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If we REALLY want to emulate FDR's solution to the Depression, we're going to have to provoke Japan into attacking Pearl Harbor again.
Somehow, I don't see that happening. Especially since Hawaii is more a prefecture than a state, anyway.
If the US provoked Japan; then Grenada, Iraq, Panama, North Vietnam, and Afghanistan flat out attacked the US. Because calling what the US did "provocation" is an overstatement at best.
Fiscal policy played a relatively small role in stimulating recovery in the United States. Indeed, the Revenue Act of 1932 increased American tax rates greatly in an attempt to balance the federal budget, and by doing so dealt another contractionary blow to the economy by further discouraging spending. Franklin Roosevelt’s New Deal, initiated in early 1933, did include a number of new federal programs aimed at generating recovery. For example, the Works Progress Administration (WPA) hired the unemployed to work on government building projects, and the Agricultural Adjustment Administration (AAA) gave large payments to farmers. However, the actual increases in government spending and the government budget deficit were small relative to the size of the economy. This is especially apparent when state government budget deficits are included, because those deficits actually declined at the same time that the federal deficit rose. As a result, the new spending programs initiated by the New Deal had little direct expansionary effect on the economy. Whether they may nevertheless have had positive effects on consumer and business sentiment remains an open question. United States military spending related to World War II was not large enough to appreciably affect total spending and output until 1941.
No, the point you missed was over the absurdity of using the up's and down's of any emotion-driven market as a measure for the effectiveness of economic policy. In such a world, you would conclude that New Deal policies simply swamped those implemented after the tulip collapse, but you'd also have to take up the idea that 1929 stock prices had been inflated to unsustainable levels, such that return to those levels would by definition have been a senseless gauge to go by.
The FDR revisionists simply need to stand up to the utter hollowness of their arguments. They will ONLY discuss for instance the END of the Depression because they can claim that the true END didn't come until after the war started, so it must really have been that war that did it. Try discusiing what happened along the way. What happened to GDP? What happened to National Income? What happened to consumer confidence? What happened to the burgeoning socialist movement and calls for scrapping capitalism altogether? The New Deal saved your free-market a$$e$, created a social contract that hundreds of millions have benefitted from, and laid the groundwork for the rise of the middle class that eventually led to your being as comfortable as you are today.
By contrast, right-wing policies have been consistent failures and achieved nothing.
I know where you were coming from, I was just having a little fun with you. What I'm trying to point out is that both sides of this arguement are picking and choosing data and charts to try to justify their position. I think we're in agreement that the Great Depression would have ended with or without the ND, due to the nature of economic cycles. The question is did the ND help or hurt the recovery. I would like to see more data from a time scale well before and well after the GD to try to make correlations. The Dow one was one of the few I came across in a few minutes with google. One chart I would really like to see is GDP vs tax rates, something I have never come across. Didn't FDR raise the top marginal tax rates to a very high level (around 90%) around '37-38?
Edited to add, I just caught BigJon's post as to the tax rate increase of '32.
If the US provoked Japan; then Grenada, Iraq, Panama, North Vietnam, and Afghanistan flat out attacked the US. Because calling what the US did "provocation" is an overstatement at best.
That's debatable. The Japanese Exclusion Act was nakedly racist and the oil embargo against Japan was nakedly aggressive, since Japan had no petroleum reserves of her own. Whether these acts justified an attack on the US is one thing; denying tnat they were aimed aggressively and insultingly at Japan is quite another.
However, the actual increases in government spending and the government budget deficit were small relative to the size of the economy. This is especially apparent when state government budget deficits are included, because those deficits actually declined at the same time that the federal deficit rose. As a result, the new spending programs initiated by the New Deal had little direct expansionary effect on the economy.
Which reinforces the point many economists are making, that the current package may be too small, given the size of our economy. China too has come out with a package to revive its economy, that is twice as large as America's recovery/reinvestment program considering relative GDP.
That's debatable. The Japanese Exclusion Act was nakedly racist and the oil embargo against Japan was nakedly aggressive, since Japan had no petroleum reserves of her own. Whether these acts justified an attack on the US is one thing; denying tnat they were aimed aggressively and insultingly at Japan is quite another.
The embargoes against Japan were in response to them rampaging through China and other brutal actions. Certainly a justifiable response to one country invading, raping and taking over another.
I would not want FDR as my budget or finance director, but he was a great wartime leader and knew better than the isolationists of what was to come.
It's not the war that stopped the depression. The war ended unemployment because so many young men were removed from the work force. After the war was over, every other developed nation was bombed and burned to oblivion and definitely not manufacturing anything. We sold our products to the entire world through the 50s with little competition. We could charge what we liked because we had a virtual manufacturing monopoly. Since then our advantage has steadily decreased, yet we are still doing things as though nothing has changed. We have the second highest tax rates on business behind only Japan. This adds to the cost of our already overpriced exports, yet we cannot understand why we have trade deficits and unemployment. We have to ask ourselves, What is our advantage in the world's marketplace? Right now it is nothing. Until we correct that, we can throw all the money in the world into our economy and it won't change a single thing except to blow up the national debt and pay off Democratic supporters.
It is obvious, you are nothing but a right-wing shill. I will not even try to examine extremely complex events like the Great Depression objectively. I will automatically dismiss any and all articles and studies that do not meet my pre-existing biases while accusing you of bias. I will ignore that economists and economic historians are divided on what exactly caused the Great Depression, what sustained the Great Depression, and what ended the Great Depression. I will ignored that economists and economic historians are divided on the New Deal. I will ignore that many economists and economic historians who think that the New Deal was a good thing think that many regulations and programs that were enacted by the New Deal were counter-productive. I will ignore that many critics of the New Deal think that many regulations and programs that were enacted by the New Deal were benefitial.
Although I am a reasonably intelligent person, I am extremely narrow minded and reactionary. I realized at one point in my life that I am the ultimate arbitor of truth and anyone who disagrees with me must be lying, stupid, or ignorant. My worldview lacks subtly and nuance. I find it difficult that sometimes both sides can be right and sometimes both sides can be wrong. For instance I find it hard to believe that some New Deal regulations and programs were benefitial such as the SEC, the public works programs, rural development, and others. Some New Deal programs were destructive like price controls and farm subsidies. Some were benefitial in the short term like Social Security, but were fatally flawed and may prove to be counter-productive in the long-term. This confuses and angers me. It makes deification and demonization much more difficult.
The embargoes against Japan were in response to them rampaging through China and other brutal actions. Certainly a justifiable response to one country invading, raping and taking over another.
I would not want FDR as my budget or finance director, but he was a great wartime leader and knew better than the isolationists of what was to come.
And the Japanese exclusion act? Yellow Peril, anyone?
But hey. We can always put thenm in camps. That's justifiable, as well...
Although I doubt that the stimulus bill will do much to help, I sincerely hope that it does work. I have been unemployed for over two months with no UI to back me up and I have NEVER in my life been so long without even an interview for a job.
I note that your article completely ignores the downturn of 1937 when government spending, too small to affect the economy, dropped followed by a precipitous drop in GDP.
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Christina D. Romer December 20, 2003
