Showing posts with label New Deal. Show all posts
Showing posts with label New Deal. Show all posts

Sunday, December 12, 2010

Michael Barone is as usual very perceptive.
The whole thrust of [Obama's] first two years -- the stimulus package, the health care legislation, the vast increases in government spending -- has been to put programs in place that have done little or nothing to stimulate economic growth.
That's not accidental. The template for the Obama Democrats' policies, the New Deal of the 1930s, was not designed to stimulate economic growth, but to freeze in place a tolerable but not dynamic status quo.
The New Deal's father, Franklin Roosevelt, believed that the era of economic growth was over, just as many contemporaries believed that technological progress was at an end (how far could you go beyond the radio and the refrigerator?). FDR, like his cousin Theodore, was an affluent heir who had contempt for men who built businesses and made money. They were "economic royalists" and "malefactors of great wealth" -- sentiments echoed by Obama last week.
The initial New Deal program, the National Recovery Act, set up 700-plus industry codes to hold up wages and prices. That made some sense in a time of deflationary downward spiral, but proved unsustainable over a longer term.
Later New Deal programs strengthened labor unions, in an attempt to protect current workers and freeze work rules in place -- which tended to block the flexible management practices that eventually gave a competitive edge to later foreign-based auto companies. New Deal transportation policy protected existing trucking firms from competition -- a policy overturned by the likes of Ralph Nader and Edward Kennedy in the 1970s.
High tax rates on high earners and continued uncertainty over increased regulation and unionization led to what economists called a capital strike. Job creation was dismal as the 1930s went on, and unemployment hovered over 10 percent until wartime mobilization began in the 1940s.
We have headed down the same dead end-path. I like Barone's point that the New Deal was not intended to expand the economy but to maintain the status quo. The view in the 30s was that we had maxed ourselves out, the frontier had closed, we had no where to go. Technology was the same way: we could never get beyond radios and refrigerators, lol.

Friday, May 28, 2010

Ed Morrissey reports on a study that finds increased government spending results in unemployment. "Instead of providing a stimulating effect to the economy, government spending creates pressures on private industry to reduce staff and investment."

Does that make it clear why the New Deal prolonged the Depression?

Tuesday, January 5, 2010

That old 1937 feeling

Paul Krugman warns about getting that 1937 feeling. Roosevelt cut back on the New Deal because he thought the Depression was over, and the result was a recession in the midst of the Depression. So Krugman's saying we can't cut back on government spending now.

But nothing that the New Deal with all of its alphabetic agencies had done down to 1937 ended the Depression, or afterward either. When will people learn that World War II ended the Depression. Unemployment was still 15 percent in 1940? The 1930s have plenty of lessons to teach, but this is not one of them.