New Deal lesson: Doing too little can backfire -Paul Krugman »
Posted By Radiofreeeuropa 11 months, 2 weeks ago in Business & FinanceSuddenly, everything old is New Deal again. Reagan is out; FDR is in. Still, how much guidance does the Roosevelt era really offer for today's world?
The answer is, a lot. But Barack Obama should learn from FDR's failures as well as from his achievements: The truth is that the New Deal wasn't as successful in the short run as it was in the long run. And the reason for FDR's limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious.
The New Deal's long-run achievements: The institutions FDR built have proved both durable and essential. Indeed, those institutions remain the bedrock of our nation's economic stability. Imagine how much worse the financial crisis would be if the New Deal hadn't insured most bank deposits. Imagine how insecure older Americans would feel right now if Republicans had managed to dismantle Social Security.
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Radiofreeeuropa
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Radiofreeeuropa11 months, 2 weeks ago
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The only reason the success of the New Deal is debated is it was applied gingerly. When fear of deficits was laid to rest (WWII) the results were obvious. No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession. The Obama administration will put deficit concerns on hold while it fights the economic crisis.
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But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession, often at the expense both of their most vulnerable constituents and of the nation's economic future.
These state-level cutbacks range from small acts of cruelty to giant acts of panic — from cuts in South Carolina's juvenile justice program, which will force young offenders out of group homes and into prison, to the decision by a committee that manages California state spending to halt all construction outlays for six months.
Now, state governors aren't stupid (not all of them, anyway). They're cutting back because they have to — because they're caught in a fiscal trap. But let's step back for a moment and contemplate just how crazy it is, from a national point of view, to be cutting public services and public investment right now.-
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Radiofreeeuropa11 months, 2 weeks ago
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Is the nation as a whole less able to afford help to troubled teens, medical care for families, or repairs to decaying roads and bridges than it was one or two years ago? Of course not. Our capacity hasn't been diminished; our workers haven't lost their skills; our technological know-how is intact. Why can't we keep doing good things?
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It's true that the economy is currently shrinking. But that's the result of a slump in private spending. It makes no sense to add to the problem by cutting public spending, too.
In fact, the true cost of government programs, especially public investment, is much lower now than in more prosperous times. When the economy is booming, public investment competes with the private sector for scarce resources — for skilled construction workers, for capital. But right now many of the workers employed on infrastructure projects would otherwise be unemployed, and the money borrowed to pay for these projects would otherwise sit idle.
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beavith111 months, 2 weeks ago
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i'm not.
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the federal gov't has control of the ability to make funds. the states don't.
for an example of how not to do it, CA has been screwed up since before Gray Davis's watch. and that was when the housing bubble was pumping up state revenues. in the face of the economic collapse, CA is running a, what, $15B deficit?
the states have to run their budget like a business. if they do politically expedient things, they bring disaster on themselves.
this current situation is a self fulfilling prophesy.
alright genius... what's a tolerable deficit that the states should run? what or when can the states return to fiscal responsibility?
in your first commentary, who was in charge in 1932?
in your second commentary, money never sits idle, unless its stuffed under your mattress or buried in your back yard..-
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Radiofreeeuropa11 months, 2 weeks ago
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Well it appears you agree with the first statement, that deficits in prosperous times were and are erroneous. We know from history that the Keynesian approach applied conservatively yields conservative results, when applied liberally brings faster and larger results. So in a time of crisis I would not put any limits whatsoever on deficit spending. This would HAVE to be reversed when private money began to flow again. (IMHO this was the mistake made by every administration in the last 50 years, except Clinton's who actually was fiscally responsible).
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If your really asking Hoover was president 1929- 33.
I beg to differ on your last comment, any banker will tell you money not invested -used-(mortgage or other loans) is basically sitting idle.
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Radiofreeeuropa11 months, 2 weeks ago
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It would be a refreshing thing if government did actually become responsive to the majority of people they are supposed to represent, but that is certainly not why they would pursue a massive employment and investment policy. They would and should do it because the private sector can not or will not.
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Frankly no one "KNOWs" with any certainty what should be done, it is all guesswork, hopefully informed by history.
And history shows Keynes ideas work, but they are crisis control tools and deficits should never have been run in prosperous times. There is only one occasion I know of where it was tried and did not seem to work... in the 90's in Japan. That scenario should be scrutinized carefully.-
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beavith111 months, 2 weeks ago
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...And history shows Keynes ideas work, but they are crisis control tools and deficits should never have been run in prosperous times. There is only one occasion I know of where it was tried and did not seem to work... in the 90's in Japan. That scenario should be scrutinized carefully....
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what you have is one case where it MAY have worked and another case where it didn't.
that's hardly a compelling case to support wild eyed Keynesianism.
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Radiofreeeuropa11 months, 2 weeks ago
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The best and easiest to understand site on Keynes and his theories is the UK site at http://www.propeller.com/story/2009/01/04/the-theo...
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Highly recommended! -
ellsworth-tooheyComment removed: Hard Banned
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Radiofreeeuropa11 months, 2 weeks ago
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Paul Krugman is an economics professor at at Princeton and a Nobel prize winner...what might Mr. Toohey's economic credentials be? One is inclined to ask since the claim is made that a man of this academic stature is unworthy to "take out your trash". One would assume your creds dwarf Dr. Krugman's.
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Yet because we have read previous commentary from Mr. Toohey, there seems to be a discrepancy in the mix. These comments have not sounded scholarly in the past, but what the hey, I'll give you a shot. What impeccable academic background in economics do you have to make such claims? -
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beavith111 months, 2 weeks ago
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Krugman got his Nobel for academic work he did in 1980. since then he's become a nothing more than a columnist. kind of like Limbaugh, but with a Nobel.
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his politics make me hesitate in believing him. how much of what he says is Nobel worthy and how much is just his opinion?-
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Radiofreeeuropa11 months, 2 weeks ago
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beavith, check your facts-
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Krugman is a current professor of economics and international affairs at Princeton University. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences "for his analysis of trade patterns and location of economic activity". He taught at Yale University, MIT, UC Berkeley, the London School of Economics, and Stanford University before joining the faculty of Princeton University in 2000. He is a member of the Group of Thirty international economic body and the Council on Foreign Relations. Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes.
Krugman is well-known in academia for his work in international economics, including trade theory, economic geography, and international finance.
Though he does write a column for the NY times, he is hardly a Rush Limbaugh.
Nor is the column in any sense the basis for his livelihood.
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