Tuesday, February 10, 2009

New Deal, Kenyesian Economics, and the Republican ReWrite

Lately it has been fun to watch republicans "state for a fact" that FDR's new Deal economics simply didn't work then and it won't work now. So lets explore some of those myths shall we? Now, all these statistics can be found on the BEA National Economic Accounts web page Here: http://bea.gov/national/index.htm#gdp

But I have borrowed from at least one other person who put it into table form.

I took this table out of his time line because I can't find all the files I saved after doing my research on this.

Never the less, the information is verifiable on the website I listed first if you like data and tables and such.

It clearly shows that Hoovers time spiked up our unemployment rate from 3.2% to nearly 25% by the time FDR took office. And when FDR took office, he inherited a very small GDP to work with. We can see that the New Deal brought lower unemployment and higher GDP. New Deal spending was working.

In 1937, FDR caved into Republican calls to pull back spending, and it sent the country into another recession for about a 1 and a half. What was the fix this time? A $5 Billion spending package which quickly brought us out of the recession.

       Tax       Federal    GNP       Unemp.
Year Receipts Spending Growth Rate

1929 -- -- -- 3.2% < Hoover era, Great Depression begins
1930 4.2% 3.4% - 9.4% 8.7
1931 3.7 4.3 - 8.5 15.9
1932 2.9 7.0 -13.4 23.6
1933 3.5 8.1 - 2.1 24.9 < FDR, New Deal begins; contraction ends March
1934 4.9 10.8 + 7.7 21.7
1935 5.3 9.3 + 8.1 20.1
1936 5.1 10.6 +14.1 16.9
1937 6.2 8.7 + 5.0 14.3 < recession begins, May
1938 7.7 7.8 - 4.5 19.0 < recession ends, June
1939 7.2 10.4 + 7.9 17.2
1940 6.9 9.9
1941 7.7 12.1
1942 10.3 24.8
1943 13.7 44.8
1944 21.7 45.3
1945 21.3 43.7

Now here is the tricky part. After the recession ended, the spending quickly lowered unemployment by 2%. However, republicans will not that unemployment was still at 15% before World War 2. And they would right. Thats still a 10% reduction in less than 8 years. Thats fabulous!

But here is where they go wrong and the myth begins. They like to claim that it wasn't spending, but WWII that got us over the final hump, despite the fact that unemployment was still continuing to slowly go down. But, what they don't understand is that it truly doesn't matter. The principle behind New Deal and Keynesian economics was still in full force.

Why would WWII have brought us out of the depression? SPENDING! We must understand that we didn't have the war machine we have today. Our military was under built, underfunded, and under outfitted for a war of that magnitude. Right now, we have more tanks, planes, artillery, and vehicles than we have men. But that wasn't the case. WWII created a MASSIVE spending project to fuel the economy. It wasn't the war itself, it was the SPENDING on the war that created the jobs!

In the end, SPENDING was STILL the key to getting out of the depression. If we learned anything from FDR it is that we cannot spend to little. Spending to little will simply not help us. We need to go big or go home.

This stimulus bill will work, if its big enough. Its time republicans stop their lying! Their partisan lying is going to cost this country big time.

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