Despite worst recession since the Great Depression, giving down only slightly.

You would think with unemployment up and the economy still weak, the charitable giving of people would be down dramatically. Not the case. Only off 3.6% in 2009.

The GivingUSA report for the calendar year 2009 shows that, in spite of this being the worst year since the Great Depression, with unemployment at massive levels and discretionary spending at a low, America's giving to philanthropic causes declined only 3.6% (or 3.2% when adjusted for inflation.

And this is not the steepest drop in giving, in real terms: in 1974, for example, giving fell by 5.5 percent.

It is absolutely astonishing that Americans gave away more than $300 billion during such a tough year.

This is the first decline in giving (in current dollars) since 1987, and only the second since Giving USA began publishing annual reports in 1956.

In other words, as American prosper, they give away more and more, and when they stop prospering, they still continue to give as much as they can. In 1974, giving
averaged $1,323 per household (including non-donors) which was 1.8% of GDP whereas, in 2009, it averaged $1,940 per household (including non-donors) or 2.1% of GDP.

It is fascinating that 75% of the giving is by individuals, whereas only 4% is by companies, while 13% is by foundations, and 8% is from bequests.

Even more fascinating: while corporate giving rose 5.5 percent, charitable bequests fell 23.9 percent in 2009 and foundation grantmaking fell by 8.9 percent. However, individual giving fell only 0.4 percent.

I wonder though whether there will be a much more significant drop if/when taxes start going up significantly. Which surely will be the case if President Obama and the current configuration of Congress have their way.

We've so far avoided a depression, but for how long given Obama's policies?

There's article in the Washington Post by columnist and economist Robert Samuelson entitled, "Why there was no depression." I would add the word "yet", because I don't think we're out of the woods yet. I say that because the problems and sources of problems underlying the 1930s Great Depression are still distinct possibilities today with policy proposals trumpeted by President Obama.

The Depression in the 1930s is attributed largely to bad government policies. Raising up tariffs dramatically during the early 1930s which choked off trade and reduced economic activity. Raising taxes dramatically on businesses, which create jobs, and private individuals. Bad monetary policy -- keeping interest rates artificially low which distorted investment and business decisions. And so forth.

Now fast forward to 2009. There are efforts to restrict trade on some goods and services with other countries, e.g. tariff barriers.

And the Fed has continued to print money and have kept interest rates artificially low.

President Obama has exploded the government's debt load and to close the gap he'll invariably choose taxes increases over spending decreases. He'll allow many of the Bush tax cuts to expire in the next year or two. He's proposing "cap and trade" policies which will slow economic activity and drive up the cost of goods and services for families. Estimates suggest cost increases would be the equivalent of anywhere from a $800 to $1700 tax increase per family. And he's proposing a massive increase in health care spending. By as much as $100 billion a year.

Arthur Laffer in a Wall Street Journal article, "Taxes, Depression and Our Current Problems" argues that bad fiscal policy played an important role in continuing and deepening the depression.

The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

The longer I look at things, the more convinced I am that government got us into this mess and government will likely keep us in this mess longer than necessary.

Who's responsible for our financial crisis? The government says Stanford economist.

I've been listening to "The Forgotten Man" by Amity Shlaes, a history of the Great Depression 1930s era. What's happening today sadly sounds like a rerun of what happened in the 1930s.

I'm up to the 1934s and FDR's New Deal which was really just an amalgam of unrelated and uncoordinated government activities instituted in response to the economic crisis and based on the "progressive" ideology which guided FDR and his advisers. They really didn't know what they were doing. FDR's policies were really just an extension and massive expansion of Hoover's after the crash of 1929.

At a point, when things weren't turning around, the Roosevelt Administration went looking for scapegoats, particularly business leaders.

Here's a link to an interesting analysis of our financial crisis by a Stanford professor John B. Taylor who outlines missteps made by the Bush Administration and the Fed over the past several years.

My research shows that government actions and interventions -- not any inherent failure or instability of the private economy -- caused, prolonged and dramatically worsened the crisis.

The classic explanation of financial crises is that they are caused by excesses -- frequently monetary excesses -- which lead to a boom and an inevitable bust. This crisis was no different: A housing boom followed by a bust led to defaults, the implosion of mortgages and mortgage-related securities at financial institutions, and resulting financial turmoil.

Monetary excesses were the main cause of the boom. The Fed held its target interest rate, especially in 2003-2005, well below known monetary guidelines that say what good policy should be based on historical experience. Keeping interest rates on the track that worked well in the past two decades, rather than keeping rates so low, would have prevented the boom and the bust. Researchers at the Organization for Economic Cooperation and Development have provided corroborating evidence from other countries: The greater the degree of monetary excess in a country, the larger was the housing boom.

The effects of the boom and bust were amplified by several complicating factors including the use of subprime and adjustable-rate mortgages, which led to excessive risk taking. There is also evidence the excessive risk taking was encouraged by the excessively low interest rates. Delinquency rates and foreclosure rates are inversely related to housing price inflation. These rates declined rapidly during the years housing prices rose rapidly, likely throwing mortgage underwriting programs off track and misleading many people.

Adjustable-rate, subprime and other mortgages were packed into mortgage-backed securities of great complexity. Rating agencies underestimated the risk of these securities, either because of a lack of competition, poor accountability, or most likely the inherent difficulty in assessing risk due to the complexity.

Other government actions were at play: The government-sponsored enterprises Fannie Mae and Freddie Mac were encouraged to expand and buy mortgage-backed securities, including those formed with the risky subprime mortgages.

Government action also helped prolong the crisis. Consider that the financial crisis became acute on Aug. 9 and 10, 2007, when money-market interest rates rose dramatically. Interest rate spreads, such as the difference between three-month and overnight interbank loans, jumped to unprecedented levels.

Diagnosing the reason for this sudden increase was essential for determining what type of policy response was appropriate. If liquidity was the problem, then providing more liquidity by making borrowing easier at the Federal Reserve discount window, or opening new windows or facilities, would be appropriate. But if counterparty risk was behind the sudden rise in money-market interest rates, then a direct focus on the quality and transparency of the bank's balance sheets would be appropriate.

Early on, policy makers misdiagnosed the crisis as one of liquidity, and prescribed the wrong treatment.

The government distorted sound money practices in an effort to keep the economy chugging along. Those actions and then ones in response to the financial crisis have only deepened the crisis we're facing.

Seeing what's happening with the Obama mega-billion economic stimulus bill looks like something the "progressives" would have done during the Roosevelt Administration. Lots of pork, social spending and efforts to further regulate and control society and the economy.

Then as today, the Keynesian economists were in the driving seat in terms of influencing government policy. The whole rationale behind the stimulus bill is that government spending is necessary to jump start the economy. Lot's of observers say that won't happen and will only add to the debt burden facing our government and society.

Getting it right doesn't like look like it's in the cards for the foreseeable future.

Are our current financial problems more like the Panic of 1873 or the Great Depression of the 19 1930s?

Here's another interesting article on our current economic difficulties. This historian, Scott Reynolds Nelson says a better analogy for our current economic difficulties are the Panic of 1873 rather than the Great Depression of the 1930s. If either serves as a model for what we can expect, tough times are ahead of us and they won't end soon. My chief concern is the government will do the wrong thing and only prolong the crisis and make it worse.

He writes in conclusion:

If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment. Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)

The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.

In the end, the Panic of 1873 demonstrated that the center of gravity for the world's credit had shifted west — from Central Europe toward the United States. The current panic suggests a further shift — from the United States to China and India. Beyond that I would not hazard a guess. I still have microfilm to read.

Another great depression?

That's the title of a column by conservative economist Thomas Sowell.

He notes that a lot of people are looking at President-elect Obama as the next FDR who will bring us out of our current deep economic recession. Yet he warns that FDR's policies which were fundamentally extensions of Hoovers, which only made matters worse.

Then as now people blame the free market system for the financial problems were facing and therefore call for significant government intervention.

The prevailing view in many quarters is that the stock market crash of 1929 was a failure of the free market that led to massive unemployment in the 1930s— and that it was intervention of Roosevelt's New Deal policies that rescued the economy.

It is such a good story that it seems a pity to spoil it with facts. Yet there is something to be said for not repeating the catastrophes of the past.

When employment began to rise after the 1929 crash, that's when government stepped in to try and prevent the loss of jobs by increasing tariffs to protect US jobs. This only made things much, much worse. Sowell cites two economist who tracked unemployment during that time.

The Vedder and Gallaway statistics allow us to follow unemployment month by month. They put the unemployment rate at 5 percent in November 1929, a month after the stock market crash. It hit 9 percent in December— but then began a generally downward trend, subsiding to 6.3 percent in June 1930.

That was when the Smoot-Hawley tariffs were passed, against the advice of economists across the country, who warned of dire consequences.

Five months after the Smoot-Hawley tariffs, the unemployment rate hit double digits for the first time in the 1930s.

This was more than a year after the stock market crash. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.

Before the Great Depression, it was not considered to be the business of the federal government to try to get the economy out of a depression. But the Smoot-Hawley tariff— designed to save American jobs by restricting imports— was one of Hoover's interventions, followed by even bigger interventions by FDR.

Today, Obama is already talking about the government trying to create 2.5 million new jobs. It has to be asked is it better for government to create jobs or for the private sector? I think definitely the latter. And will Obama give in to protectionist calls? That remains to be seen.

It will also be interesting whether Obama continues the interventionist policies of George Bush who helped nationalize part of our financial system. If he does, he'll not only have his Hoover foil but also an example to build on.

As Sowell concludes:

Barack Obama already has his Herbert Hoover to blame for any and all disasters that his policies create: George W. Bush.

What's Obama's ultimate agenda? Radical social change via government.

There's been a lot of speculation on the type of president Barack Obama will be. Will he be the cautious centralist or a radical social reformer?

In column, entitled "Obama's Plan to Transform America", Charles Krauthammer probably gets it right as much as anybody.

Krauthammer notes that

Barack Obama has garnered praise from center to right -- and has highly irritated the left -- with the centrism of his major appointments. Because Obama's own beliefs remain largely opaque, his appointments have led to the conclusion that he intends to govern from the center.

Obama the centrist? I'm not so sure.

Take the foreign policy team: Hillary Clinton, James Jones, and Bush holdover Robert Gates. As centrist as you can get. But the choice was far less ideological than practical. Obama has no intention of being a foreign policy president. Unlike, say, Nixon or Reagan, he does not have aspirations abroad. He simply wants quiet on his eastern and western fronts so that he can proceed with what he really cares about -- his domestic agenda.

Similarly his senior economic team, the brilliant trio of Tim Geithner, Larry Summers and Paul Volcker: centrist, experienced and mainstream. But their principal task is to stabilize the financial system, a highly pragmatic task in which Obama has no particular ideological stake.

Why the centralist teams on foreign policy and economic policy? Because those areas he doesn't have great expertise and lacks passionate interest and are areas he needs stability if he's to accomplish what he wants domestically.

According to Krauthammer.

A functioning financial system is a necessary condition for a successful Obama presidency. As in foreign policy, Obama wants experts and veterans to manage and pacify universes in which he has little experience and less personal commitment. Their job is to keep credit flowing and the world at bay so that Obama can address his real ambition: to effect a domestic transformation as grand and ambitious as Franklin Roosevelt's.

As Obama revealingly said just last week, "this painful crisis also provides us with an opportunity to transform our economy to improve the lives of ordinary people." Transformation is his mission. Crisis provides the opportunity. The election provides him the power.

And he plans to use the economic crisis and public fears as a justification for his actions:

The deepening recession creates the opportunity for federal intervention and government experimentation on a scale unseen since the New Deal. A Republican administration has already done the ideological groundwork with its unprecedented intervention, culminating in the forced partial nationalization of nine of the largest banks, the kind of stuff that happens in Peronist Argentina with a gun on the table.

Obama was quite serious when he said he was going to change the world. And now he has a national crisis, a personal mandate, a pliant Congress, a desperate public -- and, at his disposal, the greatest pot of money in galactic history. (I include here the extrasolar planets.)

It begins with a near $1 trillion stimulus package. This is where Obama will show himself ideologically. It is his one great opportunity to plant the seeds for everything he cares about: a new green economy, universal health care, a labor resurgence, government as benevolent private-sector "partner." It is the community organizer's ultimate dream.

Rather than not having any money to do things, Obama plans on ramping up spending for public works and other programs.

Ironically, when the economy tanked in mid-September, it was assumed that both presidential candidates could simply forget about their domestic agendas because with $700 billion drained by financial system rescues, not a penny would be left to spend on anything else.

On the contrary. With the country clamoring for action and with all psychological barriers to government intervention obliterated (by the conservative party, no less), the stage is set for a young, ambitious, supremely confident president -- who sees himself as a world-historical figure before even having been sworn in -- to begin a restructuring of the American economy and the forging of a new relationship between government and people.

Don't be fooled by Bob Gates staying on. Obama didn't get elected to manage Afghanistan. He intends to transform America. And he has the money, the mandate and the moxie to go for it.

Krauthammer's analysis makes a lot of sense given what we know about Obama's background, ideological views, recent comments, and actions.

If he does dramatically expand government debt that will likely only deepen the debt and economic crisis facing our nation. What's different about 2000s crisis versus the Great Depression is today we are already much more deeply in debt and expanding bailouts and government spending will only worsen. If the federal government throws restraint to the wind, the debt level will become enormous. Somebody will eventually have to pay for it and no doubt it will be the American people in the form of much higher taxes and inflation, which is really a tax and especially hammers the poor and those on fixed incomes.

Obama's end game maybe closing the gap between the rich and the poor and socializing medicine, but that will result in making everybody poorer. Of course isn't that what socialism is all about?

Will Obama simply push a rewarmed version of the "New Deal?"

President-elect Obama did an excellent job of selling "change" to the American people during the last election. What wasn't always so clear was what that "change" would look like. He did talk about raising taxes on the wealthy, redistributing wealth as a good thing, giving lower income Americans a refundable tax credit, and moving towards universal health care.

In reality, he was only advocating further advances along the lines of the "New Deal" programs of FDR which means more government, more taxes and more regulation of various areas of human life.

Will the current financial crisis be used as a pretext for advancing this agenda just as FDR did the New Deal in the 1930s? Is this another case of history repeating itself? Amity Shlaes, author of a recent book on the Great Depression, suggests that's just might be what happens in this New York Post op/ed piece.

She writes:

THE trouble with new financial crises is that they provide pretexts for implementing old social agendas. As the president-elect's new chief of staff, Rahm Emanuel, said recently, "never allow a crisis to go to waste."

Consider President Franklin Roosevelt's New Deal, which President-elect Barack Obama invokes when he talks of "a defining moment." Like Obama today, FDR was inaugurated into trouble. He wisely addressed the financial crisis through the steps that we learned about in school. He signed deposit insurance into law, reassuring savers. He created the Securities and Exchange Commission, making the stock market more transparent and consistent. He soothed our grandparents via his radio Fireside Chats. This was the FDR we love.

But FDR also used the crisis mood to push through an unprecedented program of reforms that progressives had been hoping to put in place for years. Sen. George Norris of Nebraska, for example, had for decades argued that utilities should be in the public, not the private, sector. As far back as the early '20s, Norris wanted to build a big power project on Tennessee River. He wanted the government - and not the Ford Motor Company, which was drawing up such plans - to be in charge. FDR made Norris' progressive dream a reality by creating the publicly owned Tennessee Valley Authority. Washington won out, but it wasn't clear its power served the South down the decades.

Will Obama attempt to do the same thing?

The Obama administration isn't likely to advocate a new NRA. But President-elect Obama may go along with Democrats in Congress as they push other old social agendas. They, like the early-'30s Democrats, now have the ugly snapshot of capitalism for which they longed.

Foremost on their reform agenda, as in 1993, will be health insurance. Indeed, we are practically guaranteed a "healthcarization" of our financial crisis, even though health care and mortgage-backed securities have little to do with one another. "Nationalization" used to be a scare word. But the easy nationalization of the giant AIG makes the nationalization of private health care suddenly seem possible.

A Democratic Washington also will likely legislate the fondest wish of private-sector unions - the famous "card-check" legislation that will deprive workers of the chance to cast an anonymous vote on shop unionization. This, in turn, will put upward pressure on wages that workplaces can't afford.

The greater danger is that the public-sector unions, with support of Democrats, will push up their own pay aggressively. Behind the GM crisis is the crisis of state and city budgets - which the demands of AFSCME, the public-sector union, will only exacerbate.

President-elect Obama creates an opening for such demands when he says, as he did recently, that everything about the last four years was wrong. Everything? Sure, the financial crisis needs addressing. But government health care and card check don't have much to do with mortgage crises.

So remember what's really be going on: Voters want change - Obama's campaign message. But the Democratic Party is widening the definition of change by the hour. And the crisis? It's just a pretext.

If Obama does push New Deal approaches we can expect greater economic difficulties in the form of a much longer recession if not depression or maybe more likely, the return of inflation. The latter resulting from an unwillingess to confront our nation's unwillingness to live within our means.

Will the history of the Great Depression repeat itself under an Obama Administration?

It's interesting learning what happened to bring on and lengthen the Great Depression of the 1930s. From what I've read the chief culprit for prolonging the problem was actions taken by the government. They tightened the money supply, raised taxes particularly on higher income folks, the people who run and invest in businesses, and raised tariff barriers which resulted in reciprocal actions by other countries which in turn slowed economic growth.

Looking at some of President-elect Obama's constituencies, it's not hard imaging many of those things happening again. He's already proposing raising taxes on those with highest incomes. His labor union constituents will no doubt clamor for trade protection from other countries. (It doesn't seem likely there will be a tight money policy with the Fed doing all it can to flood the market with money. Bernanke the Fed chair was a student of the Great Depression.)

I came across this graph on what happened with the highest income tax rates during the 30s. They started out at 25% at the beginning of the depression but ended up at 79% by 1940. Today, the highest rate is 36% but will go up to 39.5% if we don't make the temporary cuts permanent. However, with massive budget deficits it's not hard envisioning Obama and a Democrat Congress raising it even higher.

This could be another case of history repeating itself.