Nov 1st, 2009 at 8:31 am
Growth Growth Growth
Like Brad DeLong, I’m a bit puzzled by Bill Galston’s theory that adopting “a meaningful shift toward fiscal restraint” would be a good strategy for the midterms. People say they want this, but I can only assume that’s because people think such a shift would improve the economy. In fact, it wouldn’t. If Democrats implement policies that tank the economy, running around the country saying “well it polled well a year ago!” isn’t going to help them.
When it comes to macroeconomic management, you need to listen to your economists not your pollsters. Christina Romer’s analysis says we should be running bigger deficits, not smaller ones.
56 Responses to “Growth Growth Growth”
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November 1st, 2009 at 8:40 am
Does your server not know about daylight savings?
November 1st, 2009 at 9:14 am
Little Matty isn’t serious, is he? He’s just a sadist, right, trying to draw out cement-heads who will agree with this nonsense so he can then laugh at them?
The 1920 depression was cured almost instantaneously with high interest rates, a slashing of Federal spending and a slashing of tax rates.
This Keynesian nightmare will be the death of us all.
November 1st, 2009 at 9:30 am
“trying to draw out cement-heads”
Heh. And it succeeded by the second post of the thread.
November 1st, 2009 at 9:41 am
You know, I’ve never heard a Keynesian actually explain how we got out of the 1921 depression/recession, other than to insist that it wasn’t severe. They have never explained why it wasn’t severe..
November 1st, 2009 at 9:42 am
Bob,
Could you sight a more serious source than a youtube video clip with Thomas Woods? Surely if what you’re saying is correct, there would be numerous champions from the Chicago school.
November 1st, 2009 at 9:48 am
The zombie “fiscal conservativism” slogan will never die, even though IRL the ones who use it the most (Reagan, Dubya) always blatantly cheat.
FDR campaigned as a fiscal conservative and had to be bullied into mild Keynesianism, and he almost destroyed his Presidency by returning to fiscal conservativism in 1937. Conservatives say that the New Deal didn’t end the depression, WWII did, and they’re right; but when they say that they’re conceding Keynesian economics. Roosevelt only went really Keynesian after the war started.
It’s true that if your personal income goes down you should make cuts in your household budget, but that isn’t a fiscal plan for a national economy. It’s a powerful slogan, though.
Unfortunately, Obama started off deep in the hole, since Dubya had already ballooned the national debt with non-Keynesian spending. That was deliberate. The Republicans are not anarchists, but their governing philosophy is sabotage. They don’t want a stateless society, they want a crippled state. Look at California.
November 1st, 2009 at 9:54 am
Slashing tax rates is not non-Keynesian, and does anyone really say that you can end a depression with high interest rates?
“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Yeah, that’s the ticket.
November 1st, 2009 at 9:54 am
But the Democrats could discuss a long term plan to reduce the debt and limit the size of the government. However, everyone knows that reducing spending out anger core Democratic groups such as public sector employees, minorities, etc. Everyone also knows that raising taxes high enough to cover a trillion dollar deficit would anger the upper middle class suburbanites and urban elites that bund the Republican Party.
So the Obama Admninistration finds itself in the same place as the Bush ADministration, spending like a drunken sailor with no plan to stop.
November 1st, 2009 at 9:57 am
Limiting the size of government is not a Democratic goal. It’s just your goal (or slogan, at least). There are all kinds of reasons why lots of people think that reducing the size of government is necessary, but they aren’t good reasons. Again, look at Schwarzenegger’s California.
November 1st, 2009 at 9:57 am
World War II didn’t end the depression. The end of World War II did. Most people’s standard of living was considerably lower in 1941-1945 than in the immediately preceding years.
November 1st, 2009 at 9:58 am
Yes, and the US came out of WWII with a strengthened industrial base.
November 1st, 2009 at 10:04 am
David:
1. Tom Woods is awesome. He’s obviously the BIG DOG here because the Keynesian Paris Hilton purse-dogs won’t even look him in the eye.
2. The Chicago School consists of warmed-over pseudo Keynesians. It’s like a gift that keeps on giving to statists. They propose a government program (a little monetary dilution) which will invariably fail and then blame the ensuing problems on “the free market”. Brilliant strategy. Like the Keynesians, the Chicago School was eviscerated before it was created. As if I’m going to look to Chicago for validation. Why would Chicago want to examine a theory which would destroy it’s very credibility? Better just to hide under the bed and hope it all goes away.
3. Why appeal to “authority” anyhow. There simply aren’t that many recessions/depressions to study since 1913. For each one, there really aren’t that many statistical categories to examine. I’ve checked all of Woods’ numbers and they all check out. I’ve posted links to the original source material for his numbers at least 6 times in these various Little Matty comments. NO ONE has ever bothered to refute them. Which is the point of Woods’ excellent and unrefuted speech.
The anti-Keynesian “program” (do nothing) worked in 1920. The various shades of Keynesian-style nonsense dragged out the 1929 depression for 16 years. Super-high interest rates and tax rate cuts cured 70s stagflation. There is simply no historical, evidentiary or logical basis for the Keynesian religion.
November 1st, 2009 at 10:12 am
Yes, and the US came out of WWII with a strengthened industrial base.
Largely due to vastly increased savings. Rationing, browbeating people into buying war bonds – all of these things were designed to decrease consumption so as to fund capital investments.
To the extent that World War II helped to build up the infrastructure that allowed us to get out of the depression when the war ended, it was due to austerity measures, not to Keynesian ones.
November 1st, 2009 at 10:18 am
I like Thomas Woods. He’s a dangerous lunatic who lives in a bizarre alternate universe, but a sincere dangerous lunatic who lives in a bizarre alternate universe. That puts him head and shoulders above the rest of the right’s “intellectual” apparat.
November 1st, 2009 at 10:19 am
So the deficit spending was simply not a factor?
November 1st, 2009 at 10:22 am
And incidentally, the austerity measures were not evenly distributed at all. The formerly-unemployed and underemployed were better off during the war. That’s the kind of austerity I can get behind, but not the kind that people are talking about today.
Ending the depression was one thing, but the New Deal ameliorated its effects, and liberals think of that as a good thing whereas Austrians think of it as a bad thing. Gotta liquidate labo and purge the corruption.
November 1st, 2009 at 10:27 am
Outside the most pig-ignorant zombies of the Mises cult, I’ve never heard anyone claim this.
November 1st, 2009 at 10:28 am
The Chicago School consists of warmed-over pseudo Keynesians.
And the Catholic Church is just warmed-over Judaism. And celibacy is warmed-over libertinism.
Show me a rose, and I’ll show you a stag at bay. Show me a rose, or leave me alone.
November 1st, 2009 at 10:29 am
The then record deficit that Bush 1 had due to the economic downturn was a factor, (but likely not the decisive one) in him losing votes to Perot, and consquently Clinton getting the plurality (and the win).
So it is possible for the deficit to be a factor somewhat indepedently of the economy.
November 1st, 2009 at 10:33 am
After thirty years of Free Market improvements, Americans now understand where the good jobs are to found. Bars and Restaurants.
Americans are no longer forced by Socialists to work those shitty high paying union jobs. Instead, thanks to Mr. Market, they can aspire to be dishwashers, busboys, and cooks; and if they play their cards right and get lucky, Americans climbing the ladder of success can become bartenders and waitstaff. If they get lucky.
Unfortunately, Mr. Market is letting all the little cooks and busboys down at the moment in Mr. Market’s banner sector -the Servile…er…ta da! The Service Sector.
http://3.bp.blogspot.com/_pMscxxELHEg/SusD-XmoTYI/AAAAAAAAGsA/bbhhwdn91qI/s1600-h/RPISept2009.jpg
And as the Free Market makes its magical, free wheeling, global adjustments, it looks from this graph below that Mr. Market has decided that high unemployment will be required for at least five years -possibly ten.
I mean, who can say, who can predict? So independent, so whimsical, is Mr. Market!
http://4.bp.blogspot.com/_pMscxxELHEg/SsXzzDSUSqI/AAAAAAAAGfM/PWX-2daRZ0w/s1600-h/EmploymentJobLossesRecessions.jpg
November 1st, 2009 at 10:36 am
The formerly-unemployed and underemployed were better off during the war.
Well, except for the 400 thousand or so that were dead.
There’s a lot that’s sui generis about the WW2 effect on the economy, not the least of which is that putting what would be 25 million men (if scaled up to today’s population) under military discipline for two to four years undoubtly would have a large cultural effect.
November 1st, 2009 at 10:36 am
So the deficit spending was simply not a factor?
The deficit spending was funded. We had huge savings in bonds, etc. to offset it. This is contrary to the modern Keynesians, who want government spending to stimulate private spending; they think that saving money is a bad thing.
#7: Slashing tax rates [I assume you mean in the early 1920s] is not non-Keynesian,
Slashing tax rates and spending at the same time is. And you essentially just advocated increasing taxes on the wealthy as an austerity measure to help the economy (the money presumably would go into state spending). So you are saying that both decreasing spending and tax rates and increasing spending and tax rates are Keynesian policies for dealing with a depression?
November 1st, 2009 at 10:40 am
Bigger deficits might be ok so long as you assume that interest rates will always remain as low as they are now. What if they don’t? What if the Feds need to start paying 5 percent? or 7 percent? Or even higher?
Then you end up with the kind of nightmare California has.
November 1st, 2009 at 10:44 am
End the futile US military occupations of Iraq and Afghanistan. Then talk to me of your concern about deficits. Anyone who discusses the current federal deficit without first insisting on ending the US military occupations of Iraq and Afghanistan is unserious.
November 1st, 2009 at 10:57 am
So nobody buys bonds now?
November 1st, 2009 at 10:57 am
Wow Matt, your economics posts are really starting to attract the crazies. But then again, it is probably easier for them to post here than on the economics blogs.
November 1st, 2009 at 11:00 am
Max424,
The left has no credibility on jobs and wages while it supports open borders and unlimited immigration. When it comes to either helping middle class Americans or creating millions of future automatic Democratic voters by importing the poor from Mexico, the Democratic Party has always gone against the middle class.
Also, it is hard for the Democrats to have any credibility on job creation when it puts social engineering before education. How can the U.S. compete in the world market when education is so unimportant to the left (except for their own children)?
November 1st, 2009 at 11:01 am
Just to be clear: The 1920 depression not only disproves Keynes, but it also disproves the baseless hysterical Chicago School fear of deflation. That’s why it is never mentioned. Which is the title of the Tom Woods speech. The speech might also have been titled “Mainstream Abject Fear of the Truth”.
Between the second quarter of 1920 to the third quarter of 1921, wholesale prices fell 44%. Factory employment and industrial production fell 30%. The Fed raised the discount rate from 4% to 7% and then back to 4%. The Harding government did basically nothing in the way of so called Keynesian stimulus. Harding specifically and intentionally did nothing to interfere with falling wages and prices.
Further, Federal spending declined from $6.3 billion in 1920 to $5 billion in 1921 and $3.3 billion in 1922. Tax rates, meanwhile, were slashed—for every income group. The depression soon ended.
The baseless ad hominem attacks on Tom Woods and myself are truly heartwarming. Just more evidence that the “progressive” intellectual quiver is empty. Woods’ book “Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse ” was #11 on the NYT best seller list but they refused to review it. It is still #6 on Amazon’s list of books concerning Policy and Current Events. Why don’t one of you geniuses refute it? Another example of purse dogs afraid to look the BIG DOGS in the eye.
November 1st, 2009 at 11:18 am
In the Midwest the 1920 depression lasted right up until 1929, so that by the time the Great Depression came along the whole area was already radicalized and formed the biggest single pressure group pushing Roosevelt toward Keynesian policies. You may have trouble thinking of North Dakota as leftist, but 1918-1940 it was.
November 1st, 2009 at 11:19 am
#26 – What I’m asking about is bond rates. Right now, they are low. However, what’s the guarantee that they’ll stay there? You don’t know what bond rates will do, and to be honest, neither do I. However, it seems pretty clear that taking debt levels from around $12T (where there are now) to around $20T (where they are projected to be in less than a decade) seems pretty risky unless you are pretty darn sure that interest rates will stay where they are, or go down.
I think that’s a really tough bet to make.
November 1st, 2009 at 11:20 am
Why don’t one of you geniuses refute it? Another example of purse dogs afraid to look the BIG DOGS in the eye.
Probably because all this stuff about the 1920 depressio0n refuting Keynes and Friedman is new to us, and is here presented purely as a loudmouth assertion.
November 1st, 2009 at 11:41 am
Mr. Emerson:
I’ve presented these same arguments here calmly and politely numerous times before, with the usual response being RODDIS YOU STUPID FRINGE PAULTARD!!!!!
This is always from people who haven’t the slightest familiarity with any of the arguments or underlying analysis. Like Little Matty, who took a shot to Tom Woods back in May. Neither Little Matty nor his “authority” Quiggin have the slightest familiarity with Austrian School theory, or economics for that matter.
As Woods points out:
Didn’t anyone else notice the insane Republican attacks (O’Reilly, Hannity etc…) on Alan Grayson for his right-on attack calling Bernanke’s whore Linda Roberston a “K Street Whore”?
November 1st, 2009 at 12:00 pm
The beef is with ‘deficit for what’? Around $200K plus for each job created? Billions for igniting entitlements which are clearly not on any sustainable path?
Granted Obama allocated around $4 Billion for the integrated electricity grid. But talk to experts, engineers and industry think tanks – the figure is at least around $100 Billion plus needed for the overall of electricity grid in this country. So where is the money going Matt?
Zakaria compared some figures – $200 Billion for rail tracks and fast trains; wait of course not here but in China. How much here? Hardly $8 Billion. I understand population density in China makes the difference. But then are we investing in roads? Or advanced Air Traffic Control systems?
Germany and Spain may be pulling their Solar subsidies. But it is economically proven fact that, subsidies and favorable tax treatment of last many years have made Germany and Spain leaders in Solar and Alternative Energy. Do we mind pouring more money there?
We all know the inertia of Federal Administrative Machinery in disbursing these funds and hence delay. VP Biden’s vigilance for fraud might have added bit more time too; though that price is acceptable compared discrediting on such funding might arrive if GOP finds fraud in that.
But the real question is has this Administration been smart, creative and imaginative in channeling ‘deficit funding’ to create jobs? Answer is NO. Christina Romer is competent, but at times her naivety is laughable (e.g. when she termed Hedge Fund guys participating in Geithener PIPP program as good guys!).
This Administration is simply not showing enough ’spark’ in utilizing ‘deficit funding’ smartly.
November 1st, 2009 at 12:17 pm
Ok, some historical correction is needed here:
1. Regarding the New Deal, 1933-1937 not only saw unemployment fall from 22% to 9%, it also saw growth rates averaging 9.62% annually – if you leave out 1933 (given that FDR only took over midway through the years), the average growth rate was 13% annually. By absolute levels, GDP had recovered to pre-Great Crash levels by 1937 and never dropped below it.
Even the 1938 recession doesn’t look as bad, if you just take the simple step of actually using employment numbers that include New Deal jobs program employees as working – unemployment rose from 9.2% to 12.1% (not, say 19%), had returned to 9% within two years, and had fallen to 6% by 1941.
Of major presidential attempts at recovery, FDR’s record on both jobs and GDP outpaces that of JFK, LBJ, Nixon, Ford, Carter, Reagan, and Clinton.
2. WWII brought economic prosperity at the time, as opposed to just afterwards. To start with unemployment, you had 6% unemployment in 1941, 3.1% in 1942, 1.8% in 1943, 1.2% in 1944, and 1.9% in 1945. That’s the best stretch in American history. To look at GDP, you had 25% growth in 1941, 27.7% in 1942, 22.7% in 1943, 10.7% in 1944, and 1.5% in 1945 when the war wound down – for an average of 17.5% a year.
By contrast, the 5 years following saw an inferior record (although still relatively good): unemployment in 1946-8 rose to and stayed at 3.9%, increased to 6% in 1949, and 5.2% in 1950. GDP saw an average growth rate of 5.8%.
It’s not even close.
November 1st, 2009 at 12:27 pm
Bob Roddis:
As far as 1920 goes, I’m forced to ask – so what?
Real intellectual endeavor does not stop with collecting one data point and jumping up and down saying “I’m right!” Here in the U.S, we have historical data on dozens of recessions – and a lot of them took place before the Fed was established and ruined everything for you Austrians.
And you know what? They vary. Some were long, others were short. Some were sharp, others were mild. But unless you can at least expand your theory to a larger sample size than just 1 case, there’s no reason why the rest of us have to give you or the Austrians credence.
November 1st, 2009 at 12:30 pm
I love these posts. The economic crazies are hilarious. The cognitive dissonance is astounding. I especially love Bob Roddis. Remember when I asked him to explain why, since Keynsianism we’ve had no depressions? And why 1920 is the only example in the history of the world he can find? And why there were many long and painful depressions before 1913 when we were in Austrian heaven with a gold standard and no central bank? I remebet the answer I got. This is why you sit at the kids table with the Marxists and other discredited ideologies. Soon neocons will join your table, they certainly don’t belong at the adults table.
November 1st, 2009 at 12:37 pm
#34 – note that GDP in 1937 was still more than 10 percent under the 1929 number – and the fact that growrth slowed (in percentage terms) after the bounce back from the near halving of GDP by 1933 is not a huge surprise.
Also note that post WWII, with the rest of the industrialized world in ruins (or opted out of the world trade system, or both), it was a whole lot easier for the US to service the debt.
Right now, we face an increasingly competitive world (all of Asia and India), and we have a huge and growing pile of debt to service. Adding new entitlements whose costs will only go up seems like a risky move – there’s simply no possibility of the safe (in terms of US export potential) environment of the 1950s and 1960s returning. And if interest rates rise, we’ll have two awful choices: inflation to “cure” the debt, or default.
November 1st, 2009 at 12:44 pm
This is why Economics is a worthless field of study. Any either field of study, when faces with a cataclysmic crisis in that field, would start gearing up to actually solve this problem.
Economics? Too busy arguing about economic problems 100 years ago, explaining why their obviously wrong theories are still valid, and demanding that people not demonize rich people.
Economics is a science like Eugenics and Ethnology were sciences. It only exists entirely to alleviate the guilt of rich people while they destroy the world.
November 1st, 2009 at 12:55 pm
James – at least according to Eric Rauchway’s numbers, real GDP actually was not under 1929 in 1937, nor did it dip below 1929 even during the recession.
November 1st, 2009 at 1:14 pm
Well then James, you fucking moron, you should support restoring the taxation levels to those of Clinton, or maybe Eisenhower so that we can get the Reagan/Bush deficits under control – after we get the economy moving given the massive damage caused by the idiots you supported over the past eight years and whose incompetence/malice gave us the shitty economy you keep complaining about.
November 1st, 2009 at 1:31 pm
Re: You know, I’ve never heard a Keynesian actually explain how we got out of the 1921 depression/recession
The 1920 recession is the only case where doing nothing worked. That’s because it wasn’t a normal recession (and certainly nothing like this one). It was caused by the transition from a war economy back to a peace economy. If you look at other recessions where nothing was done to restore the econopmy (the 19th century offers some good examples) the results of inaction were usually calamitous.
November 1st, 2009 at 1:34 pm
Well, there is another way we could cut the deficit.
End all transfer payments from rich states to poor states.
I can just hear all those fiscal conservatives in the GOP getting behind this plan.
Of course, that would not only balance a lot of the deficit, it would also reward the rich states for voting – with the exception of Texas – for Barack.
I continually fail to understand why we can’t have a really ruthless spoils system. Why should my family in New York subsidize unreconstructed racists in Alabama or Mississippi? Or Bible Thumpers elsewhere?
November 1st, 2009 at 1:38 pm
There’s a big difference here between people who think that ameliorating the ill effects of a depression on the general population is intrinsically a good thing, whether or not the depression itself is ended, and those who think that ameliorating the results is neutral or (more often) a bad thing.
The law of the jungle and original sin play abig role in creative destruction and Mellonism: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.
This breaks Godwin’s law, but I’ve alwasy wondered whether German economists were talking creative destruction and Mellonism between the two wars.
November 1st, 2009 at 1:43 pm
World War II didn’t end the depression. The end of World War II did. Most people’s standard of living was considerably lower in 1941-1945 than in the immediately preceding years.
Galveister: The economy was booming during the war years, and The Great Depression by this time had certainly ended. It’s true the government imposed rationing and high taxes between Pearl Harbor and Tokyo Bay, and that constrained consumption. But what of it? If what you really mean to say is that you don’t think sharp tax increases + massive increases in military expenditures + rationing would be a wise course of action for the government to follow right now, just say it. Most people, me included, would probably agree with you. No need to look like a fool, or engage in ludicrous historical revisionism, to make such a banal point.
November 1st, 2009 at 5:34 pm
#40 – Every 1% increase in the marginal tax rate on “the rich” will bring in an additional $6B or so – and that’s assuming that they don’t put their tax specialists to work finding ways around those rates (hint: they will, and the top people in Congress will make sure that appropriate loopholes exist: they always do).
Given that the deficit this year is between $1.4T and $1.8T (depending on whose numbers you care to believe), that looks an awful lot like the proverbial drop in the bucket. Maybe it’ll make you feel better to raise taxes, but don’t fool yourself into believing that you can fund new programs or drive the deficit down on the backs of “the rich” – there simply aren’t enough of them.
The only way to raise enough tax revenue to make anything like a dent in the problem is an across the board tax raise, including those who currently pay no income tax at all (a pretty large chunk of the electorate, as it happens).
This really isn’t an ideological issue; it’s a simple math problem. You can grind your teeth, wail, and swear all you want, but that’s just the way it is. What everyone – Republicans as well – needs to get into their heads is that the time for showering money on the sacred cows “because it’s our turn” is long past. It’s time to actually prioritize the spending, and get rid of things we don’t actually need.
Like, say, most of the overseas military bases. Like an expansion of the war in Afghanistan. Like the colossal health care “reform”. Like unlimited, uncontrolled immigration. And so on.
November 1st, 2009 at 8:19 pm
JamesRobertson – I’m afraid your numbers on how much taxing the rich will generate are off. The House surcharge on the rich is costed out to $54 billion per year.
If you multiplied that by 10 (to go from a 1% increase to a 10%), you’re looking at cutting the deficit by about a third just on income – so you still have capital gains, estate tax, and corporate taxation.
November 1st, 2009 at 8:30 pm
#46 – As we saw in MD when a millionaires surtax was added, that revenue won’t materialize. What MD learned is that the rich have options that the rest of us don’t have, and they can shuffle things around to guard income. MD actually lost money from the upper tax bracket after the surcharge; the treasury dept will end up learning the same lesson.
It’s easy to spot extra tax revenue when you use static scoring; it’s more difficult when you factor in the rational actions of people who can afford good accountants.
November 2nd, 2009 at 1:01 am
It’s easy to spot extra tax revenue when you use static scoring; it’s more difficult when you factor in the rational actions of people who can afford good accountants.
James, if there is some creative accounting that would cause people to save money in taxes, then that accounting would have been done under the previous tax regime to save money on taxes, because money is money.. assuming, of course, that the person is a rational actor.
November 2nd, 2009 at 7:27 am
Re: As we saw in MD when a millionaires surtax was added, that revenue won’t materialize.
What Maryland learned is that upper income people tend to lose a lot of income in a severe recession.
November 2nd, 2009 at 8:32 am
#49 – … and guess what, we are in a severe recession. Which means that “soaking the rich” won’t generate much. And the very rich do have ways of guarding wealth from taxation.
November 2nd, 2009 at 11:08 am
Regarding the New Deal, real unemployment was 24.9% in 1933 (19.3% in No-Deal Canada) and had dropped to 14.3 in 1937 (9.1 in No-Deal Canada). By 1938, unemployment was back up to 19%, (11.4 in Canada), 1939 17.2% (11.4 in Canada), 1940 14.6 (9.2 in Canada) and 1941 9.9% ( 4.4% in Canada). I don’t count the make-work jobs because if the recovery had been sound, those people would have been employed in the private sector with a low unemployment rate like after the non-Keynesian program of the 1920s. Real prosperity didn’t return until after FDR died, went straight to hell, and Congress cut spending by 2/3 after WWII.
As to why we haven’t had a “depression” lately, it’s because until recently, we haven’t engaged in all of the noodle-brained nonsense of the New Deal and that nitwit Hoover. We haven’t tried to keep prices artificially high and we haven’t raised taxes to insane rates as in the 1930s.
We’ve had plenty of Keynesian induced recessions but in 1981, Democrat Volker cleaned things out for quite awhile with his 20% interest rates. We’re sinking into a depression now.
This claim that I haven’t explained pre-Fed panics is nonsense. Try here.
Further, I cited Tom Woods’ book “Meltdown” which also goes into detail about pre-Fed panics. One can always tell that the Austrian critic has not read Woods, Paul or De Soto when they make the claim that “Austrians ignore pre-Fed panics”.
November 2nd, 2009 at 1:39 pm
Even if you DO practice fiscal restraint, average voters will not believe it. You can truthfully tell them we cut $xx billion dollars out of the budget and they simply will not beleve you. As far as average voters are concerned, spending only goes up. Only income and employment matter.
November 2nd, 2009 at 1:42 pm
Obama needs to do a national Last Known Good Configuration economic reboot and set everything back to what it was under Clinton. Whatever that was, it balanced the budget. Republicans can boo hoo all they want about this or that detail but that is the last thing that worked.
November 2nd, 2009 at 5:28 pm
Bob Roddis:
“I don’t count the make-work jobs because if the recovery had been sound, those people would have been employed in the private sector with a low unemployment rate like after the non-Keynesian program of the 1920s.”
This is argument in bad faith – you’re defining yourself to your answer by saying that you’re going to analyze the New Deal’s success rate on lowering unemployment by ignoring its primary mechanism for dealing with unemployment.
Jobs are jobs – people who worked for the WPA showed up for work in the morning, did work which had real and lasting economic value, got paid wages and paid taxes on them, then went out and spent the wages. They were employed, by the government.
Second, you can’t assume that those people would have gotten jobs if the New Deal hadn’t happened – because we know for a fact that it didn’t happen between 1929-1933, and it certainly didn’t happen during the recessions of the 1870s or 1890s. And your link proves nothing – you’re basically arguing that previous recessions happened because banks are banks; fractional lending is what banking is, since the days when banks were located in goldsmitheries.
November 3rd, 2009 at 6:59 am
Mr. Attewell:
I will concede that govenment help in the form of make-work jobs might have been the humanitarian thing to do. I won’t concede that they solved the government-induced structural problems that caused and maintained the Great Depression. Indeed, the alleged necessity of those make-work jobs demonstrates that the New Deal was not causing a near-term return to prosperity which is further demonstrated by the double dip of 1937.
November 3rd, 2009 at 11:17 pm
It seems left-liberals, like this blogger and our previous and current Presidents, never question why resources get misallocated to begin with… but I can see it now. “Because everyone is too stupid left to their own devices.” Right? Nothing to do with banks being provided with an endless supply of capital to lend out to unsustainable projects to fuel a boom that’ll surely die after a few years. Lo and behold, take away this endless supply of money, and a boom quickly ends when… *gasp* the bank runs out of capital to lend out.
It’s akin to being a child and tricked into a get quick rich scheme. Being a child, and your income is limited to the amount your parents can give you, the scheme ends prematurely, without causing much harm. Now imagine if your parents had the ability to create an infinite amount of money, since they are, in fact, the Federal Reserve, to which they can pass it on to you. Now imagine if every kid in your block has access to this infinite supply of money, even if it’s loaned at 1% interest [Alan Greenspan's feds fund rate in 2003]… there would surely be a lot of happy Nigerian princesses around. When everything is realized to be not what it’s made out to be is when pain settles in [just like a drug's addicts crash], and a recession is suffered. The problem is not the crash, but the start! There are too many people and too much money working in the wrong areas! But, nooo… let’s never let resources from being assigned to work in areas that actually produce wealth.
As it relates to this topic, it’s painfully obvious, as demonstrated so blatantly clear in Harding’s brilliant handling of the Depression of 1921, that the best course of medicine is to reduce the size of government’s burden on the working man, and allow resources to be reallocated to wealth producing areas as quickly and painlessly as possible.
Rather, left-liberals like Bush, and now Obama, would rather see the band-aid pulled ever so slowly, tearing hair by hair from our collective armpits, than getting it over with relatively painlessly and quickly like Harding allowed in 1921.
Obama, apparently, saved or created 650,000 for the mere price tag of $787 billion of the stimulus package– nearly $1mil/job! If that money was left for businesses to employ, rather than being sucked away by the government into an abyss, many more jobs would have been saved or created. Even with regulatory overhead, it costs a company approximately $100,000 for a company to employ someone whose salary is $50,000, and that’s still 10x better than Obama’s performance.
Nevermind this simple mathematics, let’s let history speak. We have the free-market Harding and the interventionist Hoover (who actually pleaded his interventionist ways with Harding as his Secretary), both of whom had dealt with Depressions, with drastically different outcomes… I wonder which path is better… Suffice it to say it’s not the path Bush, and now Obama, is following.