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Monday, November 24, 2008

"Dealing" With Revisionists

I'm not an economist.

Neither is George Will. And Ed Morrissey at HotAir is just plain stupid.

Considering that fact that so many within the conservative realm will take any and everything that Will says as gospel, it's no suprise that they jumped for joy when he pointed to FDRs "New Deal" as one of the ( if not THE ) root cause that The Depression lasted as long as it did. However, Paul Krugman ( you know, that guy that just won the Nobel Prize for Economics ) had a quick and truthful rebuttal to Will's right-wing nonsense:

Ed Morrissey comes into the equation not so much hanging on Will's coattails - though I would imagine that he felt a bit more comfortable knowing that Will initiated the talking-point - but in reference to a Washington Post article where writer Lori Montgomery speaks about the simularities between what Obama is postulating and what FDR did with the "New Deal".

Portion cited from Montgomery's article:

The campaign did not release an estimate of the number of jobs that his latest proposal would create. But congressional aides who have been involved in developing stimulus proposals said that any plan to create 2.5 million jobs is likely to be significantly larger — probably well over $200 billion, or between 1 and 2 percent of the gross domestic product.
Such a plan would be bold by historic standards. President Bill Clinton, facing a weak economy when he took office in 1993, proposed a $16 billion stimulus package, which was blocked in the Senate. Obama’s proposal would be an order of magnitude larger, even when adjusted for the larger size of today’s economy.
Some economists have compared Obama’s proposals to the spending spree President Franklin D. Roosevelt launched during his early months in office in 1933. Roosevelt offered jobs programs, such as the Civilian Conservation Corps, and cash for public-works projects, such as the Tennessee Valley Authority, in hopes of easing the pain of the Great Depression.

Ed Morrissey's predictable reaction:

Lori Mongtomery apparently took pains to use the phrase “in hopes of”. FDR certainly hoped to alleviate the pain of the Great Depression with his experiment in federal mobilization of the civilian workforce, but he failed to do so. FDR spent years pulling capital out of the private sector and creating civil-service jobs that underproduced and inefficiently utilized the capital. The end result was a prolonged depression that only ended when FDR was forced to partner with private enterprise on the war effort in the 1940s.

While Morrissey's schtick is more grounded in the "the media is in-the-tank-for-Obama" way of thinking, you can still feel the flow of what Will started.

So, what does all this mean?

How do we know that George Will and Ed Morrissey are drinking their own bathwater?

Just ask Brad Delong who offers up the chart below as proof.

He goes on to state the following:

I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.

The interruption of the Roosevelt Recovery in 1937-1938 is, I think, wel understood: Roosevelt's decision to adopt more "orthodox" economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn. And once those two factors had run its course the continuation of Roosevelt's policies was no obstacle to an investment recovery driven by war-related exports monetary expansion produced by capital flight from Europe.

You can argue--and I occasionally do--that had the Supreme Court not ruled the NIRA unconstitutional it would have exerted a significant drag on medium-run economic recovery. But the Supreme Court did rule the NIRA unconstitutional, 9-0, Brandeis voting alongside MacReynolds.

Guess what Mr. Delong does - he's an economist.

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