form of high wages was slurped up by aggressive patriotic bond drives that pulled spare unused economic buying power out of the economy and into low interest paying federal debt.

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So the question that then comes up is – did this experiment in Socialism with American Characteristics work economically?  Well that really depends on how you define “work” – it did succeed in the overall goal of producing a vast array of military hardware that effectively armed many other nations and allowed the United States to successfully conduct a two front war for three years.  But it was undermined by economic waste, specifically caused by black markets and efforts to duck production limitations, price schedules, and supply restrictions.

black_market_image

Even gas rationing was a general failure in the sense of limiting gas allocation to conserve rubber, history shows people defying gas rations on both a local and regional level throughout the war.  As well enforcement of these restrictions was often quasi-legal, heavy-handed, and handled mainly on a local level, leaving the federal government’s metaphorical hands clean.  It was a voluntary effort, for example, not to drive on the weekend for pleasure – failure to comply would often lead to the driver risking being stopped and harassed or beaten by local police for their lack of patriotic fervor.

I would also argue it failed because, although austerity was something the United States public embraced for the war effort, as quickly as possible post-war this was rejected for a consumer binge that rocketed the United States economy upwards, as well as the demand for raw materials, with the 1950s post-war consumer boom.

Could Socialism with American Characteristics work again, as the two articles at the start of this piece seem to think?  I believe it could, history shows it can, but I would argue not in the long term.  Both systems rely to heavily upon humans putting material demands aside for either nobler purpose or more leisure time, forces that history shows do not hold well over a long enough period of time.

Sources:  Article on Rationing in World War II, Wikipedia entries on the Office of Price Administration and the War Production Board

1920s Federal Government and Taxation…a quiet revolution

Tuesday, January 6th, 2015

Warren_G_Harding-Harris_&_Ewing

The period from 1920 through 1929 represents an unusual shift in the operations and nature of the federal government, one that can be best considered a “quiet revolution” in federal government in which both the principles behind taxation, and the principles behind expenditure, were quietly changed to reshape the government into a leaner structure which can still be seen in the foundations of the modern federal government currently operating within the United States.  The core of this change took place under President Warren G. Harding in 1921 with the passage of the Budget and Accounting Act – a new legislation that required that President to submit an annual budget to Congress for approval which would encapsulate all the revenues and expenditures of the federal government.  It also created the Office of Budget Management (OMB, it’s modern name) and the Government Accountability Office (GAO) – all institutions designed to make the federal government operate more like a modern corporation in its handling of income and expenditures.  The immediate result was increased government efficiency in cost-management and the opportunity for the government to reduce some of its expenditures overall.  By 1922 the federal government had reduced its overall spending by nearly half, from roughly six billion to only three billion in total costs.

AWMellon

Harding also appointed Andrew W. Mellon to the office of Secretary of the Treasury, where he served from 1921 to 1931 under Presidents Harding, Coolidge, and Hoover.  Mellon was responsible for drastic modifications to the United States federal tax code, implementing vast reductions in tax rates on the theory that reduced income tax rates would capture more wealth overall for the federal government by encouraging wealthier individuals to bring their fortunes out of hiding from tax rates and into the productive economy.  During the 1920s his policies worked well overall, calling his efforts “scientific taxation” he oversaw Congress gradually reducing top-tier tax rates from 73% in 1921 to 24% by 1929.  During that same period federal tax receipts went up as well, however Mellon had some unusual ideas that shaped his policy of “scientific taxation” that make it stand out from more modern efforts to reduce tax rates.

  • Mellon believed that lower income tax brackets should be reduced as well, the lowest income tax rate was cut from 4% to 0.5% during the same period
  • Mellon oversaw estate tax rates being cut while also quietly ending policies that encouraged investments into tax shelters to hide wealth from taxation
  • Mellon pushed for the tax rate on “unearned income” – income from investments – to be taxed at a higher rate than that earned by direct labor – arguing that the inherent instability in income earned from wages and salaries needed to be sheltered from the hazards of life

The biggest part of Mellon’s revolutionary idea though was the goal of fine-tuning the income tax rate on the highest earners in society to a point where the government would gain maximum efficiency in returns by getting the most wealth into circulation against revenue generated for federal needs and then locking the tax rate down at that level.  He resisted calls during 1929 to further cut the income tax rate or other tax rates, arguing that peek efficiency had been gained and the wealthy needed no further incentives to get their money into circulation.  Mellon believed in squeezing those who could pay – his major goal was to find just the right squeeze to get the maximum revenue possible for the federal government that it needed, no more, no less.

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This aspect of the “quiet revolution” came to an end in the whirlwind of the 1930s and the global economic downturn now known as the Great Depression.  The population of the United States swept the Republican party from power in 1930 and 1932, putting the Democratic party into power and ending the era of a tight federal government and diminished federal spending.  The citizens demanded a more active role from the federal government in combating the problems of the Great Depression and this lead to the end of Mellon’s influence and an end to the idea of the federal government operating as a “business” rather than as a government.  But legacies from this carry on – in the modern United States tax policy is still guided by the goal of setting tax rates that will encourage money to stay in the system rather than hide and the federal budget is an annual event which Congress wrangles over even in the 21st century.

A final note to those who might argue that Mellon’s model, and the tight federal spending efforts by Harding, Coolidge, and Hoover are a more “proper” path for the federal government need to know a key detail, although the spending and role of the federal government declined in the 1920s the role of state governments expanded, including spending to pick up more social programs.  So the overall level of expenditure during this period on social infrastructure is a more complex topic than presented here.

Sources:  Wikipedia entries on Warren G. Harding, the Budget and Accountability Act of 1921, Calvin Coolidge, and Andrew W. Mellon

 

Civil War Intrigues – the Northwest Conspiracy

Wednesday, December 3rd, 2014

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The Civil War was a major defining conflict for the United States, one of the simplest ways to describe the change in the United States was how the average citizen referred to the nation, prior to the war it was often called “these United States” and after the war it changed to “the United States.”  But forging that new sense of unity involved a considerable amount of blood and stretching the powers granted the federal government under the Constitution to hold the various parts of the nation.  In particular President Lincoln throughout the war made a point of exercising “expansive” federal powers in the Midwestern states due to a strong pro-South, pro-Democratic party leaning in the region.  Lincoln, although not directly approving extreme actions, often allowed by inaction military commanders to take extreme steps to keep the region loyal, including using intimidation tactics, targeted arrests, suppressing the press, and expelling dangerous political figures to ensure that the American Midwest remained solid in its allegiance.  This in turn sparked its own problems, mainly the growth of groups that advocated separation from the United States and the formation of a new third nation from the states of Ohio, Indiana, Illinois, and Missouri.

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The center point of this plan was a combination of a local organization that called itself the Sons of Liberty (hailing back to the American Revolution) and lead by Clement Vallandigham (pictured above) working with Confederate raiders to enact a complicated plan in 1864 to split these four states from the rest of the union and create a new nation, the planned working name for this new entity would be the Northwest Confederation.  (The name hails from the regions original designation in the early post-Revolution period as the Northwest Territory.)  The plan was ambitious in its goals – Confederate cavalry raiders would head into the state of Illinois to link up with Sons of Liberty militia units – the combined force would liberate a series of Confederate prisoner of war camps and arm the freed soldiers with weapons taken from state arsenals.  This newly combined force, it was  hoped, would total over 100,000 soldiers in arms and provide enough force to spark other pro-South leaning individuals to join the effort and create a new nation.  This was all to start at the Democratic Party National Convention in Chicago.

The plan collapsed though, a combination of secret police/spies loyal to the federal government discovered the plot and arrested a few key leaders, but mainly internal bickering and the fact that most Sons of Liberty when faced with the call to actually rise up in arms against the federal government and the other Union states backed out of the plan.  It did have one lingering impact though, from 1864 till the Spanish American War the Republican Party was able to bring up this event to brand the Democratic Party as the party of “traitors and backstabbers.”  It was one more effective election tactic that helped ensure the Republicans maintained a dominant political position in the United States for nearly twenty years.

Sources:  Encyclopedia.com entry on the Northwest Conspiracy, Wikipedia entry on Clement Vallandigham, The Northwest Conspiracy by Thomas Fleming in What Ifs? of American History edited by Robert Cowley.