Enjoying God & Culture

The Westminster Shorter Catechism asks: What is the chief end of man? In a magnificent answer, it states: Man's chief end is to glorify God, and to enjoy him forever.

Most Christians may understand the part about glorifying God (and I could devote an entire blog to that part alone). However, many Christians probably have not given much though about enjoying God forever.

Though there is a lot I could discuss about enjoying God forever, I believe a good part of it includes appreciating the creativity and works of mankind who are made in the image of God. As Christians, we should appreciate the culture we live in, as well as other cultures.

To expand on this, we should enjoy and appreciate painting, sculpture, theater, film, literature, technology, music, architecture, law, politics, government, economics, agriculture, manufacturing, and all other elements that make up not only our culture, but other cultures as well. This should not only include what is sometimes called the high arts, but the full range of human creativity and work.

Image of God

Genesis informs us that God created male and female human beings "in the image of God." (Gen. 1:27.) The question immediately arises - what is the image of God? This question has been the subject of much discussion for centuries, usually under the phrase - Imago Dei - which is Latin for the image of God.

Is the Imago Dei to be understood in a physical sense? In other words, does it have anything at all to do with the way we physically look? There is a temptation to think of the image of God in this manner. The Mormons assert the image of God is physical since they believe God was once a man as we are who progressed into an exalted being. Thus, as God's children, we are of the same species as God is. Initially, many think of the Imago Dei in this manner, in a physical sense of the phrase.

However, Jesus informs us that God is spirit. (John 4:24.) Historic Christianity teaches that there is no physical shape or form of God that constitutes his image, since God is all or only spirit and is invisible. This is part of why the Second Commandment forbids making a graven image (an idol, a likeness) of God. (Exodus 20:4.)

Instead, the Imago Dei mainly comprises of the following characteristics which are found in all human beings:

• The capacity to reason;
• The capacity to love;
• The capacity for creativity;
• The capacity for language;
• The capacity for holiness;
• An innate knowledge of immortality;
• The capacity for making free will decisions;
• An innate sense and knowledge of morality;
• A capacity for self-transcendence;
• A capacity for self-consciousness;
• A consciousness of the existence of God;
• An understanding of the distinction between God and non-God

The Imago Dei distinguishes human beings from the animals. While animals can seem to exhibit some of the characteristics listed above, this often results from our wanting to attribute these characteristics to them.

So what does the image of God look like? The Bible points us to Jesus Christ, who is the "image of the invisible God." (Colossians 1:15.) The fullness of God dwells in Christ. (Colossians 1:19.) Jesus was the most fully human that ever walked on this earth, and is the best representative of what the Imago Dei means. However, every person on earth reflects the Imago Dei, whether they do good or evil, they cannot escape from it. We should therefore appreciate every person we come across as one made in the image of God.

The Female Divine?

My wife asks me from time to time - what about the Feminine Divine? To her it seems unfair that God is portrayed as strictly male. I somewhat agree - to some degree that does seem overly emphasized. However, I think the problem likely involves the limitation of our language. I will try to explain.

The Bible always refers to God in the male gender. However, the Bible implies that God has what is sometimes referred to as a female side. I don't mean God is gender neutral. Instead, I more mean that God seems to encompass more than simply being just male or female. For instance, in Genesis 1 the Bible says that God created man in his own image. However, he created both male and female in that image. This implies that there is a female aspect to the image of God, and thus ultimately to God.

Yet Christians should be cautious here. Many pagan religions have female goddesses, and then the number of goddesses (and gods) tends to abound. Usually those religions basically view the gods as super-humans, so if there are male gods, there are female goddesses. But these gods and goddesses are not only distant from the God of the Bible, they are in a completely different category. They are limited gods, subject to human foibles as well as to the fates, and are the subject of myths. In contrast the God of the Bible is all powerful, perfect, holy, not subject to anything (especially the fates), and is thoroughly historical as opposed to mythical.

However, in the Old Testament, the Hebrew word for Wisdom is Hokmah, female in gender, and Wisdom is thereby cast in the role of a woman. In Proverbs 8, Hokmah is presented as a person who antedates creation, who stands in some sort of relationship to God, and who assists in the creation of the world and man. While Hokmah is never quite presented as God, or as his wife, she is how God operates in the world, and she is manifested in the created world.

In the New Testament, the Greek word for Wisdom is Sophia, also female in gender. In the New Testament, all aspects of wisdom focus in the person of Jesus. In Christ, all the treasures of wisdom and knowledge are hidden. Colossians 2:2-3. Christ is not only the power of God, he is the Sophia of God. 1 Corr. 1:24. Does this mean Jesus Christ is secretly female? The simple Christian answer usually given is no, he is definitely all-male. However, the real answer is likely more complex, and many people recognize something they want to call the female side of Christ. While many assert he is the perfect role model for a man, the truth is much broader. I tend to believe there is a mystery of the faith here that God does not exactly intend for us to completely understand.

There is a strong part of Church history that embraces Hokmah, as well as Sophia, as part of a feminine wisdom tradition. It is likely a reason one of the greatest architectural church buildings was named the Hagia Sophia (Holy Wisdom). Unfortunately, a good part of that tradition has been lost or suppressed, and should be restored to bring a balance. While some of this has been a reaction to feminist theology that sometimes presses for a female goddess, I think Christians should seek out what is good, right, and true in Church history of a feminine wisdom tradition.

Victory of Reason

I recently finished The Victory of Reason: How Christianity Led to Freedom, Capitalism, and Western Success by Rodney Stark (Random House - 2005), a professor of sociology at Baylor University. Stark points out that Christianity extols reason, as well as logic, virtually to the exclusion of all other religions which are mostly mystery based. Christianity developed a rational theology - which posited progress. This progress applied to theology itself - which could be challenged and refined - and thus it changed for the better over time. While Greek philosophy embraced reason and logic, the Greeks never applied it to their religion.  So the practice of their religion eventually became mainly lost when their civilization ended.

This rational theology, when applied to society, laid the basis for the success of Western Civilization. It not only overturned the largely inefficient Roman society and economy, chained to slave labor - it encouraged innovation in every area of life, by positively applying reason to the scope of human existence. Stark explores how specific improvements occurred in the Middle Ages in agriculture, transportation, weaving, water and wind power, etc. Monasteries led such progress, since they essentially acted as business corporations, rewarding merit, led by those who showed management skills. They produced a surplus, sold it, reinvested as needed, and lent the rest - usually at profitable interest rates. In this way, they initiated the modern capitalistic system, which was further perfected in Italy in the late Middle Ages with the introduction of the banks (bancos) - whereby Italian banks soon had branches all over Europe - all long before the Protestant Reformation arose.

Stark explains that capitalism essentially applies reason in the business arena. He denies that it arose simply because of the Protestant work ethic, though he admits it got destroyed in the Catholic countries because of tyrannical abusive state powers that overtaxed and over regulated. I largely agree with his analysis of economic development in the Middle Ages as praiseworthy.

Stark furthers argues how Christianity laid the foundations for modern science, as reason applied to the natural world - and how it laid the foundation of modern democracy, as reason applied to political institutions. Unfortunately, he does not address the famous Catholic Church suppression of Galileo, nor incidents such as the Spanish Inquisition - topics scholars like to use to attack Christianity, and thus has come under some criticism here. Too bad because a response is not that difficult.  (Update: Stark later addressed these issues.)

Stark posits the Reformation, and later the freedom from having to attend a state selected religion, as foundational forces which wound up forcing churches and denominations to compete with one another - and thus become more responsive to individuals. He also notes that the freedoms in the Reformation based countries led to an explosion in progress on all fronts in those countries, especially in England, and then later the United States.

I recommend this book to those interested to an answer to why Western Civilization succeeded in contrast to the rest of the world, and especially to Christians interested in our culture, and Christianity's impact on our culture. I especially like his viewpoint of Christianity as a whole organization spanning the centuries.

Mormon Godhead

As I explained in a previous post, The Trinity, Historic Christianity believes in the Trinity. In a fundamental difference with Historic Christianity, Mormons reject the Trinity. Instead, Mormons believe in the Godhead, composed of Three Gods, God the Father, God the Son (Jesus Christ), and God the Holy Spirit. Though they are three separate and distinct Gods in their own right, they work in unity through the Godhead, with God the Father as the primary God in charge.

The Mormons believe the Nicene Council (325 A.D.) fabricated the teaching about the Trinity out of whole cloth. This position ignores the numerous statements throughout the Old Testament and extending into the New Testament that there is only One God. It ignores the implied teachings about the Trinity in the New Testament. It also ignores the numerous statements of early Church fathers about the Trinity, including those who had been alive when the apostles were still alive.

I haven't yet found a Mormon who can adequately explain all this. They will talk about how One God refers to only the Father, or only the Son, though those terms are not used in the Old Testament. Or they will insist that the Hebrew word Elohim refers to the Father, and Yahweh or Jehovah (an English transliteration of Yahweh) refers to the Son, even though these terms are all used interchangeably for God in the Old Testament. They especially have problems if you point out the combined Hebrew word which is translated Yahweh Elohim.

On a philosophical level, Three Gods would not lead to unity, even if it is claimed they work together, and eventually lead to disunity. The Mormons pride themselves on a unified religion, which they have as long as you do not seriously question the leadership publicly. (Those who do have been excommunicated.) However, the Mormon Church is one denomination among several in the Restorationist movement (all who believe Joseph Smith was a prophet and the Book of Mormons is a new revelation from God) and none of those denominations even talk to each other. In addition, the Mormon Church has led to one of the deepest divisions with every Christian denomination or church. The Mormons hold all of them to be apostates (a word essentially synonymous with rebellious). They agree that both Jesus Christ and God the Father told Joseph Smith in the First Vision (according to his third written account in 1938) that all Christian churches were wrong. (The two earlier written versions before did not mention that all the Christian churches were wrong, or that both Jesus and the Father appeared to Joseph Smith.) Oddly, while the Mormons desire the respect of other Christians, they say all of them are apostates. Calling Christians apostates hardly leads to respect or unity.

It's a shame, because there are many shared values between Christians and Mormons, and I hope efforts can be made to focus on those shared values and to find areas to work together.

Health Care

Most people sympathize with the concept that everyone should be able to receive health care. It sort of aligns with Christian concerns of taking care of the sick, like the good Samaritan. However, while the good Samaritan paid for the care of the man voluntarily out his own pocket, and therefore even the expert in the law considered him a true neighbor (Luke 10:25-37), many people think the government wants to pick our pockets to pay for the massive government program being put forth to achieve this result.

Is that true? President Obama says it is not. He claims his plan will not raise the already record-breaking deficit, nor require any new taxes, because it will be all paid by savings he will find in the Medicare and Medicaid government programs. This claim alone has seniors alarmed worried that the proposed savings will come at the expense of health care benefits already available to them. Since President Obama proposed the elimination of Medicare Advantage, a Medicare supplemental paid for by the government for poor seniors - administered by private companies - the fears of seniors have only escalated. When Humana sent out letters informing their clients about this proposal, and the impact it might have, the government threatened them, about as close to a case of censorship we have had for years.

The CBO (Congressional Budget Office), charged with impartially assessing such plans, has announced that the health plan proposals will cost a lot more than claimed in the President's proposals or the plans proposed by the Democrats in Congress, and will add a lot more to the deficit. Therefore, the President will have to raise taxes in order to attempt to make his proposal deficit neutral, which he has pledged, while at the same time pledging not to raise taxes on those making $250,000 or less. The CBO announcements has likely been the most important factor in the poll numbers showing growing opposition to the proposals on the part of the people. In the meantime, President Obama proposes a penalty for anyone who does not sign up for a health plan (something he was opposed to during his campaign), as well as fees for really good health care plans, but refuses to call this a tax, even when someone like George Stephanopoulos, a liberal, brings out a simple dictionary definition of taxes.

Meanwhile, other proposals to reform health care go largely ignored. For years, the government has allowed a tax deduction for health plans offered by employers, but unfairly prevented a similar deduction for plans purchased by individuals as well as the self-employed. This government policy has distorted the private market. Most individuals have no idea of what health care actually costs. They only know what their contribution is after their employer pays their share of the health care plan they have. The employee doesn't realize they are really paying for the cost that their employers pay, since the employers reduces their wages to account for what they are paying in health care benefits. The employer chooses the plan, not the employee, though sometimes they are given a choice of plans the employer pre-selects. The plans usually selected by the employer have very low or no deductibles, at a high cost to the employer, resulting in a lower wage for the employee. When the employee goes to the doctor or the hospital, they often have no idea of the cost, nor do they care because it is covered under their plan.

A better plan would be to give a deduction, or better, a tax credit, directly to individuals to choose their own plans. That way, consumers would be in charge of deciding which health care plans to purchase, along with a choice about deductibles, as well as when coverage would kick in. Direct consumer involvement historically has been the best vehicle to driving down costs as providers of goods and services compete for their business. The current system keeps consumers in the dark about not only the cost of their health care plans, and ultimately about the cost of their health care itself. Under this system, it is not surprising that health care costs continue rising.

The Trinity

Every Christian church, or denomination, proclaims the Trinity, three persons in one God, the Father, the Son, and the Holy Spirit (or Ghost). This universal Christian doctrine is accepted, taught, and proclaimed in all Christian churches, as best expressed in the Nicene Creed. This doctrine demonstrates a unity between the Roman Catholic, Greek Orthodox, Lutheran, Presbyterian, Episcopalian/Anglican, Methodist, Baptist, Pentecostals, non-denominational and interdenominational churches, as well as all other Christian churches and denominations.

It is extremely important to notice that Christianity does not attempt in any way to say that the Trinity means three Gods are one God. Such a statement would be a logical contradiction, and therefore completely unreasonable. Instead, a unified Christianity has insisted that the Trinity means that God, while one in essence is manifested in three Persons, the Father, the Son, and the Holy Spirit. Every Christian church or denomination you enter therefore accepts the Trinity, as well as the Nicene Creed, regardless of whatever other disagreements they might have with other churches or denominations.

The Trinity is not only a unifying doctrine among churches and denominations, it also answer deep philosophical questions. One of the great questions, debates, and issues in philosophy regards the ultimate issues of unity and diversity. All around we see diversity. What gives unity to it? Without such a unity, we are only left with a wild diversity which ultimately does not sit at all well with us on a deep level as human beings. Our spirits strives at that deep level for unity. However, on that level, we cannot accept a made-up or arbitrary unity. Our spirit/souls long for an ultimate unity to that diversity, yet such a unity that does not deny or suppress the diversity we not only see all around us, but also sense or intuit in our souls. The Trinity provides a beautiful, magnificent answer to that unity and diversity our spirit/souls strive for and needs that ultimately can not be found elsewhere and corresponds to the unity and diversity all around us.

The Trinity is primarily based on the teachings about One God based in Old Testament Israel, which goes back to Abraham, and even earlier. All monotheistic religions, whether Hebrew, Islamic, or Christian, trace their roots back to Abraham (usually affectionately referred to as Father Abraham). The Trinity reflects the New Testament emphasis that Jesus Christ, on his own, refers to himself as God, and strongly implies that the Holy Spirit is also God. However, even the Old Testament implies a Trinity by such passages in Genesis where God says he will create man in our image. Denying this very historical Christian doctrine not only raises religious issues, but philosophical as well. Usually, as a society denies the Trinity, freedom tends to be restricted. This tendency most clearly manifest itself in Islamic societies where, though much of the Old Testament and the New Testament is affirmed, we easily see a restriction of freedom because of the lack of a foundation in diversity which provides a basis for freedom. Therefore, many in the West would instantly find the restrictions of a Muslim society unbearable, even though we find a common heritage in Abraham. The teachings about the Trinity largely explains why Western Civilization has led and provided the world with a maximization of freedom without falling into chaos.

In the context of the One God, promulgated and emphasized time and again in the Old Testament, as well as repeated time and again in the New Testament, the Trinity, strongly implied in the New Testament by the references by Jesus to himself as God, as well as the Holy Spirit. The Trinity avoids the errors of asserting three Gods, as well as the error of asserting that God is only one Person to the denial of Jesus Christ or the Holy Spirit as God.

Reason

Reason set Historic Christianity apart from most all other religions in the world. Oddly, many assert Christianity contradicts reason. Usually humanistic forces press this position, but sadly too many Christians half-hardheartedly reply that faith replaces reason. (My last blog discussed Historic Christianity.)

Historic Christianity emphasizes reason because we are made in the image of God - reason comprises part of that image. Historic Christianity emphasizes reason because God does so. "Come let us reason together," says the Lord. (Isaiah 1:18 - NIV.) Historic Christianity emphasizes reason because the New Testament does - as stated by the Apostle Paul, "I am not insane, most excellent Festus,' Paul replied. 'What I am saying is true and reasonable." (Acts 26:25 - NIV.) Christian leaders throughout the centuries emphasized the very important role of reason. As a result, Historic Christianity laid the basis for the emphasis on reason in Western Civilization, which has led to the advances in science, medicine, government, law, and capitalism which we enjoy today in the West, and as spread to other parts of the world.

The New Testament calls Jesus Christ the logos (Word) of God. The logos relates both to logic and to the underlying structure of the world in Greek philosophy. The New Testament says that God created the world through Jesus Christ, the logos, and he sustains and holds the world together. (Colossians 2:16.)  This forms part of why Christians expect to find reason in nature, and part of why, historically, they confidently engaged in science.

However, Christians assert there are limits to reason. They generally do not believe reason alone can prove God the existence of God by itself (though Thomists do). They do not believe reason alone produces faith.  While we need to exercise faith, the Bible does not ask for blind faith or a leap of faith.  Instead, it seeks for a response of reasonable faith, one based on sufficient evidence while also based on a child-like response to the truth.  Since we have a sinful nature, our reason often results in imperfect results.  We need revelation from God, since our reason alone cannot produce ultimate truth, only recognize and confirm it as revealed.

Historic Christianity

Historic Christianity means viewing the Church as a living organism (the Body of Christ/the Bride of Christ) over the course of about 2000 years, delivering a consistant full gospel message united by a core of doctrine, under the authority of the prophetic-apostolic Word of God, under the headship of Jesus Christ, offering each other the right hand of fellowship, with the freedom to form different churches and denominations with varying traditions. Sometimes this invisible Church has fared better than at other times, but God has always kept at least a faithful remant. It also refers to what I would call a full-orbed Christianity, as opposed to a shrunken, minimized, or debilitated Christianity. A full-orbed Christianity addresses the full scope of man and humanity, the full range of human culture and civilization, the full range of spirituality - including our ressurected, glorified bodies, as well as the full range of the Kingdom of God, starting from its iniation by Jesus on through to the new heaven and the new earth as well as the new Jerusalem, and the work of the Saints in it.

It is also a way to minimize denominational differeneces and focus on what C.S Lewis called Mere Christianity, the title to a book by that name based on a series of BBC radio addresses he delivered during World War II.

I look to Christian scholars and leaders throughout that time period starting from the early Church fathers, through St. Augustine, several Church leaders in the Middle Ages including St. Francis of Assisi (the Franciscan monks founded most all of the missions around Northern California where I live), Martin Luther, John Calvin, as well as other Reformers, Johnathan Edwards, George Whitfield, the Wesley brothers, and more recently Carl F.H. Henry, and Francis Schaeffer, as well as a much longer list. St. Augustine is particularly interesting because both Catholics and Protestants look to his writings (Martin Luther was an Augustinian monk and often looked to Augustine's writings as he struggled with the issue of justification), and his work, The City of God, which spanned human history, culture, and civilization up to the wanning days of the Roman Empire, and set the tone for intellectual thought for the next 1000 years, and still has ramifications to the present.

Historic Christianity also distinguishes from a Christianity set in the latter half of the 20th Century, that tends to not only demphasize orthodox doctrines and creeds, but also tends to act as though the Christian Church virtually didn't exist for almost 2000 years, especially those that emphasize what has been called a "super-spirituality". This type of Chirstianity tends to disrespect most all church traditions in favor of a contemporary church that emphasizes a contentless belief that Jesus will make everything all right, or worse, that Jesus will provide riches for the "King's kids." While such branches of Christianity play a vital role in the Church, and I would extend them the right hand of fellowship, I don't think they represent what I think of as Historic Christianity.

Finally, the term Historic Christianity is somewhat similar to the concept of the one holy catholic and apostolic Church mentioned in the Nicene Creed (which I and others think of as the invisible church) - but these days that phrase tends to get confused with the Roman Catholic Church, so the phrase Historic Christianity works better.

Mormonism & Religious Truth Claims

How do we evaluate Mormon truth claims, or any religious truth claims, including Christian truth claims? Certainly faith is crucial. However, the object of faith is subject to the usual rules of confirmation of truth in virtually every field. Historic Christianity applies reason to confirm the claim, the rules of logic to test it, the principle of verifiability to check it, and considers the claim open to disproof. Any truth claims advanced by any religion should be open to the same tests to be considered credible, whether it be Christian, Mormon, Jewish, Islam, Hindu, Buddhist, Shinto, and the vast myriad of other religions.

This does not mean religious claims can be tested by the scientific method. While the scientific method is vital and useful in science, it cannot be used to test all truths. The scientific method can only test events that can be repeated in a laboratory to test certain scientific theories. It cannot possibly test the invisible, the spiritual, or the miraculous. Such events, by definition, cannot be reduced to seeking empirical evidence. However, such events should not be ruled out a priori (before any evidence) simply because of a prejudice against the supernatural. This does not mean the scientific method plays no role on religious claims. Where religious claims touch on matters of history, science, and the like, the scientific method should be used to determine whether the religious claims bear out. If the God who reveals himself in writing or in miraculous acts also created the world, then there should be external evidence that matches up with the internal witness of the spirit or the witness borne out in holy writings.

If there are witnesses to the miraculous events, their testimony should be considered as the testimony of anyone to any event is considered. If they are known for their truthfulness, not known for being insane, then their testimony should be given the same weight as the testimony of those who testify about non-miraculous events are given. However, their testimony should be not be accorded special consideration because it involves a non-natural occurrence. It should be probed, poked, and subject to the normal test of truth for any testimony.

Oddly, those who would exclude even the possibility of a supernatural occurrence exhibit the very same close-mindedness they often accuse religious people of. If they were truly open-minded, as they often claim to be, they would keep their minds open to the possibility of the supernatural and miraculous. While this doesn't mean they have to adopt a faith position, at least they should not be closed to it. On the other, hand, Christians do not ask for any exemptions from the normal tests for truth, only that the same tests be applied to religious claims as in other fields. Mormons should do no less.

Mormons

We have almost all had Mormon missionaries visit our door. Usually we come up with some excuse to send them away. Sometimes we are honest and say we do not want to talk. Occasionally, we engage in a brief discussion with them. Rarely do we want to find out what they want to talk about, much less engage in a lengthy discussion with them, though there are exceptions. Some they visit want to learn everything they have to offer, and that is what the Mormon missionaries live for.

However, the Church of Jesus Christ of Latter Day Saints (often called Mormons or abbreviated LDS) represents a big slice of what is now considered mainstream America. The LDS say they have 5.7 million member in the U.S., and 13 million worldwide. That would make them about the 4th largest church body in the U.S. behind the the Roman Catholic Church, the Southern Baptist Convention and the United Methodist Church. Critics say if lapsed and unlocatable members are discounted, the number stands around 1.3 million. It is considered one of the fastest growing churches today.

In any case, the Mormons are part of our American history and experience. Their difficult migration starting in 1846 from Navoo, Illinois to what was then outside of the United States in the Great Salt Basin was epic. Their establishment of a settlement, community, city, and civilization in the midst of a desert then considered a wasteland was breathtaking. And they have gone from being considered outcasts to being considered part of mainstream America in slightly over two generations. Their members occupy prominent positions in our political life, including Senate Majority Leader (Harry Reid) and recently a prominent Republican candidate for President and former Governor of Massachusetts (Mitt Romney.)

A good television show that considers their past and rising role in America is simply called "The Mormons." It has aired on many PBS stations and is produced in partnership by American Experience and Frontline. It is a four hour show on DVD that you can probably find at your local library. You can also watch it online at: http://www.pbs.org/mormons/. It explores the great strengths of Mormonism, along with some of its troubling aspects, and has a fair balance of supporters and detractors. It focuses on the LDS church as part of America, and its unique role as an American religion.

I will be exploring some aspects of Mormonism in future blogs.

Great Depression Spending Maximized

On my January 21st posting (http://rudyrentzel.blogspot.com/2009/01/infrastructure-spending.html), I spoke about how increased spending under both Hoover and Roosevelt at the start of the Great Depression did not end our economic woes. One way to measure this increase in spending is as a percentage of GDP, which gives a better picture than numbers.

In 1930, government spending represented 3.4% of GDP. By 1932, even before Roosevelt entered office, government spending increased to 6.9% of GDP. This increase occurred under Hoover and a Democratic Congress. (See the above link.) By 1934, government spending increased to 10.7% of GDP. From there it hovered up and down around 10% ending up at 9.8% in 1940. Under Roosevelt, the government increased spending by about as much of a increase as a percentage of GDP as it had under Hoover. Under the combination of both Hoover and Roosevelt, government spending tripled as a percentage of GDP from its 1930 level.

On the deficit side, in 1930, the government did not have a deficit, it had a surplus. By 1932, the deficit represented 4.0% of GDP. By 1934, the deficit represented 5.5% of GDP. From there it hovered around 3% of GDP, ending exactly at 3% of GDP in 1940, though it briefly droped to 0.1% of GDP in 1938.

By April 3rd of 2009, both the House and the Senate approved modified versions of President Obama's fiscal year 2010 budget of $3.6 trillion. The Congressional Budget Office projects this spending will represent 25.5% of GDP, more than double the percentage of GDP ever reached in the Great Depression with New Deal spending. On the deficit side, the CBO projects a deficit of near $1.4 trillion, which will represents 9.6% of GDP, almost double the percentage ever reached in the Great Depression under New Deal spending. This represents an unprecedented level of government spending and deficits, with the exception of a war on the level of WWII.

While both the government spending spending and deficit, as a percentage of GDP has risen significantly over recent years, President Obama often reminds us he inherited a fair size spending increase and deficit to start with, since it started under the second Bush. What he doesn't mention is that he is in part to blame. He was a U.S. Senator from Illinois when those budgets and spending plans were passed, and voted for those outlays, including the bank bailout - the TARP. He was part of the majority that controlled Congress starting in 2007, and thus set the budget. He cannot escape responsibility by the simple claim that he inherited this budget.

The increased government spending and deficits will tend to keep investors from investing as occurred at the start of the Great Depression, and prevent the recovery that normally kicks in after a recession, or at least stagnate it as occurred in the 1970s. The money the government spends comes out of the private sector, and is not available for invstors to invest. Investors will tend to keep money they have on the sidelines there until they see a government that controls its spending and debt (even China is now concerned about our level of government spending and deficit), though they will invest some as they see the economy improve. They will be concerned that such spending will inevitably lead to higher taxes, and they will tend to seek countries to invest that they believe will keep the tax burden lower which will leave them with more profits. Until they wholeheartedly invest in our economy, any recovery will tend to only limp along.

The Road to Serfdom

In 1944, during World War II, Frederick Hayek wrote The Road to Serfdom in England. Hayek was an Austrian economist who started teaching in England in the 1930s. He remained in England after Germany took over Austria in 1938, initially as a refugee, and then became a British subject. Starting in the 1920s, central planning, best expressed in socialism, became the rage in academic circles in England, as well as throughout Europe, and especially so in Germany from even before that. Academics believed the use of science in central planning achieved better and more just economic results than the chaotic and random free markets ever could. They thought central planners could gather more information, and thus make more intelligent choices for society.

Hayek challenged the belief in central planning, and thereby socialism, head on. He argued that central planners could never gather enough information to take into account all the numerous and varied factors involved in the production, distribution, and price setting of any one product or service, much less for an entire economy. The free market was much better suited for this. Though no one person in the market could gather the necessary information, the entire market, made of numberless individuals collectively gathered the information and made the decisions to decide what and how much to produce, distribute, and set prices, not only for one product or service, but for an entire economy. Moreover, prices provided the primary means for communicating information throughout the market to individual producers, investors, distributors, and consumers.

In fact, the choices made by individuals continually and inevitably frustrates central planners, since central planning requires the central planners to make decisions and set goals for everyone, regardless of the decisions or goals of individuals. Central Planners would also tire and be frustrated with democratic institutions, where decisions and goals have to be compromised in an often laborious and tedious fashion. At the very least, they would want the democratic institutions to delegate absolute authority to make decisions to the central planning experts. Inevitably, central planners want more and more authority in order to carry out their central planning mandate. The more central planning that exists, the greater the loss of freedom and choices for individuals, and the more democracy becomes endangered. Worse still, the more central planning, the more the markets become distorted, and the more the economy deteriorates, usually leading to the call for even more central planning.

The logical end of central planning is tyrannical government, though Hayek did not claim this would always happen. The forces of freedom could push back in a country depending on the circumstances and background of each country, and if pushed back hard enough, those forces could roll back the central planning. However, Hayek did point out that both Russia and Germany, from a socialist start, did go all the way to tyranny, with the accompanying loss of freedom. Hayek foresaw the inevitable collapse of the Soviet empire at a time when many academicians were singing the praises of the socialist experiment in Russia.

As a result, academicians ostracized Hayek for years. He was finally recognized and won a Nobel Prize in economics in 1974. He was vindicated as both the United States and England made a strong turn back to the free markets in the 1980s with leaders often citing his book as their guide. He was further vindicated not only with the collapse of the Soviet Union in the 1990s, but also as even Communist China started turning to free markets. While the term central planning is no longer in vogue, big government programs have much the same effect to varying degrees. He died in Germany in 1992.

Update Recession Comparisons

On my January 18 post, I made some comparisons of our current recessions, since there was a lot of talk that this was the worst recession since the Great Depression. Some figures have changed, so I decided to update the post.

At that time, the latest GDP figures we had from the 3rd Quarter stood at a 0.5% loss. Since then, we have the revised 4th Quarter GDP numbers at an annualized 6.2% loss - still 4.6 percentage points less than the 1957-58 peak quater loss of 10.8%, but near the 6.4% peak quater loss in the 1981-1982 recession.

At that time, the latest national unemployment rate was at 7.2% for December. Since then, the national unemployment in January went up to 7.6% - still 3.2 percentage points less than the unemployment peak of 10.8% during the 1981-1982 recession.

At this point, I can't agree it is the worst recession since the Great Depression, but I will keep track of the numbers.

Great Depression Income Tax Hikes

In my last blog, I discussed how government inaction concerning bank failures helped to turn the recession of 1929-30 into a Great Depression. This time I want to focus on how tax hikes helped that occur.

Nowadays, almost everyone recognizes that the last thing you want to do in the middle of a recession is raise taxes. However this is exactly what occurred in the 1930s and helped prolong the Great Depression.

With one or two brief exceptions, the income tax only got started in 1913. It started with a top marginal tax rate of 7%. It went much higher during WWI to fund the war, but dropped to 25% throughout the economic boom of the 20s.

In 1932, Hoover and a Democratic Congress raised the top marginal income tax from 25% to 63%, more than a double increase. In addition, the income tax was increased at all marginal rates on everyone. The idea was to increase revenues to meet the increased spending the government undertook to meet the economic crises. It didn't do that - as government revenues went down, government spending went up, and the deficit continued rising.

Roosevelt with a Democratic Congress raised the top marginal in 1936 to 79%. This meant if you were in the top income tax bracket, for every extra dollar you made, you had to pay 79 cents to the federal government. In addition, corporate tax rates as well as capital gains rates were raised in drastic measures. An investor has to consider all of these taxes, as well as taxes on the state level, which were also raised during the Great Depression, before making investments.

When the government raises top marginal to such rates, it makes investors much more reluctant to invest in economically efficient investments. Instead, they tend to spend their time and money hiring tax lawyers and accountants to find economically inefficient investment tax shelters so they don't have to pay such high taxes.

Capitalism needs investors who invest capital in economically efficient investments that create wealth, jobs, and goods for the general economy. When the government raises taxes to high rates, it discourages these kinds of investments, and an economy stagnates, eventually hurting everyone in the economy. While the government had good intentions to balance the budget, because of the increased spending to meet the needs generated by the economic downturn, I believe the extraordinary tax increases in peace time helped to turn the recession, along with other government actions or inactions I discussed in this blog, into a Great Depression and prolong it.

Great Depression Bank Failures

In my last blog, I focused on how government attempts to protect the economy from foreign competition helped turn a recession into the Great Depression. Now I want to focus on how government inaction further helped take the economy in this direction. This time I will focus on bank failures. But first I need to explain how the government got involved in this arena.

In 1913, the government established the Federal Reserve Bank to be the lender of last resort. This means that the Federal Reserve stands ready to lend a bank money in an emergency bank run when no one else would. Before this, banks banded together in associations to rescue each other in the event of a bank run. Clearinghouses, which cleared bank checks also took up this role. A bank run occurs when depositors panic all at the same time and run to the bank to withdraw their deposits. Since a bank never keeps all the deposits, and lends out most of the money, a bank run can destroy a bank unless some entity steps in early and provides enough cash to convince depositors that the bank won't close and their deposits are safe. The government took over this role in 1913 when they established the Federal Reserve system.

Now banks fail every year. However, the number of bank failures doubled in 1930, and then doubled again in 1931. On December 10, 1930, a run started on one of the largest banks, the Bank of United States in New York. The next day, December 11, 1930, it failed. The Federal Reserve, still relatively new, did not act to save it. When people heard that a bank as large as the Bank of United States failed, they feared the money in any smaller bank where they held their money could not be safe. It triggered a run on banks across the nation and more and more banks failed. As a result, the money supply across the nation fell by about a third, and the private sector lacked the money to recover from the recession. This is because in economic terms, banks create money as they turn a percentage of deposits into loans. As banks failed, not only deposits were lost, but the money created through loans were lost.

Had the Federal Reserve stepped in and saved the Bank of United States, and then other large banks, it is unlikely the panic that ensued would have happened. The Federal Reserve should have done so because it had taken over this function from the private sector. Had it done so, it could have prevented the large scale bank runs that followed and the fall in the money supply. The economy would likely have recovered on its own as usually occurs in a business cycle. However, this combined with the slowdown in worldwide trade from the increase in tariffs from the Smoot-Hawley Act (see 2/8/08 post) helped to spiral the recession down into the Great Depression.

The bank situation, as well as the money supply began to get better by 1934 after the bank holiday imposed by President Roosevelt in 1933. However, by that time, most of the damage to the banking system and to the money supply had been done and helped to turn the recession of 1929-30 into the Great Depression.