'The "Experts" Told Them So'

Paul Krugman sets the record straight. Again:

Amity Shlaes strikes again, by Paul Krugman: When you hear claims that the New Deal made the depression worse, they often come directly or indirectly from the work of Amity Shlaes, whose misleading statistics have been widely disseminated on the right.

Now, Ms. Shlaes has found a new target: John Maynard Keynes. There’s a lot to critique in this piece, but this one takes the cake:

But the most telling fact about the new rush to spend is that its advocates have insisted on invoking the New Deal. They tend to gloss over the period when the phrase, “We are all Keynesians now,” was actually first uttered: the mid-1960s. (Uttered by Friedman, in fact, though he meant only that we all work in the terms of the Keynesian lexicon.)

The Great Society of that period was the ultimate Keynesian experiment, and it didn’t work very well.

Grr. Keynesianism says that deficit spending can help create jobs when the economy is depressed. The Great Society wasn’t deficit spending, it wasn’t intended to create jobs, and the economy of the 1960s wasn’t depressed. It was social engineering; we can talk about how well or badly it worked, but it had nothing whatsoever to do with Keynesian economics.

Now, LBJ did engage in some Keynesian economics: namely, he imposed a contractionary fiscal policy in the form of a tax surcharge in an effort to cool an overheating economy.

Alas, pretty soon we’ll have all the usual suspects saying that the Great Society proves that Keynesian economics doesn’t work — after all, the “experts” told them so.

Comments

[anne]

Understanding how well indeed the Great Society worked simply takes looking to the dramatic decline in poverty in America that came through the 1960s, and looking to the income and wealth gains among the aging as poverty reduction, Medicare, and later the indexing of Social Security benefits took effect. While Medicare and Social Security indexing remained, poverty programs were fought against and limited with a corresponding increase in poverty as the Great Society was belittled just as the New Deal has been belittled.

[anne]

http://www.cbpp.org/8-26-08pov.htm

August 26, 2008

Poverty and Share of Americans Without Health Insurance Were Higher in 2007 — and Median Income for Working-Age Households Was Lower — Than at Bottom of Last Recession: For Poverty Rate and Non-Elderly Median Income, Worst Performance on Record For Any Six Years of Economic Growth
By Arloc Sherman, Robert Greenstein, and Sharon Parrott

The number of Americans in poverty climbed by 816,000 in 2007, while the poverty rate remained statistically unchanged, overall median income rose modestly, and the number and percentage of Americans without health insurance fell somewhat, according to Census data issued today. But the poverty rate remained higher, median income for working-age households remained lower, and the number and percentage of Americans without health insurance remained much greater than in 2001, when the last recession hit bottom.

This marks the first time on record that poverty and the incomes of typical working-age households have worsened despite six consecutive years of economic growth.[1] The new data show that in terms of poverty and median income, the economic expansion that started at the end of 2001 was the worst on record. The data provide fresh evidence that the gains from the expansion were quite uneven and flowed primarily to high-income households.

Moreover, the weakening of the economy makes it very likely that in 2008, poverty will rise, median income will fall, and the number of uninsured will rise.

The new Census figures show:

The poverty rate stood at 12.5 percent in 2007, which was statistically unchanged from the 12.3 percent level for 2006 but well above the 11.7 percent level for 2001. The child poverty rate climbed from 17.4 percent in 2006 to 18.0 percent in 2007.

Overall median income increased from $49,568 in 2006 to $50,233 in 2007, compared to $49,455 in 2001. But median income for working-age households (i.e., those headed by someone under 65) remained statistically unchanged from the 2006 level and was $1,100 below its level in the recession year of 2001 — and $2,000 below its level for 2000 when the previous economic expansion peaked. (All median income figures are adjusted for inflation.)

The percentage of Americans without health coverage fell from 15.8 percent in 2006 to 15.3 percent in 2007, and the number of uninsured declined by 1.3 million to 45.7 million. The improvement occurred because the increased enrollment in public programs — notably Medicare and Medicaid — more than offset a decline in the portion of the population with employer-sponsored coverage. The number and percentage of Americans without insurance remained, however, well above the figures for 2001. In that year, 39.8 million Americans, or 14.1 percent of the population, were uninsured....

[Not a continuing of the Great Society....]

[calmo]

Don't mind me...mind this: Grr. It doesn't look all that helpful, but tis.
More than primal.
Tis.
Possibly building on Setser's "Ut-oh", also more than primal.
Ok, try it, and see if it ain't so.
Gr. I'm off.

[anne]

http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

Historical Poverty Tables

Poverty Status of People by Family Relationship, Race, and Hispanic Origin: 1959 to 2006

1959 22.4%
1969 12.1
1979 11.7
1989 12.8
1999 11.9

2006 12.3

[Owner Earnings]

What To Anticipate Tomorrow And The Next Few Weeks

[anne]

Notice what the Great Society accomplished in terms of poverty reduction, and what was lost with the loss of impetus in the 1970s and on.

ttp://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

September 7, 2007

Poverty Rate: 1959 to 2006

2006...... 12.3
2005...... 12.6
2004...... 12.7
2003...... 12.5
2002...... 12.1
2001...... 11.7
2000...... 11.3

1999...... 11.9
1998...... 12.7
1997...... 13.3
1996...... 13.7
1995...... 13.8

1994...... 14.5
1993...... 15.1
1992...... 14.8
1991...... 14.2
1990...... 13.5

1989...... 12.8
1988...... 13.0
1987...... 13.4
1986...... 13.6
1985 ..... 14.0

1984...... 14.4
1983...... 15.2
1982...... 15.0
1981...... 14.0
1980...... 13.0

1979...... 11.7
1978...... 11.4
1977...... 11.6
1976...... 11.8
1975...... 12.3

1974...... 11.2
1973...... 11.1
1972...... 11.9
1971...... 12.5
1970...... 12.6

1969...... 12.1
1968...... 12.8
1967...... 14.2
1966...... 14.7
1965...... 17.3

1964...... 19.0
1963...... 19.5
1962...... 21.0
1961...... 21.9
1960...... 22.2

1959...... 22.4

[kthomas]

She has a cool name, though. She's kind of weird, having seen her speak at UC Berkeley some years ago. I thought she was a bit odd, though she seemed VERY articulate.

[calmo]

"VERY articulate" says kt who has seen her speak at UBerk...slightly different from hearing her speak, yes?
Ok...lots of body language then? (a different kind of articulation to be sure)
Maybe twas PowerPoint...only.
Grrrrrrr....
Let's cut to the chase: did she growl?
Or was she stuck in post-primal "bla bla" land...as laffy sometimes describes it?

[Imelda Blahnik]

Thanks anne for all your comments and links, I really appreciate them.

[Imelda Blahnik]

calmo....I may be misreading your comment, but you do realize that Krugman, not Shlaes, said "Grr" in the post above, right?

[ken melvin]

Could this Amity Shlaes have debated Arthur Okum? Held a candle for him? She reminds me of earlier iterations of Joe/Joel Klein that would tear down Harry Truman, Wm. Faulkner, etc. based on made up standards that ignored the context of the times. All too, too New Yorkish.

[anne]

Imelda, thank you.

http://ebooks.adelaide.edu.au/y/yeats/william_butler/y4c/part65.html

1919

The Cat and the Moon
By William Butler Yeats

THE cat went here and there
And the moon spun round like a top,
And the nearest kin of the moon,
The creeping cat, looked up.

Black Minnaloushe stared at the moon,
For, wander and wail as he would,
The pure cold light in the sky
Troubled his animal blood.

Minnaloushe runs in the grass
Lifting his delicate feet.
Do you dance, Minnaloushe, do you dance?
When two close kindred meet.

What better than call a dance?
Maybe the moon may learn,
Tired of that courtly fashion,
A new dance turn.

Minnaloushe creeps through the grass
From moonlit place to place,
The sacred moon overhead
Has taken a new phase.

Does Minnaloushe know that his pupils
Will pass from change to change,
And that from round to crescent,
From crescent to round they range?

Minnaloushe creeps through the grass
Alone, important and wise,
And lifts to the changing moon
His changing eyes.

[realpc]

I will try to remind everyone again, even though it's probably useless, that you can't infer causation from simple correlation. A careful and intricate analysis might give you some clues about what factors contributed to ending the Great Depression, or decreasing poverty in the 1960s, etc., although you still could not be sure.

Basically, everyone reads into history whatever they like to believe. Especially ideological zealots. It's so easy to select certain facts and ignore others, and to interpret things within a particular framework.

The only thing we can probably be sure of regarding modern economics is that all the ideologies are at least partly wrong. The Great Depression didn't end just because of economic engineering and federal government interventions, but some of those things may have helped. American poverty didn't decrease simply because of welfare, social security and labor unions, although they might have done some good in some contexts.

We have a mixed economy, like every other advanced contemporary nation. We do not choose between capitalism and socialism; we choose between degrees of each.

[calmo]

Well...yes, Imelda, (a name every bit as cool as Amity) it is Krugman that alerts us to Setser's "Ut-oh".

So, it's viral...just bla bla ing sayin, it could have started with bsetser...I'm sure he's proud (wouldn't you B?)

Ok, I needed to check Amity's bio:

http://en.wikipedia.org/wiki/Amity_Shlaes

and learn that she is an English BA grad...splaining kt's infatuation maybe mine too for others similarly undistinguished (Tanta chief among them).
Ok, I'm waiting for the next variant.
Prrrrrr? Fstt? Pshhh?

[Bruce Wilder]

realpc: "I will try to remind everyone again, even though it's probably useless, that you can't infer causation from simple correlation. A careful and intricate analysis might give you some clues about what factors contributed to ending the Great Depression, or decreasing poverty in the 1960s, etc., although you still could not be sure."

That one can not literally observe causality, physical or social, was an insight from the Enlightenment philosopher (and sometime economist) David Hume. Hume's view certainly recommends skeptical realism, but it does not lend any support whatsoever to the tendentious deceptiveness of Amy Shlaes.

History, as it occurred, is not consistent with the worldview of the National Review Online. Correlation. Causation. Duck soup. NRO = wrong about everything.

[anne]

Notice employment growth through the Great Society....

http://krugman.blogs.nytimes.com/2008/07/29/look-whos-talking-2/

July 29, 2008

Look Who's Talking
By Paul Krugman

Annual rates of employment growth, by president:

Johnson 3.8% *
Carter 3.0
Kennedy 2.6
Clinton 2.3

Nixon 2.1%
Reagan 2.0
Ford 1.6
Eisenhower 0.8
Bush I 0.6
Bush II 0.4

There's something happening here.

Obamanomics is a recipe for recession, ** declares Michael Boskin, the chief economic adviser during the administration of George H.W. Bush.

* Approximations.

** http://online.wsj.com/article/SB121728762442091427.html

[anne]

The years of Lyndon Johnson easily marked the strongest employment growth of any President since Eisenhower, and more easily the strongest reduction in the poverty rate, both accomplishments needing to be carefully attended to rather than ignored as is often the case or even denied. Again, where older persons were the poorest age distributed group when Johnson became President, they were rapidly becoming the most secure when the Presidency ended needing only the indexing of Social Security benefits along with Medicare and general poverty reduction.

[Bruce Wilder]

Michael J. Boskin: Yet despite his obvious general intelligence, and uplifting and motivational eloquence, Sen. Obama reveals this startling economic illiteracy in his policy proposals and economic pronouncements. From the property rights and rule of (contract) law foundations of a successful market economy to the specifics of tax, spending, energy, regulatory and trade policy, if the proposals espoused by candidate Obama ever became law, the American economy would suffer a serious setback.

As opposed to the tremendous boost that the American economy received from the ascendance of George W. Bush and his Republican Congress. These people have no shame.

[X Man]

This data seems to confirm my personal recollections of the high degree of egalitarianism in the U.S. during the 70s. In general, public schools were still quite good and conspicuous consumption meant buying German beer instead of the local brand. Rich people had nice rides (mostly Caddies or Lincolns) but not crazy European supercars. The economy was screwed up, but most everyone had enough to eat (and drink).

1979...... 11.7
1978...... 11.4
1977...... 11.6
1976...... 11.8
1975...... 12.3

1974...... 11.2
1973...... 11.1
1972...... 11.9
1971...... 12.5
1970...... 12.6

Oh, and did I mention that in the 70s nearly everyone was often drunk, stoned, or both? My own read of the growth of the radical right beginning in the late 70s is that the more sober Americans were sick of their less self-righteous countrymen having such a good time and not being poor.

[Ken Houghton]

Trust fund babies blathering about the evils of helping the poor.

Makes me long for the days of "Dog Bites Man."

[the buggy professor]

1) There's some confusion between the Great Society --- a term coined by LBJ for his government programs in 1965-65 --- and deficit spending.

And that confusion exists in the Krugman comments, Mark's comments, and the posted comments in this thread.

.....

2) JFK proposed the deficit spending, something new, as a way of dealing with the unemployment of 1960 and into the early part of his administration.

The actual changes in government taxes and spending came only in 1964, and had nothing to do with the Great Society per se.

....

3) The Great Society programs might have been partially funded by the JFK deficit policies, but the economy was badly distorted by the rising costs of the Vietnam war. We started escalating it in 1965, and within a year there were 500,000 US troops in Vietnam.

..

The Johnson administration refused to raise taxes to pay for the war. The combination of initial deficit spending, tax policies, the Vietnam war, and the like did increase GDP growth for a while and brought down unemployment . . . but the US inflation rate was rising steadily.

...

Worse, we were now exporting the inflation to our trade partners by means of an over-appreciated dollar, a heated economy, and massive imports.

...

5) The Nixon administration continued more or less along the same lines, and by 1970-71 our economy was in growing trouble, along with the economies of our trade partners . . . though in Asia our huge imports of the Asian-tigers and from Japan did set off a long boom there.

It was in the run-up to the 1972 election that Nixon declared that "we are all Keynesians now" --- echoing Milton Friedman's earlier, different remark.

.......

Incidentally, to end this post, Robert Lucas recently said that "in a foxhole we're all Keynesians".

..

Michael Gordon, AKA, the buggy professor.

Anne: Very much enjoy your links to poetry and literature. Started me reading Yeats again. Thanks

[calmo]

Michael Jackass Boskin...Duck soup is too good for this bum, this sack of indecency, this miserable scum bag, this little dump of misaligned human genes...

I cannot get my Grrrr to go, people.

Ken, not a recent Boy Scout, was not able to reproduce the wolf howl to punctuate his otherwise heartfelt post.
This B it, ken:
Owh-owh-oooooooowh.

[Lafayette]

Deep Denial

Shlaes is perhaps not worth the ink wasted on her. Expect more of that kind from the Rabid Right as they go deep, deep into denial.

They may rant over Keynesian Economics all they want. What have they to show for 8 years of Crony Capitalism? Except body-bags coming home to America, pollution unabated, a CA-deficit that is skyrocketing, one of America's most globally despised administrations and good riddance to a PotUS returning to Texas with his tail between his legs.

I could go on but the stench is too awful.

[Lafayette]

BP: Worse, we were now exporting the inflation to our trade partners by means of an over-appreciated dollar, a heated economy, and massive imports.

An over-appreciated dollar? Right. That IS buggy ...

It's the euro that is over-appreciated, not the dollar.

[Phil Rothman]

I guess Paul Krugman feels there's a moral imperative to take on an intellectual lightweight like Amity Shlaes and some readers of this blog feel like cheerleading from the sidelines; so be it. I'm far more interested in his critique of Cole and Ohanian's analysis published in one of the most comptetitive/prestigious academic economics outlets, the Journal of Political Economy:

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409

At least one of those authors believes the message of this JPE article remains quite relevant today:

http://www.newsweek.com/id/168626/output/print

[calmo]

Greetings laf, I see not only that you could go on, but that you do...
Good on you (Australian, yes?).
bp (buggy professor? ok, thanks for the steer...the carriage trade or entomology, you figure?) is sayin that the export-led economies were doing their best in the fx to keep the $ up...prolly right.
You following Setser's notes on the switch from Agencies to Treasuries (China esp) and the implications for funding US deficits?
Ut-oh.

[Bruce Wilder]

Cole and Ohanian, PHil?

They are hacks. If you've got the money, you can "hire" UCLA just as well as Brookings or Heritage. Sad, but true.

[calmo]

Welcome Phil (no intellectual lightweight, but no winner of the Spelling Bee Crown either) [ok, seriously, I live for spellin mistakes and "comptetitive" was pretty good].
Are U a Kantian scholar with that "moral imperative" stuff? There are students of philosophy salivating in the wings here just waiting for the smoke of the econometric jargon to clear...
Speaking of smoke, this is such a sumptuous intro, one of the most comptetitive/prestigious academic economics outlets, the Journal of Political Economy I need to ask: are you a contributor or possibly staff member of this outfit?
Ok, deed done though: I shall read the link you provide.

[Phil Rothman]

Bruce Wilder: By any reasonable metric of research activity, Cole and Ohanian are serious, highly accomplished scholars. Use of "hack" in this context, IMHO, is inappropriate and inaccurate.

Calmo: I assume you're familiar with the distiction between 'typos' and spelling mistakes. That said, I'm glad you got some enjoyment from tracking and commenting on my typo. If you follow my link, you'll see I'm an economist ( and if you explore that link a bit, you'll see that I specialize in time series econometrics); but I did indeed read Kant's 'Fundamental Principles ..." a long while ago.

[zerobeta]

On paper the Great Society and many other social programs look great and they come with many good intentions. Unfortunately, the reality of our two-party system causes them to be economically toxic for our country, in practice. The problem is for those who oppose a social program it is more politically viable to either undermine it, neglect it, or run a defecit and let foreign governments finance it.

It also indirectly causes government to assign financial value on its citizens as they move from assets to liabilities on the balance sheet.

I believe that the our war on drugs (and rising police state) and enormous (and growing) prison population is a direct response to rising welfare costs. It is much "cheaper" for the federal government to imprison the people it would otherwise put on welfare - because it transfers the cost burden to the states. The states then finance with municipal bonds, which produce income that the Federal Government does not tax. This is basically equivalent to what Enron did from an accounting standpoint. The war on drugs is just a way to better move these "liabilities" off the Federal Government's balance sheet. I think its somewhat peculiar that the price of marijuana or cocaine has been level or falling while every other major crop has felt the effects of inflation.

Another example is Bretton Woods II, which was brought forth by Nixon after the Great Society which essentially shifted the cost burden of these programs from US Taxpayers to foreign debt holders. While a cunning and somewhat brilliant tactical move, as time has progressed we are starting to realize that strategically this may not be the best move. I'm not saying this was the only motivation for it, but certainly one of them.

In addition, the change in calculation of CPI during the Clinton Administration has caused many to believe that it has been grossly understated for many years - which is a major input in the "indexing" of these benefits.

The economic inefficiency and negative externalities caused by the interaction of these programs and our political system diminishes any economic benefits they create. Since no politician would say "We can't afford you any more" or worse, "We do not believe that you are a cost worth bearing", they must engage in creative tactics to achieve their goals which are more costly in the long run.

[a]

"Keynesianism says that deficit spending can help create jobs when the economy is depressed."

I'd agree with that - it can. But at what cost, how many jobs created, and for how long? I'd say that taxing wealth and use the money to provide jobs, also creates jobs. Why is this approach worse than Keynesianism?

[ken melvin]

I suspect those who criticize the 'Great Society' etc. have never taken the time to asked what if they had not been implemented. Theirs is a world where one needn't be bothered with reality, one where one sits about in a circle of like minds and comments on clouds above that appear to resemble various aspects of a shared ideology.

[Juan]

Prof. Krugman should look in his own backyard. As an economics major at Princeton a few years ago, I was taught the New Deal made the Great Depression worse in no less than three classes... not convincingly, but enough to sow some healthy doubt I suppose.

[chas]

"[Krugman] sets the record straight?" Come on, why don't you try some objectivity for a start. Take a look at how wrong Krugman was regarding investment during the Great Depression..., and how right George Will was (an George is not even an economist!!!). Will you let this post go? Or will you just delete?
http://cafehayek.typepad.com/hayek/great_depression/

[anne]

http://delong.typepad.com/sdj/2008/11/lessons-from-th.html

Lessons From the Great Depression Blogging
By Brad DeLong

Private investment recovers to 1929 levels by 1937, as New Deal policies take effect [Graph]

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, well 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 National Industrial Recovery Act 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.

* http://www.jstor.org/pss/1927330

August, 1938

The Downturn of 1937
By Sumner H. Slichter

[anne]

Recording further the Great Society effectiveness:

http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

August 26, 2008

Poverty Rate: 1959 to 2007

2007..... 12.5
2006..... 12.3
2005..... 12.6

2004..... 12.7
2003..... 12.5
2002..... 12.1
2001..... 11.7 Bush II
2000..... 11.3

1999..... 11.9
1998..... 12.7
1997..... 13.3
1996..... 13.7
1995..... 13.8

1994..... 14.5
1993..... 15.1 Clinton
1992..... 14.8
1991..... 14.2
1990..... 13.5

1989..... 12.8 Bush I
1988..... 13.0
1987..... 13.4
1986..... 13.6
1985..... 14.0

1984..... 14.4
1983..... 15.2
1982..... 15.0
1981..... 14.0 Reagan
1980..... 13.0

1979..... 11.7
1978..... 11.4
1977..... 11.6 Carter
1976..... 11.8
1975..... 12.3

1974..... 11.2 Ford
1973..... 11.1 * Low
1972..... 11.9
1971..... 12.5
1970..... 12.6

1969..... 12.1 Nixon
1968..... 12.8
1967..... 14.2
1966..... 14.7
1965..... 17.3

1964..... 19.0
1963..... 19.5 Johnson
1962..... 21.0
1961..... 21.9 Kennedy
1960..... 22.2

1959..... 22.4 * High

[anne]

As women gained in rights:

http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

August 26, 2008

Poverty Rate: 1959 to 2006

Families with female householder no husband present

2006...... 30.5
2005...... 31.1

2004...... 30.5
2003...... 30.0
2002...... 28.8
2001...... 28.6
2000...... 28.5 Low

1999...... 30.5
1998...... 33.1
1997...... 35.1
1996...... 35.8
1995...... 36.5

1994...... 38.6
1993...... 38.7
1992...... 39.0
1991...... 39.7
1990...... 37.2

1989...... 35.9
1988...... 37.2
1987...... 38.1
1986...... 38.3
1985...... 37.6

1984...... 38.4
1983...... 40.2
1982...... 40.6
1981...... 38.7
1980...... 36.7

1979...... 34.9
1978...... 35.6
1977...... 36.2
1976...... 37.3
1975...... 37.5

1974...... 36.5
1973...... 37.5
1972...... 38.2
1971...... 38.7
1970...... 38.1

1969...... 38.2
1968...... 38.7
1967...... 38.8
1966...... 39.8
1965...... 46.0

1964...... 44.4
1963...... 47.7
1962...... 50.3 High
1961...... 48.1
1960...... 48.9

1959...... 49.4

[anne]

As Blacks gained in rights:

http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html

August 26, 2008

Poverty Rate: 1959 to 2006

Black individuals

2006...... 24.3
2005...... 24.9

2004...... 24.7
2003...... 24.4
2002...... 24.1

2001...... 22.7
2000...... 22.5 Low

1999...... 23.6
1998...... 26.1
1997...... 26.5
1996...... 28.4
1995...... 29.3

1994...... 30.6
1993...... 33.1
1992...... 33.4
1991...... 32.7
1990...... 31.9

1989...... 30.7
1988...... 31.3
1987...... 32.4
1986...... 31.1
1985...... 31.3

1984...... 33.8
1983...... 35.7
1982...... 35.6
1981...... 34.2
1980...... 32.5

1979...... 31.0
1978...... 30.6
1977...... 31.3
1976...... 31.1
1975...... 31.3

1974...... 30.3
1973...... 31.4
1972...... 33.3
1971...... 32.5
1970...... 33.5

1969...... 32.2
1968...... 34.7
1967...... 39.3
1966...... 41.8

1965......
1960......

1959...... 55.1 High

[paine]

johnson's war on poverty 22% -> 12 %
knocked the first ten points off the national rate
but only hyper employment
and free health and day care
can knock the next ten off

[anne]

Paine

johnson's war on poverty 22% -> 12 %
knocked the first ten points off the national rate
but only hyper employment
and free health and day care
can knock the next ten off

Interestingly, Nixon proposed legislation for a national day care system that was defeated by a mix of conservative Democrats and Republicans. Though I remember reading the vote was close, the idea, which is quite important, was never seriously raised again. Remind me now to disclaim ever being a feminist.

[anne]

Paine

johnson's war on poverty 22% -> 12 %
knocked the first ten points off the national rate
but only hyper employment
and free health and day care
can knock the next ten off

[Perfect, just perfect and achievable.]

[anne]

So that we understand how important these points are, we should think to the stereotypical Asian success story but notice that the poverty rate for families headed by an Asian woman in 2006 was 17.7% and has not been below 13.2% since 1987. Day care is a critical issue in terms of poverty reduction, along with health care and lots of employment and no excuses for why women are not working.

[paine]

anne

the point i think

simple fiscal thrust works
where capacity is slack
it can draw the system up to peak capacity
and where capacity is peaking
fiscal thrust induces further investment

more facilities not just new ones

the lesson of the period 33-39 vs 40-44

if you want to draw it the system to capacity
and beyond into net new per capita capacity

then run big enough deficits
or you'll pro-long the recovery un-necessarily

[paine]

lesson number 2

to really push real output to real capacity
you need mark up contols

we now could do this better
then the war production price board

[paine]

btw
retuning to 37-38

the over praised auto didact
and fed chair
mort eccles
out of fear of excessive "free reserves"
upped the required reserves
and he did this dirty credit contracting deed
at the same time morganthau
pulled his return to a balance budget surprise

two instruments ...two ....bloopers
macro perfect stymie

[paine]

anne
if the new deal has a
eal heel

its my beloved WPA

better we induce pri sec job expansion me thinks
then green corps building..."make work "
much like lbj's poverty dole
its humane its socially beneficial
but its politically unsustainable policy

better we knock off the twin headed flying people eater

looming general inflation and gaping fed deficits

these two
phobiana universalis
need drowning
and
now that grovers tub is availible ...

-------------
i'd rather we savagely cut payroll taxes
then up gub spending

yes the multiplier will be ..."way feebler"
as much is used to reduce
the growth of household indebtedness
but hey
the wage class will at long last
see and touch
the dembos giving THEM something

slogan

"its yours you earned it
we think in times like these..
u oughta
keep it "

[paine]

get america use to 10% deficits
and 2% unemployment

when the silk panama crowd screech inflation

roll out
the new economic mechanism
with its patented
two ply trade
growth and universal prosperity
speed way

a general mark up
cap and trade system
that controls
wage profit inflation completely
and
a dollar forex rate
that balances foreign trade

[anne]

Agreed.

[Julio]

paine,

et tu,
moonwalking backwards
away from the ignorati
watch for the wall behind you

its a teachable moment
change we can believe in
and dance to

[ken melvin]

Twixt toil and success lies amany dead afore their time. You'll not find me extolling these virtues to my fellow man 'til the day I see the rich and those born thereof busting theirs. Don't bring me your tired and hungry is good for the economy.

[paine]

do the chas .....cha cha cha

"Take a look at how wrong Krugman was
regarding investment during the Great Depression...,
and how right George Will was.."

chuckle-nomics like this
gives even von haystack
a laff track

[Bruce Wilder]

Phil Rothman: "By any reasonable metric of research activity, Cole and Ohanian are serious, highly accomplished scholars. Use of 'hack' in this context, IMHO, is inappropriate and inaccurate."

You might want to actually read the paper(s) in question. Like all good academics, they have assiduously published the same basic argument in a variety of venues. The argument has not improved with repetition.

Ohanian and Cole have argued that, if a classical, general equilibrium, Says Law model were accurate, if perfect competition in clearing markets represented the way the economy works, if Keynes were wrong and all-wet, then the U.S. economy would have recovered rapidly after 1933, although wages would have been depressed to low levels.

They observed, accurately, that wages in some manufacturing and mining sectors rose, with strong unionization.

That's their argument: compare and contrast an entirely imaginary, right-wing fantasy economy with the actual economy, and then blame the actual economy for falling short of the imaginary economy, with regard to certain, selected variables.

What makes this hackery of a low order is that Cole and Ohanian never test the realism of their imaginary economy.

The challenge for a general equilibrium model of the economy of 1933 is: how big do wage and price cuts have to be, to get to full-employment? Is there any reasonable, plausible path of wage and price cuts that leads to a full-employment recovery? It is a commonplace to say that the "fiscal stimulus" of WWII was the Keynesian policy necessary to end the Great Depression. But, was there a laissez-faire, Says Law option, that would have brought about recovery earlier?

The Cole and Ohanian standard, by which they "measure" the shortcomings of the New Deal, suggests that there was. But, they don't even attempt to prove that their imaginary standard was the least bit realistic an estimation.

[Lafayette]

Selective fallacies

Rothman: I'm far more interested in his critique of Cole and Ohanian's analysis published in one of the most comptetitive/prestigious academic economics outlets, the Journal of Political Economy:

Thanks for the Newsweek link. Interesting article, which tries to give a balanced view on statist intervention. However, it is replete with its own set of conveniently selective fallacies.

Many economists have concluded that these policies were primarily responsible for keeping unemployment well above 10 percent until World War II, when labor's bargaining strength was reduced by the National War Labor Board.

When the start rate for unemployment was above 20%, then getting it down to 10% was not a bad accomplishment. Why assume that it was pathetic just because we panic when the rate gets above 5% nowadays.

It was pretty damn good for the times and conditions that prevailed at the outset. Why it took so long is the proper critique to be made.

Fannie Mae might have been useful in the 1930s, but there are no convincing arguments that it was necessary after that.

As a GSE Fannie and Freddy are allowed access to advantageous money market rates, which they pass on to select groups of social class that supposedly merit such rates.

They vetted these people for credit worthiness, and most of the mortgages let are NOT subprime. That is NOT bad state intervention.

What went wrong with Fannie & Freddy was when the cronies appointed to the Board took themselves for Top Management and accorded themselves 200 megabucks as a bonus to be split amongst only a handful of individuals.

Now THAT was modern-day piracy. It should not be tolerated and I would be pleased to see a new Att. Gen. go after it and claw it back.

To this end, Keynes strong-armed the Treasury to raise taxes on capital income to close to 100 percent during the war; high capital income tax rates persisted though the 1960s. The result was very low savings and investment, and very little economic growth.

The little economic growth in England, post-war, is blamed not on the above but upon the Unions who would not budge by allowing generalized transformation of antiquated UK industries.

Besides, the UK did not have, even then, the same sort of Gini Index that the US has now. So, inferring that high marginal tax rates NOW are not an ideal way to fix America’s nefarious Income Inequality is just dead-wrong.

And, I maintain, given the pervasive greed, which is latent but not extirpated, it will come back with a vengeance if marginal rates are left as they are today (with all the loopholes, so close to zero we’ve had to concoct a Minimum Tax for plutocrats).

The only way to kill cupidity is to get at its progenitor -- extremely low marginal taxation rates. In this nation, today, Confiscatory Taxation at the high end is precisely the most effective way to do away with greed. I will be underscoring that point when the heydays come back to our Golden Boys on Wall Street. And they WILL surely return – they always have.

In response they (India) undertook radical reforms that removed controls on industrial investment and on imports, reduced import tariffs, and opened the country to foreign capital. The result has been nearly 20 years of astonishing growth that has lifted several hundred million people out of poverty.

India was an economic basket case when it finally saw the light and undertook the changes mentioned above. Yes, they worked … in India. To remedy a circumstance that is NOT one which exists in America today.

I do not decry this accomplishment of enlightened Indian politicians. But, neither do I think it an example that suits America today.

The danger we face at this fork in the road is the conventional wisdom that associates more regulation with better regulation and more restrictive policies with less risk. History teaches us that the opposite is usually true and that the costs of getting it wrong can last for decades.

This comment makes good sense, admittedly. But, it is no reason to believe that with Unbridled Crony Capitalism, American-style, that government intervention is NOT the remedy.

Conclusion

The article is right to admonish us not to undertake exaggerated countermeasures in the face of an exaggerated problem, hyped by the media. Let us hope that cooler minds will make the right decisions.

The systemic failure had to be addressed. And, though Paulson got off on the wrong foot, the US is doing what is right in recapitalizing the markets.

America is at a decisional crossroads, that the subprime mess has exacerbated but did not cause. Industrial Policy, those ugly two words, is back in fashion because Top Management, in their short-term profits myopia, have let a bad case get worse. To the point where there is not question whatsoever that maybe "it aint broke". Detroit is only the most blatant example.

Energy is another. Health Care another. And our Educational system yet another.

Federal intervention is absolutely necessary to address those challenges. The Market Solution has had its day and has been found lacking as a consequence.

It just can't get everything right because it was never meant to get everything right. We just foolishly believed it could.

[Lafayette]

Fanciful thinking

BW: It is a commonplace to say that the "fiscal stimulus" of WWII was the Keynesian policy necessary to end the Great Depression.

Quite right, far too commonplace.

War with Hitler was unavoidable and largely the consequence of myopic and oppressive post-WW1 reparations laid upon Germany. No one courted, it just happened.

However, in an economic sense, it did solidify the economic reprise that an entire decade of the 1930s had undertaken by means of the New Deal. Historically, in 1933 the manufacturing employment was at about 7M people (see here) down from 10.5M in 1929. It steadily improved throughout that decade -- and finally skyrocketed during the war. (Thanks largely to American women who went to work replacing "our boys".)

The conclusion is starkly simple: Statist intervention worked, but far too slowly. Our question, therefore, should not be, "Does government spending to reduce underconsumption function?", but rather "What policies/conditions prevent it from working even faster?" (We know well that not all the policy decisions taken were for the best; most notably one, the Smoot-Hawley Tariff Act of 1930 that greatly contracted trade with Europe.)

The circumstances of the 1930 decade were inherently different from today. War with Germany and Japan was becoming increasingly inevitable. Roosevelt was racing against time.

None of that is even remotely comparable with today's global economic context. Today's context is far more complex, but possibly more sustaining because it is more diverse. Such could be fanciful thinking admittedly. Time will tell how fanciful.

[paine]

"...Cole and Ohanian are serious, highly accomplished scholars"

those free range korporate heaven type
FLACKS and HACKS

to be crude about it

greek em gang
greek em

[paine]

phil

welcome business con

[ken melvin]

"The challenge for a general equilibrium model of the economy of 1933 is: how big do wage and price cuts have to be, to get to full-employment? Is there any reasonable, plausible path of wage and price cuts that leads to a full-employment recovery?

What better description of the race to the bottom?

[ken melvin]

Talk of could've, should've; all this insistence that only if from the right is getting rediculous. Especially since it was their policies that created the messes. The ideology was right, too bad the patient died?