My demonstration... Part I

Here is the first portion of my demonstration, as requested, of a direct and measurable link between New Deal policies and the recovery of the US economy from the symptoms of the Great Depression.

My first topic will be the initial fiscal policies enacted by Roosevelt immediately following his inauguration as President (say, his first 100 days). I will cite the author of the piece and then relate how it pertains to my argument that the New Deal did have programs and policies that benefited the economy more than it hindered it... as requested by Ryan.

Exhibit 1A: A speech given by Mr. Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve Banks, at the H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington, Virginia March 2, 2004:

"The finding that leaving the gold standard was the key to recovery from the Great Depression was certainly confirmed by the U.S. experience. One of the first actions of President Roosevelt was to eliminate the constraint on U.S. monetary policy created by the gold standard, first by allowing the dollar to float and then by resetting its value at a significantly lower level. The new President also addressed another major source of monetary contraction, the ongoing banking crisis. Within days of his inauguration, Roosevelt declared a "bank holiday," shutting down all the banks in the country. Banks were allowed to reopen only when certified to be in sound financial condition. Roosevelt pursued other measures to stabilize the banking system as well, such as the creation of a deposit insurance program. With the gold standard constraint removed and the banking system stabilized, the money supply and the price level began to rise. Between Roosevelt's coming to power in 1933 and the recession of 1937-38, the economy grew strongly."

Exhibit 1B: Dr. Randall Parker of East Carolina University and former Reagan Economic Advisory Council member, wrote the following in 2002 (highlights are inserted by me):

"Once again we return to the financial system for answers. The abandonment of the gold standard, the impact this had on the money supply, and the deliverance from the economic effects of deflation would have to be singled out as the most important contributor to the recovery. Romer (1993) stresses that Eichengreen and Sachs (1985) have it right; recovery did not come before the decision to abandon the old gold parity was made operational. Once this became reality, devaluation of the currency permitted expansion in the money supply and inflation which, rather than promoting a policy of beggar-thy-neighbor, allowed countries to escape the deflationary vortex of economic decline. As discussed in connection with the gold standard hypothesis, the simultaneity of leaving the gold standard and recovery is a robust empirical result that reflects more than simple temporal coincidence.

"Romer (1993) reports an increase in the monetary base in the United States of 52 percent between April 1933 and April 1937. The M1 money supply virtually matched this increase in the monetary base, with 49 percent growth over the same period. The sources of this increase were two-fold. First, aside from the immediate monetary expansion permitted by devaluation, as Romer (1993) explains, monetary expansion continued into 1934 and beyond as gold flowed to the United States from Europe due to the increasing political unrest and heightened probability of hostilities that began the progression to World War II. Second, the increase in the money supply matched the increase in the monetary base and the Treasury chose not to sterilize the gold inflows. This is evidence that the monetary expansion resulted from policy decisions and not endogenous changes in the money multiplier. The new regime was freed from the constraints of the gold standard and the policy makers were intent on taking actions of a different nature than what had been done between 1929 and 1933."

Here are two contemporary "conservative" points of view clearly showing measurable and specific examples of New Deal fiscal policy that DIRECTLY resulted in economic improvement within weeks of the inauguration of FDR and the implementation of his New Deal. I have given the "sound-byte" of the arguments, but the proof can be seen for anyone who questions by following the links provided. Had FDR not taken us off the gold standard, the recovery could not have happened, and had FDR not instructed the Federal Reserve to "devalue" the dollar by printing more money, the same could be assumed.

Exhibit 2A: Unemployment.

A funny thing here... as I was perusing the BLS website last night, I happened upon THIS article about the WPA. The long and the short of it is simply this: During its lifetime from 1935 to 1943, more than 8 million people were employed with the WPA, and at its largest, it's rosters contained the names of 3.4 million Americans... but not ONE of those names ever came off the UNEMPLOYED lists! NOT ONE! In fact, because Republicans didn't want any aspect of the New Deal to be shown in a positive light during the 1930's, they made sure that NO American that was employed with a "Federally-funded" relief program was shown as "employed" at all.

What this means to you and I is that, unless you can show me that you are basing your unemployment numbers off of "adjusted" figures that DO account for the more than 8 million Americans that worked within the CCC, WPA, TVA, BLM, NIRA and ERA umbrellas (and I know I wasn't!)... we are going to have to do a WHOLE LOT of recalculating of what the ACTUAL unemployment rate at anytime between 1933 and 1943 really was.

An average male working for the WPA in 1936 was making $1,512/year... while the national average in the private sector was only $1,368/year. Yet, this guy is counted as UNEMPLOYED by the Federal government TO THIS DAY because he was working for a "relief" program funded by the Feds. How can this NOT mean that a whole new light is shed on arguments made by those that simply look at figures and say "See? The New Deal didn't work!"??? In any given year between 1933 and 1939, as many as 3.9 million people have to be taken off the unemployed lists because they were actually making MORE than those that had jobs in the private sector!

It is now my CONCERTED opinion that THIS is a huge mitigating circumstance as to WHY unemployment remained so high throughout the decade... because in actual point of fact, far more people were making a decent living (compared to the private "employed" sector) than had ever previously been thought. Would YOU quit a relief-program job that paid a full 10% MORE than the national average, just so you could work for GM, or IBM, some other private company that might lay you off the next time the market hick-ups?

Recess: ... because I have to get back to work now.