Here's Krugman trying to spin the prolonged slump of the 1930's on 'balancing the budget'. This insightful riposte to conservatives arguing the New Deal was bad for the economy was seen as 'devastating' by Steve Benen. That really depends on your priors, I guess.
FDR did try to keep the budget balanced, as the Keynesian idea that deficits produced growth was not conventional wisdom for any subgroup for another 20 years (the General Theory was published in 1936, after all). I think such spending does not have an expansionary effect, though I suppose the industry thinks it does by a 60-40 margin. Still, you had an insane number of new government programs and tax increases that could be called typical liberal programs in the New Deal: price controls, Social Security, work relief, unemployment insurance, the cartelization of big business, minimum wages, slaughtering 6 million pigs, leaving fruit in the fields to rot, government-granted privileges for labor unions, government works projects, higher taxes, etc. Only on the budget deficit would the 1930's fall in the category as 'conservative', so that's all the Left has to explain why this didn't work. As a fiscal conservative, I would gladly trade a big budget deficit for lower taxes, spending, and regulations.
Finding an ideology to blame for the great depression seems to be all the rage now.ReplyDelete
On the one hand, you have the general outlines of what they teach you in High School, that FDR saved capitalism by leadership and spending lots of money and then the war solved everything. On the other hand you have Friedman, Bernadke claiming monetary policy prolonged an ordinary recession.
Historians have pointed to tariffs, increasing income taxes, labor intervention, price supports, and most hideously, National Recovery Administration. Centralized industrial policy and socialism were cutting edge and dominated economic academia at Harvard, Columbia and Yale and many of FDR's advisors. Finally, you have economists conducting empirical research like Christina Romer, Rober Higgs, etc.
Seems like political ideology is an imperfect fit because Hoover was such a disaster it enabled FDR's disaster to look good in comparison of GDP growth.
Anyway, it'd be an interesting debate to follow if the commentators addressed one another instead of straw men.
But what do I know, I’m just a lawyer lurking to make sure Erik doesn’t violate his confidentiality requirements again.
Sorry, I meant Eric. And I was kidding.ReplyDelete