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Conservatives Put Their Faith in the God "Market" ... And It's a God That Can Fail

by Robert S. McElvaine

Robert S. McElvaine is Elizabeth Chisholm Professor of Arts & Letters and Professor of History at Millsaps College. His books include The Great Depression: America, 1929-1941. He is now writing "Oh, Freedom! -- The Young ’ 60s."

It is time to revise George Santayana’s famous (and oft-misquoted) dictum, “Those who cannot remember the past are condemned to repeat it.”

What “conservative” (a misnomer if there ever was one) Republicans are doing in the face of the current serious economic problems would fit better with, “Those who willfully deny the past condemn us all to repeat it.”

Republican economic philosophy is faith-based, not fact-based. Their absolute, unquestioning faith is in a deity called the Market, and no matter how many times the evidence shows that faith to be misplaced, they keep insisting on doing the same things.

What the faithful in this religion of Marketism accomplished this past week was a rerun of the mistakes that prevented full recovery from the Great Depression and precipitated a renewed and quite severe fall (for which the word “recession” was coined) in 1937.

The faith-based regressives (a much more accurate name for them than “conservatives”) repeat false mantras so many times that people start mistaking them for the truth. Among these erroneous recitations are:

You can’t raise taxes during a recession.
The New Deal didn’t end the Depression, proving that spending won’t cure economic hard times.
When the American people have to tighten their belts, the government should do the same.

In fact, as our economic history from the 1920s to the present has shown repeatedly, each of these declarations of the Marketist catechism is the opposite of the truth. The Great Depression ended because of massive government spending for World War II, and that happened at a time when the top marginal tax rate was 88 percent.

And, in a consumption-based economy, when potential consumers tighten their belts under recessionary conditions, it incumbent upon government to loosen its belt and spend more to make up for the decline in demand.

President Obama’s surrender to the Marketist extremists who, emboldened by the certainty that faith provides, were holding the American economy and the nation’s full faith and credit hostage until their demands were met leaves the federal government’s policy moving in exactly the wrong direction. It is contradictory during what is still a period of contraction (or, at best, extremely anemic expansion).

What the Marketists have, through their willful denial of the past, condemned us to repeat is a policy very similar to that pursued by Franklin D. Roosevelt in late 1936 and 1937. While certainly not a faithful Marketist himself, FDR was almost as spooked about deficits as so many Americans are today. As soon as he felt that his reelection was secured, he began cutting back on spending and the economy again took a nosedive. It was only when spending was again increased that the nation pulled out of this “Recession of 1937.”

Under the current political situation, there is scant hope that the same can be done now.

It is, though, interesting that in the days following the debt ceiling/spending cut deal, the stock market went off the cliff. Many analysts attribute the fall to overseas factors, and it is likely that they played a role. But it also seems that many investors are more cognizant of economic facts than are the Marketist politicians. The investors understand that cutting spending in the midst of a “Great Recession” is counterproductive, no matter how attractive it may be to their philosophical outlook.