Monday, March 15, 2010

Irony...

Ryan made an excellent point in a text he sent me last night (you don't have to apologize for long texts... I'm not going to bust your balls if you are at work), in which he asked me to share my GDP data with him to see if it included data through all of FDR's Presidency and not just to 1940.

The short answer is YES, the data was not specific to FDR, and I'll post the entire image at the end of the post. The point he made was that it is difficult to prove a negative, and he'll need to collate data from other depressions/recessions and compare it to the New Deal years to see if he can find evidence that the recovery would have gone faster without New Deal.

Here's my thoughts on that... not that you asked for them, but here they are anyway.

Post-FDR administrations ALL still employ New Deal policies and programs, to one degree or another, right up till Reagan takes office, so recessions that occur after WWII and before 1981 aren't going to give you a fair measure by which to gauge the success of failure of New Deal in the 30s. Depressions and recessions prior to 1933 will be free of New Deal politics (barring 1932, perhaps... Hoover was desperate his last 18 months in office), however, I can damn-near promise you they were ALL much longer recoveries than even the Great Depression... and I can't say with any degree of certainty that the lack of New Deal was the reason... meaning there might be other factors needing consideration that we aren't aware of right now.

I guess my point is really that the US economy has always been BIG... and very dynamic. With the coming of the Industrial Age to the US, it is no small matter to consider the factors that effect that economy, and let's face it... none of us are economists. I'd be satisfied with your finding the evidence and figures behind any one of the (probably) thousands of modern economists that clearly and specifically detail WHY they hate the New Deal and what numbers they have to prove it... IF it can specifically refute MY specific evidence that the New Deal worked (besides the historical example, of course).

Again, I feel that FDR's New Deal was a response to a national (indeed, global) crisis, where after three years of suffering, the American people said they had suffered enough and were ready for help. Hoover and his efforts (initially very "conservative", hands-off policy that only took on a greater centralized role as the free fall continued to worsened) had NO measurable effect on stopping the economic disaster or in bringing about the long-awaited recovery.

Keep in mind that, as I said previously, there were 670,000 people that could have been evicted from their farms, had the Hoover Government had enough manpower to bounce them out! It wasn't FDR that had the machine gun nests installed on government buildings... it was Hoover who did, as he watched the tens of thousands of destitute veterans camped out across the lawn from the White House in "Hooverville". I am absolutely convinced that the winter of 1932-33 constituted every bit the "national crisis" that the US had experienced at any time prior to the outbreak of the Civil War... with a sitting US President ordering Federal troops to point loaded weapons at US citizens because he feared for a "revolution".

The old saying applies... "Extraordinary times call for extraordinary measures" and the New Deal was a totally new way of thinking about how the US economy runs, and if and how it should be regulated. Most... literally 80%... of the New Deal programs were dead and gone before the end of WWII, and 19 of 27 "alphabet soup" programs were instituted as temporary relief and recovery programs within the first 100 days of his first term.

I agree that we gained some programs in the long term that have not worked as well NOW as they might have THEN (SSI, for example)... but I feel it is important to note that by 1937, the "New Deal" was basically DONE. Three "finger-in-the-dike" programs came after the '37 recession... but otherwise the New Deal was over, and the move to bring spending back under control was the policy of the day (at least till '39 and the expansion of the military branches began).

That is my case... in a nutshell. I guess I simply don't understand how we can come to the conclusion that the recovery could have gone faster, when there are no historical examples of an economic disaster to compare it to in the entire modern history of the world. This was a crisis that was directly responsible for the destruction of whole governments in continental Europe, the tragic deaths of hundreds of thousands of people in the USSR and China, and directly contributed to the beginning of the worst period of global warfare in our planet's history. If we accept that the New Deal "started" the recovery in 1933 (seemingly undeniable, in my eyes), and that the process was nearly complete (with only one indicator still below the norm by then) by the end of 1938... how much FASTER can we really have expected the recovery to have moved, knowing the scope of the crisis? Five years is "too long" a time to recover 44% of the nation's wealth and prosperity that had melted into nothing over the course of a three-year economic free-fall? Hell, you can even see from the chart below that it took Reagan THREE years of aggressive deficit spending to recoup the lossess suffered from the Carter Recession... and surely no one is going to compare THAT with the Great Depression?

From 1933 to 1939, the US saw an average rate of growth in our GDP of 8.5%... the highest we have ever seen in our history, mind you... and that rate of growth STILL took five years to reach adjusted averages of where we should have been had the Crash never happened. How much BIGGER a recovery could we have hoped for without responding to the demands of the American people in 1932?

I'd be pretty satisfied if you could just explain THAT, let alone if you could find evidence that the New Deal failed...


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