Chait on Schlaes
Jonathan Chait has a great piece on Amity Shlaes and The Forgotten Man. Best line: “The experience of reading The Forgotten Man is more like talking to an old person who lived through the Depression than it is like reading an actual history of the Depression.”
The most important point, however, is how closely contemporary conservative rhetoric is coming to resemble Hoover’s prescriptions:
Pence has insisted that The Forgotten Man proves “that it was the spending and taxing policies of 1932 and 1936 that exacerbated the situation.” Sanford, for his part, offered this fiscal diagnosis: “When times go south you cut spending. That’s what families do, that’s what businesses do, and I don’t think the government should be exempt from that process.” That is, of course, a perfect description of the paradox of thrift, only put forward as the solution rather than the problem. Governor Tim Pawlenty of Minnesota insisted that “we can’t solve a crisis caused by the reckless issuance of debt by then recklessly issuing even more debt,” and called for a balanced-budget amendment to the Constitution, which would of course massively exacerbate the present crisis. It is 1932 again in the Republican Party. [...]
But now we have come to a time when leading Republicans and conservatives–not just cranks, but the leadership of the party and the movement–once again sound exactly like Herbert Hoover. “Prosperity cannot be restored by raids upon the public Treasury,” said President Hoover in 1930. “Our plan is rooted in the philosophy that we cannot borrow and spend our way back to prosperity,” said House Minority Leader Boehner in 2009. They have come to this point by preferring theology to history, by wiping Hoover’s record from their memories and replacing it with something very close to its opposite. It is Hoover, truly, who is the Forgotten Man.
Brad DeLong takes the view that “Had John McCain won last November, very few of the New Deal denialists would be out in public–instead, the Republican legislators and their tame intellectuals would be enthusiastially rallying behind McCain’s tax cut-based Keynesian fiscal stimulus package right now.” I’m not nearly so sure that’s right. Recall that McCain was touting a spending freeze as the solution to the economic crisis while on the campaign trail, already to the general acclaim of the congressional right-wing.
43 Responses to “Chait on Schlaes”
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March 10th, 2009 at 10:28 am
Daring middleman David Brooks seems to excoriate Republicans for acting like jackasses in the face of a new Depression, but in reality it’s an excuse to accuse Democrats of not taking the crisis seriously enough, and that in someone’s dream world the Republicans will rise up out of the lake and take it even more seriously and this time they’ll come up with super-awesome solutions which will make all the Democrats tremble.
But wait, there’s more:
What would really rock the Democrats would be for the Republicans to unveil their magic free energy engine which would power America from static electricity.
March 10th, 2009 at 10:28 am
Chait says “It should be clear that intellectual coherence is not the purpose of Shlaes’s project.”
Shlaes is a lying sack of shit. Lying is the purpose of Shlaes’ project.
March 10th, 2009 at 10:39 am
“We can’t bust heads like we used to, but we have our ways. One trick is to tell them stories that don’t go anywhere. Like the time I caught the ferry over to Shelbyville. I needed a new heel for my shoe. So, I decided to go to Morganville, which is what they called Shelbyville in those days. So I tied an onion to my belt, which was the style at the time. Now, to take the ferry cost a nickel, and in those days nickels had pictures of bumblebees on them. ‘Give me five bees for a quarter’, you’d say. Now, where were we? Oh,
yeah…the important thing was that I had an onion on my belt, which was the style at the time. They didn’t have white onions because of the war; the only thing you could get was those big yellow ones.”
March 10th, 2009 at 10:41 am
Had John McCain won last November, we’d all be eating our dogs right now, assuming that our dogs were large enough to be stretched over 2 months. Mine are, unfortunately, not.
March 10th, 2009 at 10:45 am
Remember that, in the last go-around in 1929-1945, the Republicans did the exact same thing. There is essentially no daylight between their positions in 1933 and 2009. The Republicans absorbed brutal electoral loss after brutal electoral loss for 15+ years after 1930 until they could red bait the hell out of the “Who Lost China?” nonsense in 1948. I.E. their entire history for eighty years has been grotesque nonsense on economic policy (ludicrously inane douchebaggery in the 1929 through 1945 period), only to be eventually bailed out by idiotic propaganda and demagoguery targeted to the most stupid and imbalanced.
March 10th, 2009 at 10:49 am
That’s Chait: fantastic on econ, insane on foreign policy.
March 10th, 2009 at 10:50 am
matthew, a spending freeze accompanied by a tax cut would, in this context, be keynesian stimulus.
insufficient keynesian stimulus, but keynesian stimulus nonetheless.
March 10th, 2009 at 10:58 am
That’s Chait: fantastic on econ, insane on foreign policy.
Nah, he’s good on both, except a little to easy on the Zionists. As Rorschach would say, “F***ing liberals…”
March 10th, 2009 at 11:04 am
If it didn’t actually have awful consequences for virtually everyone, I would LOVE to see Republicans in power making sure the budget’s balanced this year, just to see the utter clusterfuck that resulted and their party permanently ignored when it comes to serious issues.
But then I’d probably have a better chance wishing for them to not be insane.
March 10th, 2009 at 11:09 am
Whether or not one agrees with massive spending at the Federal level, reasonable progress to limit the scope of the Federal government simply can’t coincide with a major economic collapse. This is the real problem with the GOP strategy. Only in good times can a conservative approach to scaling back the government be truly feasible. In bad times, well, quite frankly people expect their government to act, and action usually means they expect their government to spend.
March 10th, 2009 at 11:16 am
9: Well, except that it would be targetted at the uber rich and probably also cut the business tax rate. Which is to say that it would have virtually no stimulating effect whatsoever.
I don’t see how MY is disagreeing with DeLong here. Yeah, McCain would also have instituted a spending freeze. But it wouldn’t have applied to the military, to the farm bill or to any other corporate handouts. It would have applied to unemployment insurance and other useless stuff like volcano monitoring (until, oops, Mount St Helens goes off again). All of which is to say, it would be a disaster, but DeLong is right, there would be far fewer references to Hooverism.
It’s amazing, given the collection of idiots that live in this country that they can still muster the collective intelligence to avoid complete economic suicide when the choice is presented clearly enough, but fortunately they can.
March 10th, 2009 at 11:25 am
mpowell, let’s not complicate things: i don’t disagree with you about the general nature of the kinds of tax cuts.
but “stimulus” is just another word for “deficit spending;” sometimes it is more effective and sometimes less so, but freeze spending and cut taxes and you are increasing deficit spending, which is keynesian stimulus, just as prof delong says.
March 10th, 2009 at 11:36 am
I don’t think the Republican idiocy is surprising or mysterious in any way. This is what it MEANS to be a conservative – you stay the same, think the same, act the same regardless of a change in circumstance. We shouldn’t expect anything more of them.
March 10th, 2009 at 11:52 am
1) Actually, I think the Republicans are HAPPY to have bought on a Depression. Household help is cheap, their ill-gotten gains go farther, the hoi polloi are scared and too afraid to strike or form unions, workers will take crumbs, and the government can’t collect enough taxes to work.
2) That’s the problems with you Leee…bruls– you always see
the glass as half empty.
Now get back to work or you’re fired.
March 10th, 2009 at 11:53 am
To try to square this circle, the libertarians are claiming that Herbert Hoover really was a big spender after all, and that the New Deal was merely the continuation of his failed, Depression-causing policies.
Did I mention that libertarians are insane?
March 10th, 2009 at 12:08 pm
What absolute garbage. When McCain was talking about a spending freeze, Obama was talking about a net spending reduction. Matt knew he was lying, but, to be fair, so was McCain. And, what was it? a month ago? Matt was complaining about the fiscal irresponsibility of the Republicans, who wanted dramatic tax cuts. Now the same group he tells us is too fervent in their wish for balanced budgets. I get the feeling that Matt is just making this shit up.
March 10th, 2009 at 12:31 pm
Anyone seen former Republican and evangelical Frank Schaeffer’s scathing attack on the Republican leadership over at http://www.huffingtonpost.com/frank-schaeffer/open-letter-to-the-republ_b_172822.html ?
Titled ” Open Letter to the Republican Traitors (From a Former Republican)”
“You Republicans are the arsonists who burned down our national home. You combined the failed ideologies of the Religious Right, so-called free market deregulation and the Neoconservative love of war to light a fire that has consumed America. Now you have the nerve to criticize the “architect” America just hired — President Obama — to rebuild from the ashes. You do nothing constructive, just try to hinder the one person willing and able to fix the mess you created. ”
———-
hee hee hee
Well, as someone has said, Evangelical Christians LOVE a crumbling Empire. Just ask the Romans. There’s damm good reason why the Romans nailed the motherfuckers up on telephone poles.
March 10th, 2009 at 12:40 pm
Thomas:
What absolute garbage. When McCain was talking about a spending freeze, Obama was talking about a net spending reduction.
When Obama was trying to get a stimulus package passed which consisted of a mix of tax cuts and spending, McCain complained there’s too much spending.
Well, spending is stimulative though. Republicans just don’t want to admit when the private sector goes insane in the membrane – b/c of greed or fear or whatever – the government has to step in.
The Republicans remind me of Baghdad Bob:
http://en.wikipedia.org/wiki/Muhammad_Saeed_al-Sahhaf
March 10th, 2009 at 12:46 pm
14: I’m not sure what the definition of keynesian stimulus is. That is as much a historical debate as an economic one and I don’t see any reason to argue it. But my point is that there are more and less helpful ways of running government deficits during a recession and McCain would have found some of the worst ways possible.
March 10th, 2009 at 12:48 pm
When McCain was talking about a spending freeze, Obama was talking about a net spending reduction.
A net spending reduction based on ending the Iraq War, which included significant increases in energy, health care, and infrastructure.
March 10th, 2009 at 12:55 pm
Right wingers do not view tax cuts as spending (well more precisely tax cuts for the rich), so large tax cuts would not violate McCain’s promise of a spending freeze. They view tax cuts for the rich as responsible fiscal policy that raises revenue. Evidence that they feel this way?
HUTCHISON: I think we get revenue the way we’ve done it in the past that has been so successful in the past and that is tax cuts…Every major tax cut we’ve had in history has created more revenue.
http://thinkprogress.org/2009/02/26/kbh-tax-cuts-revenues/
So tax cuts for the rich is precisely what they would be doing right now if McCain won.
March 10th, 2009 at 2:00 pm
Oh no, we built too many houses! Time to shut down the economy for a couple years.
March 10th, 2009 at 3:19 pm
“until they could red bait the hell out of the “Who Lost China?” nonsense in 1948.”
1946: Republicans gain control of Congress
1948: Republicans lose control of Congress
1949: China goes Communist
March 10th, 2009 at 4:07 pm
““until they could red bait the hell out of the “Who Lost China?” nonsense in 1948.”
1946: Republicans gain control of Congress
1948: Republicans lose control of Congress
1949: China goes Communist”
Everybody knew that the CPC was going to win the civil war by late 1948. It was widely (and correctly) considered that the KMT had to beat back the PLA’s Huahai Campaign or else. The PLA’s victory in Huahai was effectively determined by early December 1948, even though there were mop-up operations for another few weeks.
March 10th, 2009 at 4:07 pm
““until they could red bait the hell out of the “Who Lost China?” nonsense in 1948.”
1946: Republicans gain control of Congress
1948: Republicans lose control of Congress
1949: China goes Communist”
Everybody knew that the CPC was going to win the civil war by late 1948. It was widely (and correctly) considered that the KMT had to beat back the PLA’s Huahai Campaign or else. The PLA’s victory in Huahai was effectively determined by early December 1948, even though there were mop-up operations for another few weeks.
March 10th, 2009 at 4:16 pm
To be fair to the hooverites, the early 30’s saw a complete break with the past on how to deal with contractions. Look at the chart of inflation http://www.economics-charts.com/cpi/cpi-1800-2005.html
Going off the gold standard and abandoning long term price stability as economic objectives, made it possible to embrace spending as a viable solution to the problem. Roosevelt’s abandoning the gold standard, outlawing private ownership of gold, and revaluing the dollar were all necessary and extremely unusual corollaries to spending stimulus. People now think it is obvious that the only solution to contraction is government spending as stimulus, but forget that part of the bargain is permanent and growing accumulated debasement of the currency. It would not be so crazy to reconsider that once and a while. Not that that is what most of the Republicans are doing really, of course.
March 10th, 2009 at 4:37 pm
Chiang lost China.
We don’t control the whole world.
It’s just that simple.
March 10th, 2009 at 5:01 pm
One of the saddest things is that so many of the people most hurt by these Republican policies are the ones who most vote Republican. Pence is from Indiana, and Bohner is from Ohio. Republicans dominate in the poor white areas of the south, and in poorer rural areas.
March 10th, 2009 at 5:13 pm
Burrito Boy: I didn’t mean that the Democrats lost China (Joe from Lowell is right); I meant that your chronology was mistaken. The Republican victories of 1946 did not come from demagoguing something that was yet to happen.
March 10th, 2009 at 6:48 pm
To try to square this circle, the libertarians are claiming that Herbert Hoover really was a big spender after all, and that the New Deal was merely the continuation of his failed, Depression-causing policies.
Did I mention that libertarians are insane?
But Hoover was an economic interventionist. From Meltdown, by Thomas Woods, page 99:
“Among other things, he launched public works projects, raised taxes, extended emergency loans to failing firms, hobbled international trade, and lent money to the states for relief programs. He sought to prop up wages at a time when consumer prices were falling dramatically…”
Another thing not mentioned when people blame the economic problems in 1937 on Roosevelt cutting spending is the wage situation: “…money wages skyrocketed by 13.7 percent in the first three quarters of 1937, thanks to increased labor union activity resulting from the Supreme Court’s favorable decision on the National Labor Relations Act f 1935. (Meltdown, pg. 102).
The thing that the government did not do, and should have done, was nothing. How can I say that? How do I know that this would work? Because it is what worked in 1920-1921 after the post-World War II bust (the one in which Gatsby of The Great Gatsby lost his money temporarily).
Production had droppedby more than one-fifth by the middle of 1920. Things were worse than they were in 1930. Yet the economy did recover without people doing much of anything. As Woods relates (p. 94), this is a sticking point for many modern economists, who cannot explain how prosperity returned.
March 10th, 2009 at 6:53 pm
That first non-quoted sentence should have had italics around the word “was”:
“But Hoover was an interventionist.”
The Forgotten Man may well indedd be a crappy book. I haven’t read it yet, so I cannot tell. But Meltdown (which is about the current situation but has a chapter on the Depression) is fantastic. What’s more, it’s written by an Austrian-schooler, not a CFR person (who is presumably a Chicago schooler), so it actualy has a model to explain the events rather than a scattershot anecdotal approach.
March 10th, 2009 at 6:54 pm
“Burrito Boy: I didn’t mean that the Democrats lost China (Joe from Lowell is right); I meant that your chronology was mistaken. The Republican victories of 1946 did not come from demagoguing something that was yet to happen.”
My point was rather that what consistently fueled the Republicans from the late 1940s onward was the fallout from the “Who Lost China?” debate – the 1946 Republican wins weren’t consistent or stable – but Red Baiting was (as the career of Richard Nixon attests to).
March 10th, 2009 at 7:37 pm
Looking at Chait’s interpretation of Hoover, a few things stand out:
First, he ignores the role of the Hoover-era Fed in prolonging the Depression by trying to expand the money supply in 1929 and 1930. The discount rate went from 6% to 2%, and the Fed purchased $375 million in government bonds and lent $200 million to member banks.
Second, he ignores the fact that Hoover’s calls for businesses to keep wages up (a policy that helped keep unemployment high and prevent the necessary restructuring of the economy), rather than being a simple matter of toothless disapproval, carried with it the implicit threat that action might be taken if businesses did not “voluntarily” submit.
Third, he is assuming that an aversion to direct relief programs for the poor is the same thing as laissez faire. Hoover may have disdained Roosevelt’s welfarism, but that does not mean that he did not try to regulate the economy. It’s just that his regulations were mostly business-focused. He tried desperately to prop up farm prices while increasing production beyond what the market wanted or needed, and as stated previously, he extended government loans to firms that were simply unsound.
More on Chait:
The final unanswered question that must nag at the minds of the true believers is how the Depression managed to develop even before Roosevelt assumed office.
Oh, it’s very simple. We pursued a plicy of monetary expansion in the 1920s that led to unsound investments. Some of this was exacerbated by the fact that we pursued a protectionist policy at a time when the rest of the world owed us money and could not hope to pay it back unless we imported goods from them. After the bubble burst in 1929, Hoover refused to let the correction occur, and used every tool at his disposal (except direct welfare to individuals) to try to prop up prices and businesses so as to avoid the necessary deflationary correction.
We finally got uot of the Depression in 1946, after several years of intense saving on the part of individuals managed to provide the funds for infrastructure and capital goods to be rebuilt, and after the intense government intervention of the World War II years began to relax.
Note that many Keynesians predicted a calamitous economic bust after the spending of the war began to decrease. Strangely enough, it didn’t happen, and 1946 was a very prosperous year (in terms of standard of living*).
*GDP statistics show a slight decrease from 223.2 to 222.6 billion (1998 dollars) from 1945 to 1946, but this ignores the fact that much of that spending was on war items that did not improve standard of living. Private GDP (GDP – government spending) exploded, growing 28% from 130.5 billion to 167.4 billion).
March 10th, 2009 at 8:55 pm
Labeling Hoover “an interventionist” may be comforting form an ideological perspective, but it’s a bit short on intellectual rigor. In face, when faced with a depression that dropped GDP by about $10 billion per year between the crash and the end of his term – from a starting point just north of $100 billion – Hoover increased federal spending by less than $0.2 billion between 1929 and 1930, from $3.13 to $3.3 billion. The highest spending ever got under him was a little over $4 billion.
In other words, as the economy shrunk by 10%-20% per annum, “interventionist” Hoover engaged in stimulus spending on the order of 0.2-2% of GDP.
March 10th, 2009 at 8:57 pm
We finally got uot of the Depression in 1946
As a matter of fact, Q1 1933 represented the end of the last 2 consecutive quarters of negative growth. Thereafter, the economy was in recovery except for a brief period in 1937. The economy rebounded to its pre-Depression level of activity by the end of FDR’s first term. By 1939, unemployment has falling 15 points, from 25% to 10%.
March 11th, 2009 at 10:17 am
Before one gets too confident that macro economics is advanced enough to say assuredly what to do, one most consider not only 1929 to 1942 but also 1919 to 1925 and 1970 to 1985.
March 11th, 2009 at 12:03 pm
Meanwhile….
You missed the point of the book…probably because you have no direct knowledge of it.
March 11th, 2009 at 12:06 pm
“Prosperity cannot be restored by raids upon the public Treasury,” said President Hoover in 1930.
Funny, that’s exactly what Hoover did in a manner of speaking.
March 11th, 2009 at 12:10 pm
BTW some democrats argue that FDR was president when the country recovered and FDR was a democrat therefore democrats and democrat party (Keynesian) policies pulled us out of the depression. There could be other factors you know?
March 11th, 2009 at 6:42 pm
Labeling Hoover “an interventionist” may be comforting form an ideological perspective, but it’s a bit short on intellectual rigor. In face, when faced with a depression that dropped GDP by about $10 billion per year between the crash and the end of his term – from a starting point just north of $100 billion – Hoover increased federal spending by less than $0.2 billion between 1929 and 1930, from $3.13 to $3.3 billion. The highest spending ever got under him was a little over $4 billion.
Diect govenment spending is not the only means of intervention. I’ll have to re-read the appropriate chapters of Rothbard’s America’s Great Depression and get back to you to have more specific information to recite.
March 12th, 2009 at 3:14 am
Hah! What old person would talk like Amy? Nobody I heard. They all thought that the Republicans helped cause the Depression and only the die-hard anti-Integrationists from the South (who probably voted Dem.) really hated FDR for his wife’s advocacy for human rights for “negroes”.
Hoover was unjustly blamed for the Depression while prior Presidents Coolidge and Harding should be given more of the blame. I fear Obama might get more blame than he should for this Depression than Bush in the end as most of the pain will reside during Obama’s term, not Bush’s. And people’s memory will not accept 3 years of “we inherited this”. Eventually, 20 percent unemployment and many square miles of tent cities during Obama’s administration will wear him thin…Unless some success with ’stimulus’ does in fact happen.
Btw, FDR ran his first campaign to the Right of Hoover and wanted to be a fiscal conservative but smarter people convinced him that he’d better do some govt. advocacy for the many newly poor being “liquidated” by former Sec. of Treasury Andrew Mellon. Even Mellon wasn’t such a villain, but the advice that millions of Americans should just give up and work for peanuts did stick in the craw of so many ‘old people’ none of whom seem to think of amy’s world view as reality. She makes one valid point w/o acknowledging it…FDR tended to be conservative…and his going conservative resulted the mini Depression of ‘36-’37 which helped caused the horrid example in her book…a suicide due to poverty…although that happened every year during GW Bush’s best years. Suicide is a tragedy but not necessarily a result of fiscal policy. Conservative ideology had it’s trial and it was the best years of GW Bush’s years…and those were a disaster. (except for some of us in the “leisure class”)
March 12th, 2009 at 10:23 am
Hah! What old person would talk like Amy? Nobody I heard. They all thought that the Republicans helped cause the Depression and only the die-hard anti-Integrationists from the South (who probably voted Dem.) really hated FDR for his wife’s advocacy for human rights for “negroes”.
Hoover was unjustly blamed for the Depression while prior Presidents Coolidge and Harding should be given more of the blame. I fear Obama might get more blame than he should for this Depression than Bush in the end as most of the pain will reside during Obama’s term, not Bush’s. And people’s memory will not accept 3 years of “we inherited this”. Eventually, 20 percent unemployment and many square miles of tent cities during Obama’s administration will wear him thin…Unless some success with ’stimulus’ does in fact happen.
Btw, FDR ran his first campaign to the Right of Hoover and wanted to be a fiscal conservative but smarter people convinced him that he’d better do some govt. advocacy for the many newly poor being “liquidated” by former Sec. of Treasury Andrew Mellon. Even Mellon wasn’t such a villain, but the advice that millions of Americans should just give up and work for peanuts did stick in the craw of so many ‘old people’ none of whom seem to think of amy’s world view as reality. She makes one valid point w/o acknowledging it…FDR tended to be conservative…and his going conservative resulted the mini Depression of ‘36-’37 which helped caused the horrid example in her book…a suicide due to poverty…although that happened every year during GW Bush’s best years. Suicide is a tragedy but not necessarily a result of fiscal policy. Conservative ideology had it’s trial and it was the best years of GW Bush’s years…and those were a disaster. (except for some of us in the “leisure class”)
Oops…forgot to say great post! Looking forward to your next one.
April 16th, 2009 at 10:12 pm
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