Those who ignore history are doomed to repeat it

It was 1937. The US economy was almost completely recovered from the Depression. The GDP, production, profits, and wages had all regained their 1929 levels. Unemployment remained high at 14%, but had dropped about half from its Depression high of 25% in 1933.

Sound familiar? It's very similar to where we are today.

But FDR, concerned about large deficits and their impact on the national debt, and egged on by conservatives, decided to cut federal spending and tighten the money supply.

Econ 101 side note

All economies fundamentally consist of a series of transfers of wealth. People and organizations exchange some of their wealth for a necessary (or desired) good or service. Renting a movie? You've just exchanged some of your wealth for a desired good. Buying food at the grocery store? Same thing. Getting your vehicle's oil change? Exchanging wealth for a service. When an airline buys new civilian aircraft from Boeing, it's a bigger example of the same thing. When the federal government orders military aircraft, it's another example of a big transfer of wealth.

All those wealth transfers add up to create the GDP - the sum total of all money that changes hands in this country. When the GDP grows, our economy is doing well. When the GDP flattens out (because not as many transfers of wealth are taking place, or because the transfers are all smaller), the economy stalls. When the GDP shrinks, we're having an economic downturn. If it shrinks a little, that's a recession. If it shrinks a lot, it's a depression.

There are three types of actors in the economy: individuals, companies, and governments.  And all three sets of actors contribute to the economy. The biggest single contributor is the federal government.

Now, back to the story

In 1937, the Roosevelt administration cut spending. This took a huge chunk of money out of the economy. They also tightened the money supply, making what money was left in circulation harder to get. Because businesses weren't back to spending as normal yet, this caused the economy to tank.

The result was the recession of 1937, arguably the second-worst economic downturn of the 20th century.  Industrial production declined almost 30 percent. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels. Unemployment spiked from 14.3% in 1937 to 19.0% in 1938.

The lesson

Taking a huge chunk of money out of circulation in 1937 by cutting federal spending during a recovery caused the economy to tank. And yet that is exactly what the GOP proposes to do now.

Who's getting the blame for the government shutdown?

The GOP has been feverishly trying to place the blame for the government shutdown on President Obama and the Democrats. But the polling numbers show that their attempt isn't working very well. Multiple (in fact, all the polls) polls show that the public blames the Republicans for the shutdown more, and in some cases much more, than it blames President Obama and the Democrats.

NBC/Wall Street Journal Poll (October 7-9, 2013): "By a 22-point margin (53 percent to 31 percent), the public blames the Republican Party more for the shutdown than President Barack Obama – a wider margin of blame for the GOP than the party received during the poll during the last shutdown in 1995-96."

AP/GfK Survey (October 9, 2013): "62 percent mainly blamed Republicans for the shutdown. About half said Obama or the Democrats in Congress bear much responsibility."

CNN/ORC International survey (October 5-6, 2013): "63% of those questioned say they are angry at the Republicans for the way they have handled the shutdown."

Meanwhile, public support for the GOP in general seems to be dropping in a corresponding manner.

Gallup's October 3-6 poll showed that Republican favorability has dropped to an all-time low. "With the Republican-controlled House of Representatives engaged in a tense, government-shuttering budgetary standoff against a Democratic president and Senate, the Republican Party is now viewed favorably by 28% of Americans, down from 38% in September. This is the lowest favorable rating measured for either party since Gallup began asking this question in 1992." Take a look at the chart on the Gallup website, and you can see that the last time the government shut down, GOP favorability also took a huge dive. The twin 1995-1996 shutdowns ended up costing the Republicans several seats in Congress.

There appears to be some real anger. A late-September CNN poll revealed that 69% of the public think the GOP are acting like "spoiled children" over the budget negotiations.

The GOP proceeds with this shutdown at their own peril, because the public clearly places the majority of the blame on them.

Is Obamacare really that unpopular?

The GOP has long been claiming that Obamacare should be defunded/rescinded because it's unpopular, and the polls seem to back them up. Real Clear Politics shows that the polls are running on average about 50% opposed, 40% in favor, and 10% undecided. The Kaiser Family Foundation polls show a slimmer majority in opposition, but still a majority.

But the Kaiser Family Foundation recently posted something else that shows that many Americans don't know what's actually in Obamacare, but when they find out they tend to broadly support it.

Here are some things in the Affordable Care Act that Americans support:

• Allowing young Americans to stay on their parents' coverage. Since this was implemented, the percentage of uninsured young people (ages 19-25) fell from 48% in 2010 to 21% in 2012. 76% of Americans support this, including 69% of Republicans.
• Tax credits to small businesses to buy insurance. According to an article in Forbes, many small businesses are already eligible for tax credits of up to 35 percent. After January 1, 2014, the credit increases to 50%. 88% of Americans support this, including 83% of Republicans.
• Close Medicare “doughnut hole”. 81% of Americans support this, including 74% of Republicans.
• Health insurance exchanges. 80% of Americans support this, including 72% of Republicans.
• Subsidy assistance to individuals. 76% of Americans support this, including 61% of Republicans.
• Medicaid expansion. 71% of Americans support this.
• Guaranteed issue (no pre-existing conditions). 66% of Americans support this, including 56% of Republicans.
• Medical loss ratio. 65% of Americans support this, including 62% of Republicans.

The GOP knows (and Republican Senate Minority leader Mitch McConnell has said) that it's easier to prevent something from happening than it is to undo it later. It appears to me that Obamacare is likely to be pretty popular once the word gets out, and my in fact eventually be thought of as being virtually untouchable, like Social Security and Medicare.