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Thursday, February 19, 2009

"The New Deal and the New New Deal"

Robert Reich says there are lessons in the Great Depression, but they won't be found among right-wing talking points:

The New Deal and the New New Deal: Countering Conservative Claptrap, by Robert Reich: ...One of the oddest of right-wing claims is that FDR's New Deal didn't pull America out of the Great Depression, so Barack Obama's "New New Deal" won't, either. While it's true that the New Deal didn't end the Great Depression, three points need to be impressed on the hard-pressed conservative mind:

1. The New Deal relieved a great deal of suffering by establishing social safety nets -- Unemployment Insurance, Aid for Dependent Children, and Social Security for retirees. Most have remained, a worthy legacy. But because the structure of the economy has changed..., there are gaping holes in the safety net which a New New Deal should fill...

2. FDR's public works spending did help the economy somewhat. By 1936, U.S. the economy was showing some life. ... But FDR cut back on public-works spending, and the economy sank back into its former torpor. A warning to Obama: Don't worry about so-called "fiscal responsibility" when aggregate demand still falls far short of the economy's total capacity.

3. The Second World War pulled the nation out of the Great Depression because it required that government spend on such a huge scale as to restart the nation's factories, put Americans back to work, and push the nation toward its productive capacty. ... Yes, the national debt ballooned to 120 percent of GDP. But the debt-GDP ratio subsequently declined -- not just because post-war spending dropped but because the economy continued to grow... Lesson: The danger isn't too much stimulus, it's too little stimulus.

    Posted by on Thursday, February 19, 2009 at 07:20 PM in Economics, Fiscal Policy | Permalink  TrackBack (0)  Comments (17)


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