Let's see, in the past 8 years, we have had tax reductions, two wars, and huge increasing budget deficits. Who among you is going to say with a straight face we have not had a huge fiscal stimulus? The stimulus worked great for 6 and 1/2 years until we all realized the stimulus had gone into building homes for people who can't afford them. So as we deal with the hangover of the last stimulus and stumble toward rationality, Nobel winner Paul Krugman is arguing that the solution to our difficulties is a bigger fiscal stimulus? The problem with Bushonomics was that we did not have enough tax reductions, wars and budget deficits? You all realize this is insane, don't you?
David Shemano --- Original Message--- To: PEN-L list <[email protected]> From: Louis Proyect <[EMAIL PROTECTED]> Sent: 11/10/2008 6:54AM Subject: [Pen-l] Krugman: WWII ended the Depression >> NY Times, November 10, 2008 >> Op-Ed Columnist >> Franklin Delano Obama? >> By Paul Krugman >> >> Suddenly, everything old is New Deal again. Reagan is out; F.D.R. is in. >> Still, how much guidance does the Roosevelt era really offer for todays >> world? >> >> The answer is, a lot. But Barack Obama should learn from F.D.R.s >> failures as well as from his achievements: the truth is that the New >> Deal wasnt as successful in the short run as it was in the long run. >> And the reason for F.D.R.s limited short-run success, which almost >> undid his whole program, was the fact that his economic policies were >> too cautious. >> >> About the New Deals long-run achievements: the institutions F.D.R. >> built have proved both durable and essential. Indeed, those institutions >> remain the bedrock of our nations economic stability. Imagine how much >> worse the financial crisis would be if the New Deal hadnt insured most >> bank deposits. Imagine how insecure older Americans would feel right now >> if Republicans had managed to dismantle Social Security. >> >> Can Mr. Obama achieve something comparable? Rahm Emanuel, Mr. Obamas >> new chief of staff, has declared that you dont ever want a crisis to >> go to waste. Progressives hope that the Obama administration, like the >> New Deal, will respond to the current economic and financial crisis by >> creating institutions, especially a universal health care system, that >> will change the shape of American society for generations to come. >> >> But the new administration should try not to emulate a less successful >> aspect of the New Deal: its inadequate response to the Great Depression >> itself. >> >> Now, theres a whole intellectual industry, mainly operating out of >> right-wing think tanks, devoted to propagating the idea that F.D.R. >> actually made the Depression worse. So its important to know that most >> of what you hear along those lines is based on deliberate >> misrepresentation of the facts. The New Deal brought real relief to most >> Americans. >> >> That said, F.D.R. did not, in fact, manage to engineer a full economic >> recovery during his first two terms. This failure is often cited as >> evidence against Keynesian economics, which says that increased public >> spending can get a stalled economy moving. But the definitive study of >> fiscal policy in the 30s, by the M.I.T. economist E. Cary Brown, >> reached a very different conclusion: fiscal stimulus was unsuccessful >> not because it does not work, but because it was not tried. >> >> This may seem hard to believe. The New Deal famously placed millions of >> Americans on the public payroll via the Works Progress Administration >> and the Civilian Conservation Corps. To this day we drive on >> W.P.A.-built roads and send our children to W.P.A.-built schools. Didnt >> all these public works amount to a major fiscal stimulus? >> >> Well, it wasnt as major as you might think. The effects of federal >> public works spending were largely offset by other factors, notably a >> large tax increase, enacted by Herbert Hoover, whose full effects >> werent felt until his successor took office. Also, expansionary policy >> at the federal level was undercut by spending cuts and tax increases at >> the state and local level. >> >> And F.D.R. wasnt just reluctant to pursue an all-out fiscal expansion >> he was eager to return to conservative budget principles. That eagerness >> almost destroyed his legacy. After winning a smashing election victory >> in 1936, the Roosevelt administration cut spending and raised taxes, >> precipitating an economic relapse that drove the unemployment rate back >> into double digits and led to a major defeat in the 1938 midterm elections. >> >> What saved the economy, and the New Deal, was the enormous public works >> project known as World War II, which finally provided a fiscal stimulus >> adequate to the economys needs. >> >> This history offers important lessons for the incoming administration. >> >> The political lesson is that economic missteps can quickly undermine an >> electoral mandate. Democrats won big last week but they won even >> bigger in 1936, only to see their gains evaporate after the recession of >> 1937-38. Americans dont expect instant economic results from the >> incoming administration, but they do expect results, and Democrats >> euphoria will be short-lived if they dont deliver an economic recovery. >> >> The economic lesson is the importance of doing enough. F.D.R. thought he >> was being prudent by reining in his spending plans; in reality, he was >> taking big risks with the economy and with his legacy. My advice to the >> Obama people is to figure out how much help they think the economy >> needs, then add 50 percent. Its much better, in a depressed economy, to >> err on the side of too much stimulus than on the side of too little. >> >> In short, Mr. Obamas chances of leading a new New Deal depend largely >> on whether his short-run economic plans are sufficiently bold. >> Progressives can only hope that he has the necessary audacity. >> >> >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l >> >> _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
