Hoobama

“History doesn't repeat itself - at best it sometimes rhymes.”

--Mark Twain

Is there a “rhyme” to the presidencies of Barack Obama and Herbert Hoover, as we earlier suggested? Consider the most significant parallel. Hoover ended a major sweep in U.S. history, the 1865-1933 post-Civil War domination of American politics by a Northern, business-friendly Republican Party. That era lasted 70 years. It’s possible that Obama is the president who will end the era of Democratic big government, which began with Franklin Roosevelt’s election in 1933, a period of now nearly 80 years.

Republicans before Hoover, whatever you felt about them, delivered business-led growth with rising prosperity. When Republicans produced a Great Depression instead, they were finished. Democrats before Obama were willing to be measured by government-led job creation. Once the job growth stopped, why elect Democrats?

Hoover: Great Depression. Obama: Great Recession.

Hoover’s political troubles had become obvious by 1930, two years into his presidency, when the nation threw out a Republican House and replaced it with Democrats. In 2010, two years into Obama’s presidency, America replaced a Democratic House with Republicans.

Hoover, with 14 months to go before the end of his term and very worried about his prospects for re-election amidst horrible economic conditions, launched a new program historians now call the “Hoover New Deal of 1932.” It consisted of 9 separate projects to spur economic growth.

Obama, with 14 months to go before the next election and very worried about his prospects amidst poor economic conditions, launched a new program called the “American Jobs Act.” It consists of 15 separate points to spur job growth.

One of Hoover’s projects was the Reconstruction Finance Corporation, a government institution that by providing loans to financial institutions, aimed to spur growth. Hoover provided the Corporation with $2 billion, which would be $27.5 billion today.

One of Obama’s “Jobs Act” points is creation of a National Infrastructure Bank, charged with financing job-growing projects. Obama plans to provide the Bank $10 billion.

Hoover’s “little New Deal” didn’t work. Here’s why Obama’s “American Jobs Act” seems doomed, even if it could get past a Repubican House. As Milton Friedman has taught us (via Wikipedia and James Pethokoukis), consumer choices regarding consumption— and recall that consumer spending accounts for roughly 70% of economic activity—are determined not by current income but by the consumers’ longer-term income expectations. Friedman’s key conclusion is that transitory, short-term changes in income have little effect on consumer spending behavior.

And as CNBC’s Larry Kudlow has observed about the “American Jobs Act’s” impact on hiring:

while more than half of the president's new package is called "tax cuts," the reality is that these are temporary tax cuts. . . just for one year. . . Businesses like to look ahead at least three to five years for their employment planning. And they're already worried about the tax and regulatory mandate costs of Obamacare, which has become a great deterrent to job creation.

We already know temporary tax cuts don’t work. Obama in 2011 seems lost in the economic hard times. Like Herbert Hoover in 1932.