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… which is not his natural habitat.

Please address any further questions you have about the New Deal to President Barack Obama:

there are several who have suggested that FDR was wrong to intervene back in the New Deal. They’re fighting battles that I thought were resolved a pretty long time ago.

You can throw in what SpongeBob’s buddy Patrick would call a “sentence enhancer” if you want.

Eric’s book on the Depression and New Deal is the subject of this week’s book club at TPM café. So if you don’t see enough of him here, or you want to learn how FDR actually caused the Depression, you might want to stop by over there.

Some doofus, of course.

(Previously)

Salon has a slideshow of New Deal public works titled (hrm) “Greatest Achievements of American Socialism”. Is it too late to get an amendment in the stimulus bill stipulating that projects have to be cool-lookin’?

Liberty League

“… Odd, this neurotic tendency in the American business man. Can you account for it? No? I can. Too much coffee.”

“Coffee?”

“That and the New Deal. Over in America, it appears, life for the business man is one long series of large cups of coffee, punctuated with shocks from the New Deal. He drinks a quart of coffee, and gets a nasty surprise from the New Deal. To pull himself together, he drinks another quart of coffee, and along comes another nasty surprise from the New Deal. He staggers off, calling feebly for more coffee, and…. Well, you see what I mean. Vicious circle. No nervous system could stand it.”

Bertie Wooster’s Uncle Percy (with a brief assist from Bertie), in P. G. Wodehouse, Joy in the Morning. Which, I arbitrarily assert, is the best of the Jeeves/Wooster novels.

Liberty League

Ronald Reagan liked to see himself in the parable of an optimistic boy who, facing a room full of manure, happily set to digging: “With this much manure around, I know there’s a pony in here someplace.”

But today we need a different parable. In this one a boy discovers a well-kept stable with a pony in it, contentedly munching hay. It’s a fine pony, though maybe in need of some brushing. There’s probably also a horse-pat in the bottom of the stall, because hey, it’s a pony. The boy fixates on these aesthetic drawbacks, and begins to complain loudly about them. A friend comes along, gives the pony a brush, grabs a shovel and removes the horse-pat and says, “there you go, son, your pony’s in fine shape.” Incensed that his complaints have been rendered irrelevant, the boy does not choose to enjoy the pony, but instead orders a cartload of manure from the local store and starts shoveling it into the stall, to vindicate his initial criticism. Left unchecked, the boy is not only going to foul the stall, but also to bury the pony.

In the behavior of this boy we see the modern New Deal denialist. The New Deal wasn’t perfect, it’s true, but noting that it takes occasional maintenance and correction isn’t enough for the denialists, they have to bury it in horse manure. And no sooner do their kindly friends clear one load of these misconceptions away than they order up another load and start shoveling it into that poor pony’s stall. Clear away the misconceptions and you find that under the New Deal, GDP was up, unemployment was down, productivity was up. Which, to reiterate, doesn’t mean the New Deal was anything like perfect; it wasn’t. But still, a pony is better than no pony, right?

If someone then comes along and says to you, yes, GDP was up and unemployment was down and productivity was up and the New Deal did lots of good and important things like Social Security and yanking the South out of poverty and bringing transparency to the securities market and saving the banks, “But the facts do not support the perception that FDR’s policies shortened the Depression…. Total hours worked per adult, including government employees, were 18% below their 1929 level between 1930-32, but were 23% lower on average during the New Deal (1933-39)”—well, you should be suspicious. Do you ordinarily judge a recovery by increase of hours worked? When was the last time you heard an economist on the news explaining to a business reporter, “Well, Tallulah Mae, perhaps we’re back to work and our productivity is up and our national wealth is up but we haven’t recovered because we’re not working the same number of hours we used to”?

Let us not even get into this argument—even though, if you do get into this argument, if you do concede the ridiculous starting point that we should pretend NRA=New Deal, you evidently can still show the description of the recovery is wrong; even though, when you strip away the bluster and misdirection, the argument is really, “The New Deal jolly well did save us from the Depression, it just might have saved us faster if it hadn’t been for the NRA”; even though, if you do want to talk about what happened to hours worked, per figure 1A there’s a long-term reduction 1900-2000 and though there was a spike up during World War II, it might have been because there was a total war going—no. Let us not get into these arguments because trying to turn the argument to a discussion of what happened to hours worked is simply letting a new load of manure get shoveled into your pony’s stall, and you don’t want that.

And if it should happen that you walk happily away from your pony’s stall one day, leaving it reasonably clean and cheerful, and when you come back the pony is asphyxiating under a pile of manure, please do not stand sorrowfully, reasoning to yourself, “poor pony, if only it had done a better job of not fouling itself it wouldn’t be stuck under a pile of manure.” Ponies don’t make that much of a mess on their own. The pony chokers have been at work. Get a shovel.

Liberty League

Do I delude myself in thinking Amity Shlaes is giving a bit of ground? In her latest effort to persuade us the New Deal was bad she admits, “Many of FDR’s initial plans did bring stability: His first Treasury secretary worked to sort out banks with the outgoing Hoover administration in a fashion so fair that an observer noted that those present ‘had forgotten to be Republicans or Democrats.’ By creating deposit insurance, FDR reduced bank runs. His Securities Act of 1933 laid the ground for a transparent national stock market. Equities shot up.” Which in fairness is not a concession I remember her making before.

But she’s still devotedly wrong. Today it’s the dollar devaluation that was a horror: “Using emergency powers, FDR yanked the country off the gold standard…. Some of the worst destruction came with FDR’s gold experiment. If he could drive up the price of gold by buying it, he reasoned, other prices would rise as well. Roosevelt was right to want to introduce more money into the economy (the United States was deflating). But his method was like trying to raise an ocean level by adding water by the thimbleful.”

Except, as even some George Mason economists will tell you, devaluing the dollar was possibly one of the best things FDR did, contributing mightily to the “spectacular” rate of recovery under the New Deal.

If the Post had wanted to publish a column on the general subject of whether current uncertainty is harmful, and reflecting on the New Deal, they might have wondered if today we have done as much as Roosevelt did with the bank holiday to make banks stable and worth the investment of public money.

The post below is about half common-sense reasoning about the current crisis and half bloggy speculation about its effects on the higher-education biz. Much of it is brain dump, though there are a few useful links thrown in. You have been warned.
Read the rest of this entry »

Liberty League

Thank you, Dave, I’m so happy to have you do that. Once you’ve read Dave’s post, let me add a couple things:

1) Herbert Hoover was, in fact, a “progressive” within the 1910s definition of the word. But it’s famously true that there were many kinds of progressive. It’s also well known that some progressives supported the New Deal, while some opposed it.

2) To describe Hoover as an “interventionist” and therefore in the same mode as Roosevelt is just so profoundly stupid it’s hard to know what to say about it. As Dave points out, for much of his presidency Hoover’s “intervention” consisted of saying, “rah rah, go economy go!” And yes, when pressed to the very limit in an election year with a Democratic House Hoover backed the Reconstruction Finance Corporation in 1932. Even then, though, the RFC did not act nearly so aggressively as it did under Roosevelt, under whom it bought bank equity and funded all kinds of other New Deal programs.

You see, some interventions might be effective, while some might be ineffective. As a smart guy said, “The question we ask today is not whether our government is too big or too small, but whether it works”.

On which point:

Liberty League

In the middle of a generally apposite article, Steve Lohr of the New York Times says, “During the 1930s, the unemployment rate fell somewhat under Roosevelt, but remained stubbornly high, averaging more than 17 percent for the decade.” Dean Baker caught this, and so does Cosma Shalizi via the email: you get an average 17% if you count people who had jobs as unemployed.1 Which, Baker notes, is not what you’d call “in keeping with current methodology”. Or, you know, helpful in trying to make sense of the situation.

Baker goes on: what the New Deal achieved was “still far from full employment, but it is less than half the 23 percent rate that Roosevelt faced when he took office.” And in saying that perhaps the New Deal could have done better, Lohr’s overall point is sound: bailing out the banks wasn’t good enough, you had also to get creditworthy people lining up to borrow. In the 1930s, this was taken—by, e.g., Keynes—to mean you needed some fiscal stimulus: “it is no use creating a demand for credit, if there is no supply. But an increased supply will not by itself create an adequate demand.”

One might also point out that in the 1930s, the massive purchase of bank equity came after auditing the banks’ books to see what assets they had, and shuttering the ones that couldn’t survive.


1Also, it seems to me Lohr must count the decade as running 1929-1939 inclusive; this—using the old Lebergott data—gives you an average rate of 17.05%; if you use the current HSUS data for the same period, you get 13.16%. If you look at Roosevelt’s first two terms—1933-1940—you get 18.7% (Lebergott) as against 13.0% (HSUS current).

My friend Julian Zelizer of Princeton:

there were really three different economic goals in the First Hundred Days. The first was the goal with which we are most familiar–to revitalize the economy and move the nation out of the Great Depression. When we evaluate FDR’s success in meeting this challenge, the New Deal does not look very good.

The question one should ask here is, “professor, what’s your counterfactual?” Which is to say, what would “very good” look like? If the economy is at around 25% unemployment and most of the people still working are working part time and productivity has fallen off a cliff, things are pretty darn broken. How fast should they get fixed?

In real life—not in the counterfactual—they got fixed at reasonably quick speed. Christina Romer says they got better at a rate so “rapid” it was “spectacular”; Gauti Eggertson notes that 1933-37 saw

the greatest expansion in output and industrial production in any four year period in U.S. history outside of wartime.

So “does not look very good” means what? “Falls short of Economic Jesus”?

I’m glad Julian’s not grading my work.

Some notes on the first hundred days, in the San Francisco Chronicle and on NPR.

Spending on WPA projects as a function of state population. Mainly for fun, and so I could learn me some graphical commands in R, but I thought y’all might like to see it.

Suggestions about improving the presentation are, as ever, welcome.

If you want to pursue the question of where New Deal money went overall, you might look at

Wallis, John Joseph. “The Political Economy of New Deal Spending Revisited, Again: With and without Nevada.” Explorations in Economic History 35, no. 2 (April 1998): 140-170.

Also, more generally on the allocation of public works expenditures,

Smith, Jason Scott. Building New Deal Liberalism: The Political Economy of Public Works, 1933-1956. Cambridge, Eng.: Cambridge University Press, 2006.

This graph, from David Beckworth, is pretty hilarious. It’s unfair, but who minds unfair?

Thanks to commenter, uh, David Beckworth, for pointing this out.

I think what this picture best illustrates is the peril of getting drawn into a debate over the recovery question and the recovery question alone. The New Deal did a lot more than just set about a plan for recovery. For one thing, it saved some considerable number of people from starving, which is a nice thing. For another, it gave us a significantly reformed system of regulating economic downturns: a re-drawn Federal Reserve System, the FDIC, the SEC (which, prior to its gutting, was a pretty good thing), Social Security (which includes not only old-age but also unemployment insurance), and a variety of other similar measures. For yet another, it set about hauling the South out of poverty—a project at which nobody had succeeded despite considerable effort since the Civil War. So it was a lot more than just a recovery program.

But also, thinking just of the recovery program, I guess I think this graph isn’t so terrible at illustrating what I think we ought to notice: there was a deep, deep hole to climb out of in 1933, and the rate of climb was pretty quick. Could you really, realistically, expect much quicker, as broken as things were?

One question for David: what numbers did you use to establish trend? Did you include 1928-9, or just 1923-7 (which is one of the methodological disputes here)?

And one further point: the person who really should be on the list with Krugman, Sirota, and me, is the currently-rather-important Christina Romer. Probably also Gauti Eggertson, of the New York Fed, come to think of it.

Several people ask of the WPA graphing question, why not use a log scale? Commenter Stinky (no, I don’t know who s/he really is) kindly supplies a graph showing just this. For my money, it speaks for itself—which is to say, it screams, “don’t use me!”

We want to accomplish two things: (1) show how very outsized a chunk of money went to highways and (2) show also meaningful distinctions among lesser expenditures.

The log scale permits (2) while pretty much wiping out (1), unless you know how log scales work. I don’t think the likely consumers of such a graph do really know. But I’m wrong, Stinky says.

On Friday, when I was in New York for the AHA, I also got to go around to the NPR studios and talk with some of my favorite radio hosts.

Doing a radio interview by phone is weird; there’s none of the normal intimacy you get in a telephone conversation. Doing a radio interview in studio is more natural, because you can see the hosts and get all the normal cues you get in conversation—but it’s still weird; you’re being timed, and monitored, and there’s a big microphone in your face.

Still, after we’d been talking for some time, it got to seem more natural. Which was probably about when I stopped making sense—if you’re jet-lagged from the redeye, and also sitting comfortably in pleasant company, you start to lose coherence I fear.

Anyway, here it is: what if there’d been no New Deal?

Kieran weighs in on the question of how to present the WPA data, following up on Duncan.

In effect, what I’ve done here is choose to break a different rule from Duncan. Instead of putting two scales on the same axis, I have made one axis discontinuous between panels, skipping values in order to compress the horizontal size. Hence the reminder at the top of each panel that you’re shifting up an order of magnitude each time. Despite the rulebreaking, there’s still some principle at work because instead of just putting a discontinuity right at the end (to incorporate the largest value) the panels are split consistently by powers of ten, and it makes sense to think of WPA expenditures as falling into groups like “stuff they spent billions on” versus “stuff they spent tens of millions on” or “stuff they only spent a few million dollars on” and so on.

I like this, too. I can foresee an entire lecture on different ways of presenting information about the WPA…. Students will be so happy.

Duncan Agnew, a professor in a university at the very edge of the American West, sends along this solution to the “Tufte I ain’t” problem. I like it. Thanks!

He says anyone can feel “free to use, reproduce, and display this figure in any way you wish, with or without attribution.” Happy new year!

But I’m willing to learn. Properly rebuked for slapdash graphing, I’ve tried to improve the representation of WPA expenditures that appeared in this post, using the Greensboro font from Zapatopi.net.

I’d be delighted to hear further suggestions and critiques. One thing I want to do, but can’t figure out how for a graph like this one, is to figure out how to make the biggest line discontinuous—that way I could change the scale so you could make more meaningful distinctions among the other numbers, while still appreciating that the top expenditure goes way off the scale.

UPDATED: Here it is with a scale in billions, per suggestions.


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