Ryan's Question #2...

Ryan asks: " ...if you truly believe that the proper response to economic crisis is "cutting taxes, regulations and spending", then doesn't that mean you must also hold that the economy recovered in the areas you cited despite FDR's 180 degree opposite course? "

As much as I loved the gladiator analogy (I am addicted to Spartacus: Blood and Sand!), once again you are operating under a rather misguided understanding of my personal economic theory.

I have always advocated a belief (which I feel history demonstrates as a proof) that when a national economy takes a down-turn, then deficit spending and/or reduced taxes will help put the money needed to keep the private sector spending in the pockets of those that will spend it... you and I, in other words. When the economy rebounds, then a balanced budget and/or higher taxes will reduce the deficit and we can work from a zero-balance sheet each year. This is the model of functional national fiscal policy that Keynes advocated and has taken his name as its own... Keynesian economics.

When you ask how I can reconcile my economic position with the course of action taken by FDR during the 30's, my reply is that FDR had one half of the equation down pat... but didn't seem to understand the other half.

Now I can suggest mountains of ideas as to why FDR insisted on keeping the Federal tax rate as high as it was, but it all boils down to the simple, undeniable fact that FDR felt a very high progressive tax rate was justified in light of the unprecedented spending he was advocating, and I DO NOT THINK this is the best way to combat a down economy. However, as much as I am forced by history to give the responsibility to FDR, I can't deny that there was significant pressure from the Conservative Coalition for FDR to balance a budget that simply could not be balanced, and I am unsure how much this pressure effected his course of action. It is simply silly to deny that the President (any President) doesn't have to play politics with the opposition while he works to further his vision and agenda, so perhaps he kept deviating from the Keynesian model because he felt it would keep the GOP and Southern Democrats in their seats rather than in his face... I just don't know. I do know that he made some very surprising Cabinet appointments in his second term to show himself to be "open to ideas from the other side"... meaning, I believe, that he was trying to play bipartisan.

This does not negate the fact that I feel the efforts and direction that the New Deal took the US after 1933 was the right one, however. Perhaps, had FDR and the Feds managed to get the tax rate to a more reasonable level, then the economy would have been as timid in '37-'38 as it was, and the Roosevelt Recession might not have been as painful as it was, but I can't point to a graph or a chart and say "Here's my proof"... not with FDR anyway. I can do that with Reagan as my example, however... and Reagan proved the policy sound in his first two years as President. He cut taxes (in a big way), redistributed spending within the government to keep the funding (deficit though it was) to the places he felt needed it and cut where he felt it was being wasted. While he was doing this, he watched as Federal revenues rose as much as 20%... something no tax-cutting President had seen before him since Coolidge was in office.

FDR did get some things right, though... economically speaking. His taking us off the gold standard paved the way for a truly "free" money market that would see the US Dollar become the "global currency" right up until 2008, when Obama took office. He reformed the banking regulation agencies in ways that have not only protected our economy from repeats of the Crash of '29, but have guaranteed the savings and investments of trillions of dollars of privately-held moneys over the last 80 years, so much so that the complete failure of a bank or investment chain is so rare now that those responsible for the failure become household names (infamous, but known, all the same). His efforts and policies (and those of later Presidents) have ensured that we have not, as a nation, seen another depression since 1929, and no recession that has lasted more than three years.

So, I admit that FDR is not my "poster child" for Keynesian fiscal policy, but he got enough right to see the recovery that he did by 1939 and to then go on and beat TWO global "superpowers" that were trying to take over the world... all from a wheelchair and with a sense of panache that we don't see again until (ironically) Reagan gets elected. THAT, my friends, is why I think he is a top-tier President.