Here is an essay I wrote on December 23, 2008 in my AP english class. Even though I its a bit long you should take a look at it at let me know what you think
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For every dollar that a worker earns in the United States today, nearly fifty percent goes to government in the form of taxes. This has not always been the case. The Founding Fathers did not advocate a national income tax. They felt the country’s economic success could be best realized through a free enterprise system with limited government regulation. It was not until the twentieth century that the government imposed a federal tax on income. The role of the federal government in the economic life of this country continues to be a significant and emotional controversy.
During approximately the first 150 years of the United States of America, the economy ran without any major Federal interference. Citizens were allowed to take part in economic enterprise without government regulation, and they were free to accumulate unlimited amounts of money without political interference. This all changed in 1913. During that year the 16th Amendment to the constitution was ratified, thus levying an income tax on the population. The enactment promised that this tax would be levied upon the rich and would not exceed a “minute” percentage. In addition to the ratification of the 16th Amendment, Congress passed the Federal Reserve Act that same year. The FRA created a central bank which enabled government officials to manage the amount of currency and credit in the economy. The Federal Reserve Board used its power to increase money supply, subsequently causing an inflammatory binge. Americans took advantage or the availability of credit; it seemed like America’s economy was as successful as ever. However, on October 29, 1929, however the American economy crashed. This country’s citizens had been lead to believe that the economy would prosper with this new credit system; instead it dwindled. The Great Depression was not a failure of free enterprise, but rather, a failure of the economy because of political manipulation of money and credit.
In 1932, three years after the credit system collapsed, Franklin Delano Roosevelt became President of the United States. The country was at an all-time economic low and in dire need of some uplifting. The new President had a plan. Instead of relying upon the pre-1913 economic system of limited government involvement, the new president completely changed the American economic system. FDR abandoned free enterprise and decided that government was needed to save this countries economy. He put aside the private sector and replaced it with a quasi-socialist economic system. In a speech delivered on September 30, 1934 the president said:
Nearly all are agreed that private enterprise in times such as these cannot be left without reasonable safeguard.
One of FDR’s plans was the National Recovery Administration. The NRA funded huge government spending projects in order to restore “prosperity” to America. The government also enacted the Social Security Act, the Federal Deposit Insurance Corporation, the Agriculture Adjustment Act, the Emergency Banking Relief Act, the Tennessee Valley Authority, the Federal Securities Act, and the National Labor Relations Act. The President claimed these agencies would boost and save the economy; instead, these enactments gave the Federal government power over every aspect of the American economy. President Roosevelt stated”
We are building, stone by stone, the columns which will support that habitation. Those columns are many in number and though, for a moment the progress of one column may disturb the pillar next to it, the work on all of them must proceed without let or hindrance.
It is clear that President Roosevelt implemented all these acts with the intention for them to remain in effect long after the economy had recovered. He even made it unlawful for anyone to oppose or disagree with his plan. The President said:
The employer who turns away from impartial agencies of peace, who denies freedom of organization to his employees, or fails to make every reasonable effort at a peaceful solution of their differences, is not fully supporting the recovery effort of his government. The workers who turn away from the same impartial agencies and decline to use their good offices to gain their ends are likewise not fully cooperating with their government.
Even though American ran off a free enterprise economy for nearly its first 150 years, President Roosevelt somehow labeled it un-American for its citizens to try to be successful without government interference.
The American economy was forever changed with FDR’s New Deal. The government was no longer considered as the last necessity for help; rather, it was now the only option.
Beginning in 1964 this economic policy was challenged and changed, with the emergence of conservative economic principles termed “Reagonomics”, after the President who advocated them. President Ronald Reagan brought back the idea that government was supposed to play a small part in the American economy and free enterprise would do the rest. The economic principles that he preached were: to reduce the expansion of government spending, reduce unimportant tax rates on income from labor and capital, and control the money supply to reduce inflation. In a 1964 speech supporting Barry Goldwater, Ronald A. Reagan said:
And this idea that government is beholden to the people, that it has no other source of power except the sovereign people, is still the newest and most unique idea in all the long history of man’s relation to man…this is the issue of this election: whether we believe in our capacity for self government or whether we abandon the American revolution and confess that a little intellectual elite in a far- distant capitol can plan our lives for us better than we can plan them ourselves.
Reagan felt that America needed to return to its former economic policies of free enterprise and minimal government involvement. These conservative economic principles continued to be challenged. In the early 1960’s, President Lyndon B. Johnson told the American that they must accept greater government activity in their personal affairs. But the American people had already been living with tremendous government interference activity since 1932! Reagan knew that it was time for a change.
Ronald Reagan’s conservative values were not a new policy created by a campaign assistant. These values go all the way back to the founding of this great country. Reagan stated:
The full power of centralized government was the very thing the Founding Fathers sought to minimize….A government cannot control the economy without controlling people…they also knew that government does nothing as well or as economically as the private sector of the economy.
Reagan wanted the American voters to realize that government was holding back the progress of its citizens both as individuals and as a country. He felt that Americans had suffered for far too long at the hands of the government. Reagan pointed out that:
For three decades, we have sought to solve the problems of unemployment through government planning, and the more the plans fail, the more the planners plan.
Reagan advocated more production from the private sector with less government involvement. Reagan believed that if the government became too large it would be reluctant to give up this power:
No government ever voluntarily reduces itself in size. So, government programs, once launched, never disappear.
Reagan pointed out that many Democrats were also disgusted with their party’s liberal economic principles and were voluntarily abandoning the party. He said that even Al Smith, a well known Democrat in the 1960’s, had declared that the Democrats were taking the party that Jefferson, Jackson, and Cleveland built and were “now under the banners of Marx, Lenin, and Stalin.” Mr. Reagan feared that an expansive Federal government would take the United States down a path towards dictatorship. He declared that
Our natural, unalienable rights are now considered to be a dispensation of government, and freedom has never been so fragile, so close to slipping from our grasp as it is at this moment.
He was concerned that America was being run much more liberally than the framers had intended, and wanted to get the country back on the right track.
When Ronald Reagan became President in 1981 America had already been suffering through approximately ten years of economic “stagflation” (stagnation and inflation). The economy desperately needed a boost. Early in his term President Reagan instituted budget cuts of 39 billion dollars and passed a 25 percent tax cut for individual taxpayers. In the first seven years of Reagan’s presidency, income tax rates dropped from 70 percent to 28 percent. He also lowered the oil windfall profits tax, and officially terminated this tax in 1988. As a result of the President’s actions, inflation significantly decreased (falling to about four to six percent) and unemployment fell to about 5.5 percent. Jobs increased to sixteen million. Reagan also released tax money into the private sector in order to encourage saving, investment, and growth. During the Reagan administration the government became less competitive for credit while increasing competition within the private sector.
In 1977, prior to President Reagan’s election to the Presidency, the United States Congress passed the Community Reinvestment Act. It stated that:
The congress finds that (1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business; (2) the convenience and needs of communities include the need for credit services as well as deposit services…it is the purpose of this chapter to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities.
In far simpler terms, President Jimmy Carter required banks, by law, to lend money to parties who did not have enough money to pay back their loans. Previously, individuals and businesses with low-incomes were often denied credit because of the high-risk nature of the loans. Banks such as Fannie Mae and Freddie Mac now had to give home loans with mortgages that required no down payment. In 1995, President Bill Clinton slightly tweaked the CRA in order to increase access to mortgage credit for inner city and “distressed” urban communities. From 1977 through 2008 banks were forced by the government to issue one trillion dollars in sub-prime mortgages.
Due to the amount of money that was loaned to low income families, many financial institutions went bankrupt in 2008. Borrowers could not pay back their loans. If the government had not used its power to demand that banks make risky loans, the US economic would not be where it is today.
One would assume that the government would have learned a lesson with this latest economic crisis, but it still seems to think that big government is the solution. On Tuesday, November 25, 2008 Congress announced that they will provide 800 billion dollars to try and unfreeze the market for consumer debt from home mortgages to credit cards. The Federal Reserve said that it will purchase 100 billion dollars in obligations from Fannie Mae and Freddie Mac and other Federal Home Loan Banks. They will also buy 500 billion dollars in mortgage-backed securities. The program concerning consumer debt has said it will lend 200 billion dollars to the holders of securities backed by different types of consumer loans, in addition to the 700 billion dollar bailout package that was issued in October. In addition to this, on December 19th President Bush announced that the government will give about 17 billion more dollars to bailout the auto industry. It seems as though the government has become too intoxicated with power and will not let the economy recover through the private sector. Instead the government is on track to make the same mistakes that were made about a half a century ago.
Speaker of the House of Representatives Nancy Pelosi does not see the economic problem as having been the fault of big government. Congress’ desire to remain in power precludes it from even contemplating alternative techniques of economic resurgence. Ireland is a good example of how a re-structuring of government policy can have a favorable outcome. In the 1980’s Ireland’s economy was at an all time low point when the government decided to try a different path. They dramatically reduced government expenses and encouraged an increase in the work force. Taxes were dramatically cut and Ireland’s economy is now booming.
The liberal United States Congress still believes in the expansion of government as the only option to save the economy. On December 16th President-elect Barak Hussein Obama announced his new “New Deal”. He pledged the largest new investment program in roads and bridges since the Eisenhower administration, in addition to more Federal funding for education, energy, and healthcare. Without giving specifics, he promised to save or create two and a half million jobs in the next two years. America has seen liberal administrations fail in the past, but for some reason it is in full support of the continued expansion of its socialistic government.
How long will it take for America to return to the style of government it was created with? As for now the American citizens are being manipulated into believing that the new economic policies and bailouts are going to work. Once those policies fail to boost the economy, America will hopefully return to conservative values.