by Dave McGill

It’s a one-two-three series of punches, the third one coming tonight. Can it be happening? Main Street is being clobbered by a Democratic president.

One of President Obama’s proposals, to be announced in his State of the Union speech tonight, involves a spending freeze which will be in the budget he will submit to Congress. According to his own estimate, the freeze will suck $250 billion out of the economy. It will be partially offset by what appears to be a series of pandering moves to pacify the middle class, consisting mainly of various and relatively insignificant tax breaks. The freeze will be the third punch in just six weeks.

Two weeks ago, Obama announced the second punch, a tax on the big banks. You may recall the president dramatically demanding: “We want our money back.” The statement was falsely characterized as a populist move. However, it was anything but. The “we ” in his carefully crafted words didn’t refer to anyone on Main Street but rather only to the Treasury Department. In other words, he was just sucking another $100 billion or so out of the economy.

And, before that, in December, Fed Chairman Bernanke threw the first punch, laying out a program to encourage banks to invest in the equivalent of CD’s at the central bank. The purpose, he said with frank honesty, was – you guessed it – to suck money out of the economy.

In making these moves, the Obama administration is obviously looking beyond the problems on Main Street and is focusing on the threat of a future inflation. With the trillions that have been added to the money supply to rescue Wall Street, inflation is a valid threat, but it is reprehensible to tackle it before unemployment, real estate and retail sales begin to recover. And yet, that is exactly what the president is doing. Wal-Mart seemed to have gotten the message when it announced on Monday that it was laying off 11,200 employees at its Sam’s Club chain.

The stark differences between the handling of the problems on Wall Street and those on Main Street are incredibly revealing. As of 11/30/08 – 14 months ago – the L.A. Times reported that over $3 trillion had been doled out by the Federal Reserve, the Treasury Department and other government agencies to bail out companies that were mainly in the financial sector.

As of last Monday, by comparison, only 22% of the stimulus package put together nearly a year ago for Main Street, had been spent, according to ProPublica. Tax cuts have accounted for another 12%, and 20% of the $787 billion package is “in process,” whatever that really means. Thus, only about one-third of the package has actually been put into the economy, and most of that has gone to companies that, at some point in the future, will hire workers for the projects involved, once they are designed, approved and contracted out.

Obama’s inattention to Main Street is particularly bad news for workers at all levels, as well as for struggling homeowners and for retail merchants. His one-two-three series of punches has put the machinery in motion to suck the equivalent of about half the stimulus package back out of the economy which, ironically, is more than what has been spent to date.

Criticism without a possible solution is generally a hollow vessel. So, with that in mind, it may be of interest to look at how the country addressed a similar series of problems some 60 years ago.

Unemployment was a concern at that time, mainly because the country had barely recovered from the Great Depression and, with World War II over, a huge number of soldiers were returning to civilian life. Also, there had been then, as there has been to some extent now, a period of reduced consumption. Furthermore, the debt was high, as it is today, posing the threat of inflation.

Back then, the government did two things. Through a number of acts which created a series of successive agencies, such as the OPA and the OPS, it implemented legislation to control costs. At the same time, it also passed what was known as the Full Employment Act of 1946 which represented a concerted effort to develop a broad economic policy for the country. It mandated, among other things, that the federal government do everything in its authority to achieve full employment, which was established as a right guaranteed to the American people.

The conservatives hollered loudly and protested lengthly. Charges of “socialism” rang out from the right. However, whether or not it was the result of these pieces of legislation or not, the fact remains that the work force thereafter sustained a long period of stability and the year 1950 ushered in the greatest decade in the history of the U.S. economy. Furthermore, inflation was effectively controlled.

One more bit of irony: much of the private wealth today originated in the 1950’s and may owe its very existence to the post-war legislation that most of the owners of this wealth would now probably oppose.