"We know for sure that the big spending programs of the New Deal did not work." So said Senate Minority Leader Mitch McConnell (R-TN) in a recent press conference. McConnell's remark is part of a rather concerted effort of late to discredit President Obama's stimulus approach by discrediting the similar ideas Franklin D. Roosevelt put into effect over 70 years ago to combat the Great Depression. The most recent intellectual justification for the idea that the New Deal made the Depression worse comes from a 2004 book, FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, by Jim Powell of a libertarian-oriented think tank, the Cato Institute.
McConnell and his friends are really grasping at straws on this one, because the New Deal was spectacularly successful. In the four years before Roosevelt took office the national GDP had been nearly cut in half, falling from $103.6 billion in 1929 to $56.4 billion when he took office in 1933. Unemployment went from 3.1% in 1929 to 24.8% in that dismal year of 1933, and that was not the full picture. Many more had part time work but needed a full time income. The Dow had lost over 75% of its value and the stock index stood at 60.29 in late 1932.
Roosevelt's New Deal attempted to restore demand in the economy by initiating infrastructure programs to get money into the hands of the unemployed while building national assets. Sound familiar? There were a number of New Deal reforms to restore the financial system to health too, but there isn't time to discuss them here. FDR boosted government spending by 40% in 1934 and another 28% in 1935. By 1935 the federal government spent $8.2 billion, a 78% increase over Hoover 's last budget.
The effects of this infusion were remarkable. GDP grew 10.8% in 1934, 8.9% in 1935, 13% in 1936, and 5.1% in 1937. The cumulative effect: national output rose an astonishing 63% in four years. The Dow Jones Index doubled to 120.85. Unemployment was still high, but it had been cut by 10.6%, another excellent performance. The contention that, "the New Deal did not work" is glaringly false.
Critics point to a downturn in late 1937-early 1938. GDP fell 3.4% in 1938 and unemployment shot back up from 14.2% to 18.9%. But this "Roosevelt Recession" actually proves the efficacy of the New Deal stimulus approach. In 1937, on the advice of fiscal conservatives concerned about deficits, FDR had reduced spending by 8% and was in the process of cutting another 10.5% in 1938. But when the bad numbers started to come in he changed course in 1938, rushing another $2.3 billion infusion into his outlays for 1939. The slide abruptly ended and 1939 saw a return to a phenomenal growth rate of 8.1%. This episode demonstrated not only that the economy remained shaky and needed continued stimulus, but that the New Deal approach was quite effective in providing it.
George Orwell once wrote, "He who controls the past controls the future." By attempting to distort the record of the past, neo-Hooverites like Sen. McConnell and his echo-chamber colleagues in congress and out are attempting to close off options in the present. Because they have an ideological approach to policy rather than a pragmatic one they cannot accept data that do not conform to their preconceived biases. That is why they continually fail in policy roles, and why it has been eighty years since their prescriptions last brought prosperity. In these most perilous times, brought on by their latest tenure of ineptitude, it is all the more important to combat their misrepresentations of the historical record.
2 comments:
It gets worse, they now claim the depression is the Obama legacy.
I'm not bothered by the same nut-jobs with the same failed ideas, what disturbs me is that all six TV networks dutifully provides them (the 8%ers,)equal time, all day, as if we're not witnessing the results of their ideas applied.
Yes, one might suppose that good journalism would do better than just report the "he said, she said" claims of both sides, but would actually evaluate them to see whose contentions were more closely borne out by actual facts and events. It is not good reporting but lazy reporting to include the spoutings of flat earthers, Holocaust deniers or New Deal catastrophizers without comment alongside purveyors of fact as though both were of equal validity.
Post a Comment