Just when you think nothing will happen, it happens.
That’s probably what will take place leading up to the 2012 elections in America.
Two things are at play right now. One, elected officials are a perfectly mirrored reflection of their constituents. And two, Americans are beginning to suspect that extreme political ideologies are holding things back economically.
When this happens, small occurrences can cause great changes to take place quickly.
For example, in 1937, Congress, thinking the depression was over, started cutting programs and balancing the budget. Unemployment started shooting up again, going from 14% to 19%. At that point, things changed quickly. People needed work, and they seemed to realize that demand had to increase quickly.
Congress started spending, demand increased, employment improved and by 1939 the double dip depression was coming to an end.
One of the myths of the Great Depression is that there was one long Depression stretching from 1930 to 1941. Not true. There were two depressions. The first one started around 1930, and the second started in 1937.
The next myth is that World War 2 got America out of The Depression. Not so. World War 2 started for America in December 1941. America was starting to come out of its Second Depression by 1939.
It was “demand”, not “war”, that got us out of The Great Depression. True, America started making jeeps, tanks, guns, planes, uniforms, etc. for Russia and Great Britain, who already were in war with Germany. However, focusing on their demand for goods instead of war, would be more accurate from an economic stand point.
Our Situation Today
In part, I think we have learned from history.
The Great Recession of 2008 did not become a great depression, because we spent and made sure there was enough money in the system to keep people working. Our unemployment has reached an unacceptable 9%, but during the height of the Great Depression of 1930, unemployment reached 25%. In those times, Congress acted but didn’t hold on long enough. As a result demand fell off and nightmarish unemployment returned. Our present Congress is falling into the same trap, but will become more positive and aggressive in 2012.
As a result, there won’t be a Second Great Recession in 2012. Congress will ensure that more demand in the economy is created.
If for some reason Congress doesn’t, its members will be purged.
In 2012, a jobs bill will be passed by Congress. Small companies will receive tax incentives to hire people. And roads, freeways and bridges will be mended, rebuilt, and created.
Again, it is “demand” that rescues economies. Like economist John Maynard Keynes said back in the 1930’s, it doesn’t matter if you balance the federal budget if people don’t have money in their pockets. In 2012, Congress will help spark that.
Pragmatism vs Ideology
Most Americans are suspicious of extreme political ideology on the left and on the right. They will tolerate extremism until more pragmatic issues need to be focused on. America has reached that point. Above all else, Americans expect the economy to get fixed, and they really don’t care much how that is accomplished. If the federal government can help to do that, so be it.
In the late 1960’s and early 1970’s, it was the ideological left that was the most active and vocal. Americans let them have their day, and then hardened in the center. Conquering inflation was the name of the game in the late 1970’s and early 1980’s, and conquer it we did. Most Americans congregated in the middle and took pragmatic steps to cure a core economic problem.
Today, the ideological right is having its day. But, that ‘s about to come to an end. Americans are starting to congregate around the pragmatic middle again. This time it’s about creating more jobs in the short run, and more meaningful jobs in the long term.
You want a sure bet? Follow the money. We’re heading toward creating a “demand economy” with the Congress of the United States of America leading the way. In the end, it’s really that simple. Really? Really.