Posted By RichC on September 5, 2011
It is odd how my “simple mind” works when contemplating a blog post on Labor Day. As I grappled with the history of the holiday, my thoughts drifted to present day directional changes our country is making – some reminiscent of the reasons that triggered our end of summer holiday.
In reading about our nation’s first labor day in 1882 and the eventual national holiday in 1894 after the recession/ depression triggered by The Panic of 1893, I’m seeing similarities that are not all that unlike are current situation … even debates between management and their unionized labor – although benefits seem to be the argument today rather than “low wages and sixteen hour workdays.” LINK
The 1880s were a period of remarkable economic expansion in the United States, an expansion that eventually became driven by railroad speculation. Railroads were over-built, and many companies continued growth by taking over competitors, endangering their own stability.
One of the first signs of trouble was the bankruptcy of the Philadelphia and Reading Railroad, which had greatly over-extended itself, on February 23, 1893 …
As concern of the state of the economy worsened, people rushed to withdraw their money from banks and caused bank runs. The credit crunch rippled through the economy. A financial panic in the United Kingdom and a drop in trade in Europe caused foreign investors to sell American stocks …
A series of bank failures followed, and [several railroads]. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). According to high estimates, about 17%-19% of the workforce was unemployed at the Panic’s peak. The huge spike in unemployment, combined with the loss of life savings kept in failed banks, meant that a once-secure middle-class could not meet their mortgage obligations. Many walked away from recently built homes as a result.
As our country evaluates the field of challengers President Barak Obama will be facing in a little over a year, we are faced with a serious philosophical differences when it comes to our some of our successful founding principles. I have little doubt that the social change we have seen since the 2008 election was stimulated by the increase in debt financed war, the housing and banking collapse and ensuing recession. Changes from Democrats and the Obama administration unfortunately have done little to address the core problems of over spending and unemployment, but exacerbated the debt and created an even more expensive government.
Compounding the problem of a bigger and more expensive government is the lack of a growing economy (or partially causing). At the same time, millions more of Americans are becoming reliant on the government due to necessity, generosity or retirement age … and these social “caring” programs are also being used for “political purpose.” From my perspective, very few of the many costly entitlements we’ve pursued can be continued unchanged IF our country is to remain a place where the American Dream is a possibility for every citizen. I’m reminded of a George Bernard Shaw quote, “A government that robs Peter to pay Paul can always depend on the support of Paul.”
We are nearing that tipping point, where 50% of those who vote are becoming dependent on an entitlement check from the government … no matter how noble the programs we have accepted. At some point, we cannot continue to payout more than we collect in taxes AND in the free market world economy in which we have encouraged necessitates that American companies and our workforce remains competitive. If we don’t, the companies and capital invested that are paying the taxes to support our system will either go elsewhere or go bankrupt (and not all can be “too big to fail.”).
Companies and those with the capital to invest are hoping for change in 2012, in my opinion … and are currently sitting on the sidelines. Many do have the capital, or access to it through Federal Reserve policies of low interest rates and could invest in the US if market conditions change or the cost and uncertainties of of operating were clear. Optimistically, if a government change in 2012 is business-friendly (less regulation, competitive taxes and certainty), we’ll see job growth and expansion – new jobs and a rebounding economy will follow. Pessimistically, if investors and businesses continue to be saddled with more regulation, higher taxes and the uncertainty of a more invasive government … our economy and the American Dream will disappear.
Anyway … how about just wishing a simple Happy Labor Day without over thinking?