Welcome Guest [Log In] [Register]
We hope you enjoy your visit.


You're currently viewing our forum as a guest. This means you are limited to certain areas of the board and there are some features you can't use. If you join our community, you'll be able to access member-only sections, and use many member-only features such as customizing your profile, sending personal messages, and voting in polls. Registration is simple, fast, and completely free.


Join our community!


If you're already a member please log in to your account to access all of our features:

Username:   Password:
Add Reply
Liberal Conceit And The Havoc It Has Wrought On Our Nation
Topic Started: Oct 21 2011, 06:29 PM (1,457 Views)
tomdrobin
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
Quote:
 
Here is what Tom said: "WWII was economically a massive government stimulus program."

And what I said in response: "True, and it and Hoover's and FDR's policies turned a recession into a depression and only served to prolong it. So history shows Keynes correct and the neo-Keynesians like Krugman wrong."


English was never my strong suit, but what other than WWII was this it you speak of?
Offline Profile Quote Post Goto Top
 
Chris
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
tomdrobin
Oct 26 2011, 10:57 PM
Quote:
 
Here is what Tom said: "WWII was economically a massive government stimulus program."

And what I said in response: "True, and it and Hoover's and FDR's policies turned a recession into a depression and only served to prolong it. So history shows Keynes correct and the neo-Keynesians like Krugman wrong."


English was never my strong suit, but what other than WWII was this it you speak of?
Uh, it refers generally to massive government stimulus programs, namely Hoover's and FDR's policies of government intervention into the market. See my previous post on facts about Hoover's policies. While WWII did stimulate the economy as you said, and I agreed with, it produced in its aftermath another recession when the boys came home from war and the bills came due and Europe demanded reparations and rebuilding. Other than debunking the Hoover myth, there's nothing revisionist in those facts at all. The war was hardly planned as a policy, it's the policies to deal with war and other crisis that are subject to criticism.
Offline Profile Quote Post Goto Top
 
colo_crawdad
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
Quote:
 
. . .it and Hoover's and FDR's policies. . ..


Tin,

It appears that the antecedent to "it' in that sentence is WWII, But then again, there is little specific clarity in the statement and identification of an antecedent is an iffy proposition,..
Offline Profile Quote Post Goto Top
 
Chris
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
colo_crawdad
Oct 26 2011, 11:44 PM
Quote:
 
. . .it and Hoover's and FDR's policies. . ..


Tin,

It appears that the antecedent to "it' in that sentence is WWII, But then again, there is little specific clarity in the statement and identification of an antecedent is an iffy proposition,..
Crawdad lies again.

And again because my statement has been specified and clarified.

Leave it to a liar to obfuscate when he's got no facts and logic to bring to bear on the discussion.
Offline Profile Quote Post Goto Top
 
tomdrobin
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
It is my understanding that FDR's new deal spending was a departure from Hoover's policies. So, we had the new deal spending, the WWII spending and the reconstruction spending, yet still managed to pay for it. And, the taxes levied to pay for it didn't hurt economic growth like the naysayers these days are claiming. The big lie of supply side economics.
Offline Profile Quote Post Goto Top
 
Chris
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
tomdrobin
Oct 27 2011, 11:20 AM
It is my understanding that FDR's new deal spending was a departure from Hoover's policies. So, we had the new deal spending, the WWII spending and the reconstruction spending, yet still managed to pay for it. And, the taxes levied to pay for it didn't hurt economic growth like the naysayers these days are claiming. The big lie of supply side economics.
I think you're understanding is incorrect, while FDR decried Hoover's big government big spending policies to get elected, once elected, he adopted them on even a grander scale.

Also you're ignoring the gap between 1929 and the our entry into WWII in 1941, a 12 year gap generally called the Great Depression, right? So much for taxes paying for big government big spending not doing harm.

And you have no comment on the fact the war was not planned nor on the recession that followed it.

In the end it seems all you've got is calling people naysayers because they defy the myths you believe and arguing straw men like supply side economics that weren't argued till the 1970s near;ly 5 decades after the Great Depression.
Offline Profile Quote Post Goto Top
 
tomdrobin
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
If you want to subscribe to revisionist history to support your libertarian views have at it, but the facts don't support it.

Quote:
 
It’s become an accepted as fact among many on the right that the New Deal actually prolonged the Great Depression. It’s a concept that was popularized by Amity Shlaes book The Forgotten Man. Shlaes’ book caused a sensation on the right but has been repeatedly debunked for using a set of employment figures the were inaccurate (they excluded millions of people with jobs) and for measuring economic growth solely by the Dow while ignoring GDP and other measure of economic growth. I mention this because in recent weeks, people on the right have taken to repeating these lies. For instance this article,Thomas Sowell writes:

The American economy usually rebounds a lot faster than it is doing today. After a recession passes, consumers usually increase their spending. And when businesses see demand picking up, they usually start hiring workers to produce the additional output required to meet that demand.

That’s accurate as far as it goes. Recessions caused by financial crashes are different creatures. I’m sure someone with a PhD in econ could explain all the details and reasons but for our purposes it’s sufficient to recognize that the Great Depression and the Great Recession are not examples of normal economic downturns; we can’t expect them to behave like normal downturns. Among other things, interest rates at rock bottom should stimulate the economy and they’re not.

Quote:
 
Sowell then argues:


In that sense, this is an unusual recovery in how long it is taking and in how slowly the economy is growing — while the government is doing virtually everything imaginable.

Government intervention may look good to the media but its actual track record — both today and in the 1930s — is far worse than the track record of letting the economy recover on its own.


The obvious flaw in his statement is that government is quite notably not doing everything imaginable to boost the economy – I can imagine many things the government could be doing that it is currently not doing to boost the economy. Sowell is simultaneously engaging in rhetoric disconnected from reality and simply repeating what has become common wisdom among many right wing commentators and voters.

The argument runs along the lines that because the New Deal didn’t end the Great Depression it was therefore a failure; since the New Deal failed to end the Depression that is treated as proof that things would have been better off left alone - i.e. without government action the economy would have righted itself and done so faster, hence government action resulted in a longer depression than would otherwise have happened. It’s not a view shared by actual professional economists or historians. It’s also an argument with many many problems.

The New Deal was built around FDR’s liberal pragmatism – try something, figure out if it works, and if not, try something else. As a result the New Deal was less a single program than it was a host of programs and the basic outlines of a social safety net with minimum wages, Social Security and unemployment insurance. The New Deal also included the National Labor Relations Act which guaranteed the right of workers to collective bargaining and later included Fair Labor Standards Act. The New Deal sought, in part, to keep wages high which benefitted employed workers by maintaining their standard of living (though it’s fair to argue that such a policy didn’t encourage new hiring, the policy itself is sound – a living wage should be considered a human right). Some programs lasted years, others were quickly abandoned. The New Deal also included a host of banking regulations and the creation of the FDIC – that’s the agency that insure bank deposits so that consumers don’t lose their life savings if a bank fails. (As an interesting note, a friend of mine works in the banking industry and observed that when a bank fails we know how to unwind the problem but with the financial nonsense of credit default swaps and securitized mortgages and various derivatives of derviatives we do not know how to unwind those things so we’re not sure how to fix it when one of the companies schilling those products fails.)

Programs like the WPA and the CCC directly employed millions of Americans and built much of the national infrastructure we still use (i.e. lodges and hotels in national parks, campsites in national forests, schools throughout the nation, public buildings in many cities).


The WPA in particular is fascinating; Harry Hopkins (a Grinnell grad thank you very much), the WPA’s dynamic and occassionally colorful director was fearlessly creative in finding ways to use WPA funds and projects to employ people. In one case, items needed for a project weren’t locally available so Hopkins brought in people who knew how to make the item who then taught local laborers how to make it. WPA photographers, for example, toured the country capturing images of Americans, images which have become iconic. (Total aside – the photo of the migrant mother and her children is endlessly powerful – the woman has despair on her face, yet she also looks tough, she’s going to do what it takes.) The WPA employed out of work writers to go around the country and record folklore. In another case, the WPA hired a woman and a mule to carry library books and magazines around the backwoods of Appalachia. In retrospect, WPA projects served multiple purposes – they put people to work earning an honest day’s pay, but they also strengthened community ties and community ties, they upgraded local and national infrastructure, they gave not only the people doing the jobs but the people in the community a sense of dignity and community pride. Much of that is secondary to the standard Keynesian analysis, but I believe it’s valuable and shouldn’t be ignored.
Scholar Eric Rauchway has a clear explanation of the problem with the stats Shlaes used and which have been repeated around the American right - the short version is that her stats counted as unemployed millions of people who were in fact employed. Huh?

The statistics relied on by people on the right treat people employed in emergency work programs, like the WPA, as unemployed which inflates the unemployment figures significantly. By excluding millions of people who had jobs Shlaes has constructed a story in which the New Deal didn’t have much effect on unemployment which makes the whole thing look worse. (Here’s another take on her book.)

That’s just part of the problem:


But if the New Deal did not end the Great Depression, was it doing some good? Historical Statistics of the United States says yes: Except in the 1937-38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt’s first term and, after the 1937-38 dip, around 11 percent.

So on the numbers, the U.S. economy improved briskly during the New Deal. Things that are moving quickly and in the right direction, but still haven’t reached their destination after a while, are things that have a long way to go—which is true of the U.S. economy recovering from 1932. Historians disagree on which part of the New Deal most encouraged economic growth, but at the least the New Deal did not prevent this recovery.

Shlaes makes a different argument about numbers, because she uses different numbers. She starts each chapter with a rat-a-tat of just-the-facts, but instead of GDP, which represents the overall economy, she quotes the Dow Jones Industrial Average, which represents the maybe 10 percent of Americans who owned stock. And though she quotes an unemployment number, she doesn’t quote the figures I’ve just mentioned. Instead she chooses different estimates of unemployment that (she acknowledges) show a much larger share of Americans out of work during the New Deal.

Rauchway’s point is simple – the New Deal produced extremely strong economic growth and greatly reduced unemployment. You may not like the means it used but that’s different than using bad data to argue those means didn’t work. The New Deal – whatever else it did – did not prolong the Great Depression. People who make that case are doing so in the face of the consensus among economists and historians. They are abusing history in an attempt to win a contemporary political fight. [/quote]

http://oneutah.org/republicans/fdr-and-the-new-deal-did-not-prolong-the-great-depression/
Offline Profile Quote Post Goto Top
 
Chris
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
"If you want to subscribe to revisionist history to support your libertarian views have at it, but the facts don't support it."

Facts? Where? You posted an opinion, Tom, not facts. Anyone can find an opinion that supports anything, that's the nature of opinions.

The blogger cites Sowell: "Government intervention may look good to the media but its actual track record — both today and in the 1930s — is far worse than the track record of letting the economy recover on its own." All he does next is say that's wrong, but he fails to show it. He shows how little he understands Sowell by misrepresenting his as saying "that because the New Deal didn’t end the Great Depression it was therefore a failure." Not what he just cited at all.

He claims "It’s not a view shared by actual professional economists or historians." But Sowell is a professional economist. And wouldn't you consider Obama Economic Adviser Christina Romer a professional economist? In her paper, WHAT ENDED THE GREAT DEPRESSION?, she disagrees with your blogger:
Quote:
 
The main finding of this study is that monetary developments were a crucial source of the recovery of the U.S. economy from the Great Depression. The very rapid growth of the money supply beginning in 1933 appears to have lowered real interest rates and stimulated investment spending just as conventional models of the transmission mechanism would predict.

You highlight "Rauchway’s point is simple – the New Deal produced extremely strong economic growth and greatly reduced unemployment." But the blogger has done nothing to support that claim let alone show Rauchway even made it.



I see again you see revision as a negative. Don't you think that as new studies are done and new facts emerge that the vision ought to be revised. I for one would take such a scientific view over a historicist one.
Edited by Chris, Oct 27 2011, 11:24 PM.
Offline Profile Quote Post Goto Top
 
Chris
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
One such revision needed is to debunk the myth Hoover was laissez faire noninterventionist and FDR invented the New Deal. Here are some plain and simple facts: Herbert Hoover: Father of the New Deal
Quote:
 
Politicians and pundits portray Herbert Hoover as a defender of laissez faire governance whose dogmatic commitment to small government led him to stand by and do nothing while the economy collapsed in the wake of the stock market crash in 1929. In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation—all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt’s advisers knew that Hoover had started the New Deal. One of them wrote, “When we all burst into Washington . . . we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself.”

Hoover’s big-spending, interventionist policies prolonged the Great Depression, and similar policies today could do similar damage. Dismantling the mythical presentation of Hoover as a “do-nothing” president is crucial if we wish to have a proper understanding of what didand did not work in the Great Depression sothat we do not repeat Hoover’s mistakes today.
Offline Profile Quote Post Goto Top
 
Chris
Member Avatar
Fire & Ice Senior Diplomat
[ * ]
Tom, if you're looking for facts to support your argument, skip the emotion-laden fluff and look for dry boring facts, like the following:

Did the New Deal ‘Help’?
Quote:
 
While Barack Obama’s economics team hammers out its $800 billion fiscal stimulus plan, the commentariat is battling over the effectiveness of what some consider the prototype stimulus package, the New Deal.* The suppressed (and problematic) conclusion to all this punditry seems to be: Because government spending under the New Deal helped/didn’t help to end the Great Depression, the Obama stimulus plan will/won’t help to end the current recession.

One of the opening salvos was this exchange between George Will (anti-New Deal) and Paul Krugman (pro). More recently, New York Times editorial board member Adam Cohen (pro) wrote this column, responding to an op-ed by former Business Week bureau chief Andrew Wilson (anti) in the Wall Street Journal.

So who’s right? Did New Deal government spending “help,” as Cohen puts it?

To answer that, we first have to define Cohen’s term — what would it mean to say that government spending under the New Deal “helped”? Two possibilities come to mind:
  • New Deal spending boosted consumption, thereby increasing production, reducing unemployment, and ending the Depression.
  • New Deal spending aided people who would have otherwise been destitute during the Depression.
The first sense considers the New Deal as a stimulus program to revive the economy; the second considers it as a welfare program to aid the poor. The two notions are far from equivalent. My reading of the literature suggests that the New Deal did little as an economic stimulus, but it did provide welfare benefits.

The figure below sketches U.S. GDP and government spending (all levels) for the Great Depression era. The wildly fluctuating GDP line clearly marks the Great Contraction of 1929-1932, the Recession within the Depression of 1937–1938, and the return of GDP to pre-crash levels in 1940. In contrast, government spending has only a very mild upward slope over the period (until the 1941 ramping-up for World War II). In 1930, the second year of Herbert Hoover’s administration, government spending totaled $10 billion; at the height of the New Deal spending boom in 1936, government spending reached $13.1 billion. (In comparison, that rate of government spending growth is just below the average for the entire post-WWII era.) This raises the question of whether there was much New Deal fiscal stimulus at all.

Posted Image

We get a somewhat different view if we consider the federal budget surplus/deficit. Much of the benefit of fiscal stimulus is supposed to come from the fact that it’s deficit spending. In essence, government borrowing moves future consumption to the present and hopefully boosts the economy to a permanently higher level. As the figure below shows, the federal government dramatically ramped up deficit spending in the last year of Hoover’s administration, as tax receipts sagged and Hoover enacted his own emergency programs. FDR continued the borrowing to fund components of the New Deal.

Posted Image

However, this borrowing was not dramatic by today’s standards. As a share of GDP, the New Deal deficit peaked at 5.4 percent of GDP ($3.6 billion) in 1934; in dollar terms, it peaked at $5.1 billion (4.3 percent of GDP) in 1936. In contrast, President-elect Obama recently announced that he expects ”trillion-dollar deficits for years to come,” even without the $800 billion stimulus package that his administration is preparing. With a U.S. GDP of roughly $13.8 trillion, the Obama-projected deficit (not counting the stimulus package) represents 7.2 percent of GDP.

Does the New Deal experience thus suggest that, when it comes to fiscal stimulus, just a little bit can have large effects? Interestingly, economic research suggests the opposite. Long before she was named chair of Obama’s Council of Economic Advisers, Christina Romer wrote a short paper for the Journal of Economic History titled “What Ended the Great Depression?” The paper provides empirical evidence that FDR’s fiscal policy provided little stimulus during the Great Depression. As shown in the figure below (reproduced from Romer’s article), the results of the New Deal’s fiscal stimulus (solid line) were little different from what she projects would have resulted from “normal fiscal policy” (dotted line). Both the deficit spending and the multiplier effect from that spending were too small to budge GDP.

Posted Image

What did end the Great Depression? Romer argues that another FDR policy — doubling the fixed exchange rate for the dollar relative to gold — did the trick, though the New Dealers seem to have lucked into that result rather than planned it. The rate change worked as a monetary stimulus, inducing large gold flows into the United States, where they could now buy twice as many dollars. That buttressed bank deposits and increased bank willingness to lend, encouraging investment. The lending resulted in a sharp increase in the money supply, pushing against the Depression’s price deflation and encouraging consumption. From the moment the exchange rate changed, the United States began to climb out of the Depression — albeit slowly; more slowly than many other countries.

Romer’s explanation dovetails with Milton Friedman and Anna Schwartz’s work on the root cause of the Depression: the Federal Reserve’s sharp reduction of the money supply in the late 1920s, in order to moderate the stock market boom and return the United States to the pre-WWI dollar-gold exchange rate. It also dovetails with evidence that other nations’ recoveries from the Great Contraction began soon after they abandoned efforts to return their currencies to pre-war gold exchange rates. My reading of the economic literature indicates that the “monetary policy did it” thesis has been generally accepted by economic historians (contra Cohen’s graf 9).

So it was FDR’s monetary policy that ended the Great Depression, not such New Deal initiatives as the WPA, the CCC, NIRA, and the rest of the alphabet soup. This follows the findings of a later paper that Romer co-authored with husband David Romer on U.S. recessions in the post-WWII era, which found that monetary stimulus proved superior to discretionary fiscal stimulus in restoring the economy.

What, then, to make of our warring pundits? In the fight between Krugman and Will over the stimulatory effects of the New Deal, it seems that opposing sides can both be wrong. Will was incorrect to argue that economic conditions grew worse during the New Deal era — conditions did improve, albeit slowly, and were temporarily reversed by the Recession within the Depression. Krugman, on the other hand, was wrong to argue that FDR’s fiscal stimulus helped to remedy the Depression and that only the large fiscal stimulus of WWII ended the Depression — in fact, GDP had returned to pre-Crash trend (as calculated by Romer) by 1940. And both mischaracterize the 1937–1938 Recession in the Depression. Although federal deficit spending did decrease along with the economy, the recession appears to have been largely the product of onerous new banking regulations that weakened the monetary stimulus (a point that today’s eager-to-regulate Congress should bear in mind).

Concerning Wilson and Cohen, Wilson goes too far in claiming that FDR (and Hoover) “were jointly responsible for turning a panic into the worst depression of modern times.” If anyone merits that distinction, it is the Federal Reserve for its pre-Crash contractionary monetary policy. Cohen is wrong to claim that “as a matter of economics … F.D.R’s spending programs did help the economy.” However, he does have a point that the various New Deal jobs programs provided income for many people who would have otherwise been destitute. As indicated in the figure below, at their height, the programs provided “emergency jobs” to just over 40 percent of laborers who likely would have otherwise been jobless. As state unemployment insurance and federal safety net programs largely did not exist at the time of the Crash, the New Deal jobs programs were likely a godsend for those who got the jobs (though they did little for the millions more who didn’t). Today, however, several government programs provide income and other benefits to the jobless and the poor, so the welfare benefits of the New Deal do not need to be replicated.

Posted Image

Where does all of this leave us in evaluating policy responses to the current recession?

First, the economic history of the New Deal and the rest of the 20th century raises serious doubts about the effectiveness of discretionary fiscal stimulus packages in reversing an economic downturn. Monetary stimulus has a far better track record (which is not to say that we shouldn’t have concerns about such policy — but that is a discussion for another blog post). And though there is no longer a fixed gold exchange rate for the dollar and the Fed has dropped nominal short-term interest rates to near zero, the Fed has other monetary weapons that it can use to fight this recession. Second, the helpful welfare benefits of the New Deal are now carried out automatically by other government programs.

This leaves us with an important question that has so far gone unasked by the commentariat: Given the above, is $800 billion in new government deficit spending worthwhile?

* As Tyler Cowen points out, it’s wrong to think of the New Deal as a comprehensive, unified set of fiscal initiatives; FDR tried many different policies, and sometimes changed approaches, to fight the Depression.
Offline Profile Quote Post Goto Top
 
1 user reading this topic (1 Guest and 0 Anonymous)
Go to Next Page
« Previous Topic · Fire And Ice General Discussion · Next Topic »
Add Reply

Website Traffic Analysis