Let’s begin by quoting a portion of FDR’s first inaugural address, made March 4, 1933 as the US struggled with a deepening recession that would soon become the Great Depression.

“Our greatest primary task is to put people to work.  This is no unsolvable problem if we face it wisely and courageously.  It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources….

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a  strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency.”

As does Obama now, FDR then faced a financial crisis and rising unemployment.   The difference, at the moment, is in the degree of the problem.  For the nation and FDR, the problems were starkly worse and this allowed FDR to take more aggressive action.  Unemployment was already over 20% and heading higher.  The banks were in such straights FDR declared a “bank holidy” where banks all over the country were closed down, not to re-open.

This time around, the official unemployment rate is slightly over 10% (broader measures peg the real rate at between 16-17%) and the banking system, while stumbling badly, was not allowed to go into virtual collapse.  But mitigating the damage this time around came at a high price.  Propping up the banks, for example, took a hurculean bailout by the Federal Reserve and the Treasury which, at least nominally, weakened the country’s financial ability to duplicate FDR’s massive effort to create jobs. 

Back then, FDR could easily identify those “natural resources” where jobs could be created while simultaneously improving the country.  Bridges, roads, dams, expanded electrification (Tennessee Valley Authority), even the arts, easily gained popular support for FDR’s efforts.   Today’s infrastructure needs, while just as necessary as in FDR’s day, are less obvious.  The country badly needs to wean itself from foreign petroleum, as an example, but efforts to build such an energy infrastructure are less straightforward and more complicated.  They will take more time to develop and implement, and time is the enemy of change, no matter how necessary. 

As a result Obama cannot count on the type of instant popularity that FDR enjoyed.  The country’s situation is no less dire than in FDR’s day, but the road he must travel will be more politically difficult.   

But fundamentally, Obama’s efforts are directed similarly to FDR’s.  There is a strong effort to dampen financial speculation and increase consumer protections against unfair credit practices.  And Obama’s stimulus plans do include efforts at “accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.” 

Even the move for universal health care compares to FDR’s creation of the Social Security Administration, which was landmark legislation greatly expanding the social safety net for citizens.

There is another, less well understood but nonetheless important, similarity between FDR’s America and that of Obama’s America:  Income inequality and distribution worsened prior to both financial and economic collapses.   During the roaring ’20s income disparity worsened.  The economy had strong growth  during the first 20 years of the last century, but during the late 1920′s incomes of the majority of citizens didn’t progress.  Productive capital investment declined even as profits soared but little of it resulted in  income and job growth for the majority.  The wealthy did quite well, but the rewards were narrow and confined to the upper echelons.

The same trends, over a longer 30 year period, have preceeded this economic recession.  While corporate profits, executive salaries and bonuses soared to record levels, net income and job growth were non existant for the vast majority of citizens.  Where 70% of households could be supported by one wage earner in the early 1970s, today it takes two wage earners to support 60% of households.  Predictably, adjusted for inflation over that same time period, household incomes barely budged.

Which brings up a similarity between China and the US today:  The problem of income inequality and how to reverse the trend.  If the problem is severe in the US, it is even more so in China where hundreds of millions of people (China, at 1.3 billion people, is four times the size of the US) still barely subsist, even as wages and jobs have improved in cities where China has concentrated capital investment driven by export growth. 

Where the US faces an over-indebted population, and a lengthy recession of little or no real growth, China’s problem could become explosive without serious redistribution of the rewards of its growing economy.  Without a strong, relatively well paid labor force, China’s growth could collapse if export markets continue to contract.  China’s leadership needs to develop robust, broad, internal consumer demand as a backstop for inevitable export declines.

Both countries should heed Henry Ford’s advice.  When asked why he paid his labor so much, Ford replied “I pay them that much so they can afford to buy my cars.”

Prof. Robert Reich, former Labor Secretary for President Clinton and the author of the book “Supercapitalism” has a nice, quick post at his blog where he describes the China economy, and its policies, with ours here in the United States.

Here’s two paragraphs from Prof. Reich’s post.

“China’s industrial and technological policy is unapologetically direct. It especially wants America’s know-how, and the best way to capture knowhow is to get it firsthand. So China continues to condition many sales by U.S. and foreign companies on production in China—often in joint ventures with Chinese companies…..

“American firms are now helping China build a “smart” infrastructure, tackle pollution with clean technologies, develop a new generation of photovoltaics and wind turbines, find new applications for nanotechologies, and build commercial jets and jet engines. GM recently announced it was planning to make a new subcompact in China designed and developed primarily by the Pan-Asia Technical Automotive Center, a joint venture between GM and SAIC Motor in Shanghai. General Electric is producing wind turbine components in China. Earlier this month, Massachusetts-based Evergreen Solar announced it will be moving its solar panel production to China.”

Read the article.  It’s a common sense explanation of what is now happening to our economy, particularly as it relates to the China economy.  For us, it’s not such a good relationship.

The blog nakedcapitalism publishes an artricle by Edward Harrison of the blog CreditWritedowns about the growing food insecurity in the United States. 

Apparently in 2008 some 50 million Americans weren’t always able to put food on their tables.   It’s been a growing problem, particularly in the last decade.  Like nakedcapitalism, Beezer believes this is just another consequence of tax and other government policies which have drained the bottom 80% of Americans to further enrich the top 20%.

From the article:

“Food insecurity – defined by the USDA as when “food intake … was reduced and their eating patterns were disrupted at times during the year because the household lacked money and other resources for food” – afflicted 14.6% of Americans in 2008. ie, some 50 million people were too poor to guarantee being able to put food on the table.”

The next politician to say that cutting taxes on the wealthy is the answer to all our considerable ills should be taken out and publicly horsewhipped.

In 1971 a dollar bought $5.33 in goods and services compared to a 2007 dollar.   In 1971 the median household income was about $9,200.  In 1971 only about 31% of households contained two adult working members.  Today that percentage is close to 60%.

Median household income today is just over $50,000.   Using the $5.33 value of a 1971 dollar, household income would need to be a little over $60,000 just to stay even.

But wait, almost twice as many household now have two working adults as did in 1971.  That means the real individual median income has dropped almost in half compared to 1971!!!!

And you wonder why the economy sucks.

I’ve added the Economic Policy Institute to my blogroll on the right.  This is an clear thinking organization that studies domestic and global issues and then issues recommendations for change.

Anyone interested in policy issue debates of the day should read the EPI’s take on solutions as part of their study.

Whether you agree or disagree with Nobel winner, economist Paul Krugman, you should read him.  Krugman writes a column for the New York Times, and a nifty series of often short blog posts on the New York Times website.

The thing about Krugman is that he writes as clearly as one can get and still intelligently write about the economy.  And he has a deft sense of humour, which if you disagree with him probably makes reading him less painful.  If you agree with him, the touch of humour makes it more enjoyable.

At any rate here’s one good example of a Krugman blog posts.  When he’s not writing for the NYT, he teaches at Princeton.

Why not a WPA?