On Demand
Obama's New New Deal
Obama will enter the White House at a moment of economic crisis worse than anything the nation has seen since the Great Depression. How will his new deal compare with FDR's? Jonathan Alter, senior editor and columnist for Newsweek magazine and author of The Defining Moment: FDR's Hundred Days and the Triumph of Hope, and Amity Shlaes, senior fellow at the Council on Foreign Relations and the author of The Forgotten Man: A New History of the Great Depression, weigh in.
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Wasn't it WWII that got the US out of the 10 year Great Depression?
Maybe we just need a good war...oh yea, we have 2. Forget that...
A la putting a man on the moon before the decade is out: replace the entire American auto fleet within a decade using vehicles that get 50-100mpg.
or better yet, Leo, implement real and modern rail systems, which would make the US more efficient in a whole variety of ways - including energy efficient and time efficient
Why is Obama rescinding his promise to eliminate tax cuts for the rich. This is so upsetting and undermines the whole message of "change." Larry Summers is no major change agent.
My question is that Summers was a deregulator as a member of the Clinton econ team; will or is Obama's team willing to buck the banking/investment lobby [represented by Summers and Rubin] and re-regulate the banking and investment banking sectors? Some economists are saying that the new Citibank rescue is not transparent enough.
Check out Amity Shlaes' Wikipedia entry:
http://en.wikipedia.org/wiki/Amity_Shlaes
On 2 September 2005, Shlaes wrote a column for the Financial Times arguing that the George W. Bush administration's response to Hurricane Katrina showed that it had been well prepared for the disaster and that George W. Bush had not been hindered by consideration of federalism in his response.[4] Ten days later, in another Financial Times column, Ms. Shlaes noted that there had in fact been delays in responding to Katrina, but argued that the Bush Administration should not be held responsible for them, because they were simply an unfortunate result of federalism.[5]. Shlaes ceased to write columns for the Financial Times shortly thereafter.[6]
Shlae's work has come under fire from respected scholars. Nobel Prize winning economist Paul Krugman has criticized Shlaes for misunderstanding or misrepresenting the basic tenets of Keynsian economics.[8] Historian Eric Rauchway charges that Shlaes' writings on the Great Depression misrepresents basic historical facts. [9]
leonore,
I'd say a jobs program that rivals in size the 700 billion bank baillout qualifies, in the very least, as "change"
If the tax cuts for the rich aren't immediately rescinded, yes, that would be disappointing, but compared to what?
Let's give this guy a chance before we start crying into our coffee.
First of all, the New Deal did not work. 1937-1938 was much worse then 1933. Taxes were higher under FDR then Hoover. He destroyed food instead of feeding the poor. Instead of fostering growth,create jobs to stimulate the economy, he forced industry and farmers to produce LESS which artificially increased prices. Therefore, workers were laid off for lack of work, creating %25 unemployment, who couldn't afford the fake prices. It was only the war that got us out of the depression. Why? it created jobs.
Obama, can only do better. He seems to actually want to try to build more of a stimulus, through investment and government intervention. While I don't believe in bailouts on principle, but while FDR broke up the banks, Obama would consolidate and manage debt for stability.
"Experimentation?"
This is quite a stretch. We're dealing with an incredibly volatile and fluid economic climate. Ideas are applied, the landscape changes, adjustments must be made.
Leonore,
As for not eliminating the tax cuts for the rich. If he came into office and immediately did so what would that do to the economy? Do you even know? He's going to let them expire, can you be patient?
It seems as if there is WAY too much second guessing and complaining about a man who hasn't spent a minute as the actual POTUS.
Leonore: Obama is not rescinding his promise to eliminate tax cuts for the rich, he is probably going to let them run out. He cannot afford to alienate them... While there is much to not like about Larry Summers, he is one smart economist. Obama's team needs to weigh everything about what is going on, make decisions about how to go forward with the bulk of Americans welfare in mind. At the same time, push forward his "green" agenda and make this a cleaner world. His team also needs to put regulations on Wall Street and the banking industry.
was the "employment" / "unemployment" definition the same then as it is now?
Not sure if employment is the sole measure of an economy's health if a so-called employed worker still relies on tens of thousands in public services such as food and health care.
Eric asked:
>is Obama's team willing to buck the banking/investment lobby [represented by Summers and Rubin] and re-regulate the banking and investment banking sectors?
On Democracy Now, Naomi Klein was talking about this. Robert Kuttner was (half-heartedly) defending Obama.
The answer was no.
Hey Lenore you beat me to the punch.
Obama is just not who people think he is.
He is back tracking on one promise after another.
There is NO reason why he won't repeal the Bush tax cuts other than it is a gift to Oprah and his wealthy friends.
Wasn't the last 8 years of LOW taxes enough.
Apparently not!
Again another president who thinks the middle class and the poor should pay for everything.
Fraud.
Norman,
Thanks for providing a perspective on Schlaes that we wouldn't hear from Brian (and I like Brian, I just wish he could ask questions at least as tough as the ones Terry Gross asks. As a longtime listener, I remember how tough Brian used to be, and I honestly believe he's been slipping over the last few years.)
For every new birth of a US citizen born to a citizen of legal immigrant, the government would open a tax-free savings account (or bond or whatever) with an initial deposit of about $50,000. The money could not be withdrawn for 18 years. By the time the child reached 18, the money would compound to at least $80,000 and could be used to start a business, pay for college, put a down payment on a house, etc., or be rolled over into an IRA.
It would be a great way to fight poverty an level the playing field. And the cost would be about 20,000,000,000/year. Chump change, these days.
I wonder about the "wisdom" of Amity Shlaes. She sounds like a typical "supply-side" economists and a Bushie. Why do we need to hear more of this type of argument?
I've heard Ms Shlaes a couple of times and seems that she has an ideological ax to grind. I tend to think that Paul Krugman has more credibility; is Ms Shlaes an econmonist?
While looking in the rear view of history can be very healthy to a degree, it might blind us to the differences between past and present situations when carried too far.
Wouldn’t it behoove us and the rest of the world better if we were to take a more “googlian” approach to problems as new and as poorly understood as the ones we are experiencing?
Please refer to the recent lecture given by Eric Schmidt to the New America Foundation.
Why - I'm all for mass transit, just being realistic about people's willingness to give-up cars. (And acknowledging all the people who live in rural areas or sprawling suburbs where mass transit is hard to implement.)
I didn't specify the mechanism by which the auto fleet would be replaced, but likely investment in developing and manufacturing the vehicles, combined with subsidies to buy them.
So how 'bout this: if you're willing to give up your car, the gov't will subsidize your public transit instead, and with more money. If enough people in a community agree to do this, the community gets a grant to implement mass transit.
the right likes to say the new deal failed. my whole life i've never heard this. NOW they say it like it's a given.
i would like some facts and someone to dispute this.
hjs,
What Krugman and some others say is that Roosevelt did not go far enough, did not spend enough and so the economy shrank in the late 30's. WW II brought it out of the doldrums. I have to hope that there is another way besides war. Some people have suggested a major public works like the CCC and the WPA but to take it even further. I'd like to see that tried. We would get an improved infrastructure and we would put a lot of people to work.
This could have been Barack's theme during the campaign instead of this undefined "change" message. No matter, that is over. Now maybe he can pick up that message.
mc
so can we say new deal half way worked?
Looking at the numbers (which i cannot post here), the US has tended to grow itself out of debt trouble.
From the US Treasury web site, the debt has never gone down, even when the US had budget surpluses.
Relative to GNP/GDP our debt is not yet as high as it was during WWII, but it is getting very close the funding for supporting the banks will likely push us to an historic high.
Brian, I will send the graphs along if I can get an email address. They are PDF files and I put the sources on them.
I think there is a lot to digest and I just really started digging into it all this week.
hjs,
That might be a fair assessment, however, since it had not been tried before and hasn't been since, it is hard to compare it to anything else. What Krugman and others have said about it has been in hindsight.
I think that Shlaes' reply to the last question about her debate with Krugman was evasive at best, dishonest at worst.
It's about a lot more than a single unemployment number -- the debate goes to the heart of whether the New Deal worked or not. Simply put, a lot of right-wingers like Shlaes have been going around for a long time saying that the New Deal was a failure. While this was just an academic question no one really paid them much attention, and it was just a rare example of the losers (business interests) rewriting history, rather than the winners.
Now that the question of whether the New Deal worked is actually important, top economists are weighing in on the subject -- not just Krugman, but Brad DeLong and others as well -- and debunking the "research" that Shlaes and others have put out. The fact is that the New Deal did a lot to help pull the economy out of the Depression, and only when FDR tried to rebalance the budget (in misguided obeisance to current (1930's) economic theory) in 1937-38 did things take a nosedive again.
Now that they're being called out on this, the New Deal deniers are running like rats for cover, trying to portray the disagreement as limited to unemployment rates (they don't want to count those in government-provided jobs like the WPA as "employed").
Shlaes has had way too much exposure lately, and Brian shouldn't have her back on unless she engages in this crucial debate first, with a little bit of intellectual rigor and honesty.
it was WWII that got us out of the depression, as a result of massive public spending in defense.
it's obvious how that spending has continued through today, including the korean war, the cold war, the war on drugs, the war on terror.
the american military complex is one which is not only psychological and political, but one which is coupled with a massive amount of public spending- mainly concentrated in defense.
just today paulson said things would be worst if not for his first bailout. so maybe we could, at least, say things would have been worse without the new deal. besides if it helped for 4 years at least that gave people breathing room.
i'd like to know more.
I have no question in my mind at all that the New Deal was a good idea. I guess the question is did they go far enough?
I don't know what Paulson is talking about. It's like he lives on a different planet.
We should broaden our perception of what "infrastructure" is. It's not just roads and bridges. By the way, if we were to pile a whole lot more road construction in Connecticut the traffic snarl-ups would bring the economy to a halt. We do need a full court press on renewable energy, conservation and the energy internet / infrastructure to deliver and manage it ala T Friedman's "Hot Flat Crowded". This will lead to much greater productivity in the form of lower energy costs. There are plenty of T Boone Pinckens' out there to make this happen if government can help make the numbers work. Oil prices won't stay low forever. Universal health care would enable /allow for a much more fluid workforce as people would no longer stay at the wrong jobs "for the health plan". Mass transit, congestion pricing would would lead to families needing fewer cars and have moe transportation flexilbity. What about the 2nd Ave subway in NYC or the freight tunnel to connect the excellent deep water port in Brooklyn with rail and road links in New Jersey. A new Tappan Zee Bridge. Exising subways, and LIRR and Metro North lines are at their breaking points and can't accommodate more riders without additional equipment and parking capacity at stations. There's plenty to do!!!
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