Imagine you had a time machine. Now you have boarded it, pushed the button to travel far, but you forgot whether you have travelled back to January 1932 OR moved forward to next year, January 2012. Imagine you exit your machine and find yourself in the middle of the Country’s Presidents’ speech that, in the midst of the worse recession of the century, were to adress you and the crowd in this way:
“… The statement of the … (majority) and … (opposition) leaders of both the Senate and the House show a a real nonpartisan determination to cooperate with the administration to assure the country of the balancing of the Federal budget of expenditures and income of the fiscal year beginning next July. The amount of taxes that we will need to impose for this purpose, of course, depends on the amount of the further cuts that can be made in expenditures, and I welcome any reduction that can be made and still preserve the proper and the just functioning of the Government. With the general realization of the necessity for reductions in expenditure, we should at least be able to bring about the wholesale elimination of overlapping in governmental machinery, out of which we can get some very important economies. And with the program which has now been assured, we can also maintain the stability and credit of the Federal Government by having no increase in the national debt beyond that necessary to cover the deficit for this year, as with a balanced budget for next year we would have no increases in the debt. [....] Rigid economy is the real road to relief to homeowners, farmers, workers, and every element of the population. [...] The reduction in governmental expenditures and the stability of Government finance is the most fundamental step that we can take to this end. It can contribute greatly to employment and the recovery of prosperity (…), and it must be our concentrated purpose”.
So where did your time machine take you? January 1932 or 2012? Maybe Italy 2012? Maybe Greece 2012? France? Looks like. But no. It is just President Hoover, soon to be replaced by President Roosevelt for lack of capacity to manage economic policy. Mr. Hoover and his crazily wrong model of the economy of expansionary fiscal restrictions in a recession. Sounds familiar, I know.