Matt Yglesias

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.

CFR’s Benn Steil Doesn’t Know the Velocity of Money is a Variable

Amity Shlaes got fired from The Financial Times for being incompetent and went on to write a book about the New Deal that (a) is riddled with errors of fact and interpretation and (b) reached conclusions about economics that conservatives like. Since (b) is all that’s required in the contemporary United States to enjoy a prosperous career as a high-profile public intellectual it doesn’t surprise me in the least that she is enjoying just such a career. Nor is it surprising that a slipshod book would become congressional conservatives’ bible as they ponder Barack Obama’s economic recovery proposals.

I was, however, initially surprised to see that she’s not hanging her shingle at AEI or Heritage or Cato or the like but instead at the Council on Foreign Relations which one thinks of an outfit more likely to be guilty of being soporifically dull than batshit rightwing.

It seems, however, that Shlaes is not alone. A chap named Benn Steil is director of international economics at the Council on Foreign Relations. He also, as Brad DeLong points out, doesn’t seem to know that the velocity of money is a variable. In other words, cash and cash-like monetary instruments can circulate through the economy more or less quickly. This is a really basic error, but the terminology and the concept are going to be a bit obscure to a lot of people. It would be nice if we had institutions like the CFR around to help explain them to a broader public. Instead, we have institutions like the CFR sowing confusion.