Over at CNBC blogs,
Andrew B. Busch of BMO Capital Markets repeats the falsehoods of Amity Schlaes that Bonddad and I thoroughly debunked a few weeks ago. Busch says:
The truly disturbing aspect of the stimulus fiasco is the Congressional belief that they are acting like Keynesian economists and are invoking the name of FDR to validate their actions....
As far as the comparison to FDR, I think everyone should be very careful to emulate him.
The New Deal was actually a combination of socialism and cartelization of industry with price controls. These policies failed to stimulate growth and helped plunge the economy into the "Depression within a Depression" in 1937. It wasn't until these polices were reversed and the NRA was relegated to a minor role in the government that growth returned in 1938. The other major issue was the Federal Reserve. They mistakenly stuck to the gold standard and was forced to raise reserve requirements that cut off the legs of the recovery.
Wrong. As Bonddad and I showed in our series about the Great Depression, the New Deal:
- had the fastest growth rates of any recovery in the 20th century
- returned GDP to its 1929 levels by 1937
- returned personal comsumption to its 1929 levels by 1937
- returned total private investment to 1929 levels by 1937.
The dishonest critique of the Great Depression is based only on the fact that the Dow Jones Industrial average "only" returned to its 1927 high, not the bubble heights of 1929, and that unemployment only declined 60%-75% from 1933 to 1937 and after the 1938 recession, in 1939. As one 94 year old caller at NPR said, people at the time knew that FDR had greatly improved their lives. That's why they re-elected him.
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