A CNN poll conducted in June found that almost half of Americans now think that another Great Depression is “very likely” or “somewhat likely” to occur within the next 12months.
One sensible response is to point out that it is also “very likely” that most of those who stated this view have little conception of what the Great Depression actually was. “Depression” has come to be a term that gets thrown around whenever anyone wants to assert that things are really bad.
And yet, there is a genuine danger that the already weak economy could turn into a second coming of the hard times of the 1930s. The focus of many politicians today on cutting spending and avoiding tax increases on the wealthy is based on a misunderstanding of what led to and extended the Great Depression — and it is setting us up for a new collapse.
Most people realize that a failure to raise the debt ceiling could be catastrophic. But the drastic cuts in federal spending that some Republicans are demanding in exchange for an increase in the debt ceiling would be a repeat of the mistakes that prevented a full recovery in the 1930s and then caused a secondary collapse in 1937. Enacting these cuts is the most likely scenario in which the current recession could become a new depression.
With the economy in a precarious position, slashing spending, concentrating ever more wealth and income at the top, and blocking effective regulation is a prescription for disaster.
In fact, the first part of this prescription is very similar to one written by Dr. New Deal himself. Fearful of massive budget deficits, President Franklin D. Roosevelt cut back on spending as soon as his 1936 reelection was secured, plunging the economy into a renewed free fall that introduced the word “recession” into our lexicon so as to avoid calling the collapse a renewed depression.
Yet that is the course upon which a unified Republican Party is insisting we embark again this summer. For their part, President Obama and many Democrats have ceded the battlefield and are just trying to reduce the number of casualties. In a meeting on Thursday, for instance, the president placed cuts in Medicare and Social Security on the negotiating table.
Conservatives appear to be united behind a set of beliefs that are dangerously wrong. Theirs is a faith-based economics that contrasts with fact-based economics; their god is named the Market. Their economics is as immune to facts as its opposite, Marxism. Call it Marketism. A devout Marketist believes that the Market is always right and any government intervention is, well, sinful.