New Deal Denialism--Conservative Liars On The Rampage

by: Paul Rosenberg

Sun Nov 23, 2008 at 19:27

As conservative economics collapses disastrously under the weight of its many, many lies, it is only natural that the liars fall-back position is to take aim at the hope of actually cleaning up their mess.  And hence the sudden rise of New Deal denialism.  It's not as if this comes out of nowhere.  It comes out of the same sorts of folks who denied the New Deal as it was succeeding right before their very eyes.  And it comes out of the right-wing think tank complex.  And it gets spouted by George Will on ABC This Week.  And it's a load of bull.  Video of Will on the flip. Pride of place to this simple diagram (click to enlarge), which shows the truth: the New Deal was working just fine, until FDR, with a premature sense of relief, and a lingering belief in the old economics, decided it was time to go back to balanced budgets, thus precipitating the recession of 1937/38.  It was, in effect, a text-book science experiment: turn the New Deal stimulus policies on, economic goes up, turn them off, economy goes down.  But Will--and many others--are trying to pretend the exact opposite, that FDR's policies remained constant, and proved disasterous in 1938:

From Brad DeLong, added text on flip.

Paul Rosenberg :: New Deal Denialism--Conservative Liars On The Rampage

I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.

The interruption of the Roosevelt Recovery in 1937-1938 is, I think, wel understood: Roosevelt's decision to adopt more "orthodox" economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn.

DeLong posted that after George Will lied about the New Deal last weekend on ABC This Week, and Paul Krugman corrected him:

Then, lying whack-a-mole that he is, Will tried it again this week:

Before we go into a new New Deal, can we just acknowledge that the first New Deal didn't work?

What's more, Eric Rauchway, from Edge of the West, has posted his own illuminatingly annotated version of a letter from Keynes to FDR, February 1, 1938, in which Keynes explains to Roosevelt where he went wrong.  This was not some armchair commentary, decades after the fact.  This was "in the moment" as they say.  An openning snippet:

Because a number of people have asked, and the relevant section-the start of the letter-doesn't seem to be on the Internets elsewhere, I provide here the opening of Keynes's letter to Roosevelt, with some interpolation/translation and historical detail.
    ... the present recession

- by which he means, the downturn of late 1937-1938, not the Depression-
    is partly due to an 'error of optimism' which led to an overestimation of future demand, when orders were being placed in the first half of this year. If this were all, there would not be too much to worry about. It would only need time to effect a readjustment....

    But I am quite sure that this is not all. There is a much more troublesome underlying influence. The recovery was mainly due to the following factors:-
      (i) the solution of the credit and insolvency problems, and the establishment of easy short-term money;
      (ii) the creation of an adequate system of relief for the unemployed;
      (iii) public works and other investments aided by Government funds or guarantees;
      (iv) investment in the instrumental goods required to supply the increased demand for consumption goods;
      (v) the momentum of the recovery thus initiated.

    Now of these (i) was a prior condition of recovery, since it is no use creating a demand for credit, if there is no supply.

This is the start of what teachers call the "praise sandwich"-we'll say something nice, before we explain why you get a D....

Go ahead, read the whole thing, and you'll not only know more about the 1937/38 recession than 99.99% of conservative pundits, you'll know more about it than 99.99% of people who are not lying maniacs, either.

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I am glad someone has finally wrote an aricle on the New Deal (4.00 / 5)
Someone also needs to do an article on all the identifiably progressive people appointed to serve Roosevelt's Administration.

Harold Ickes, Henry Wallace,Francis Bittle, Frank Murphy and many others.

The latest little bit of common wisdom from obamites is that we would call FDR a center right shill for his appointments.

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Good Idea, Thanks! (4.00 / 1)
I will put that on my to-do list!

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Maybe the reason why we speak Martian to some people (4.00 / 2)
is that they simply don't pay attention to Presidential administrations.  They focus exclusively on the President when it comes to the people that really run this country.  They don't focus on appointments or political donations, or the executive and judicial branches.

Heck, for the majority of Americans, the President may literally be the only politician they can identify.  Some of this has to do with the poor state of civics education in the US, but it also relates to the press.

This is a consequence of the Presidentialism that Sirota has been focused on of late.  It is also a lazy persons way of relating to politics, and liberals are just as guilty as conservatives.

However, for those of us who paid attention to the run-up of the Iraq war, we know very well that those behind the scenes advisers and politicians make all the difference in the world.

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[ Parent ]
Right-wing propaganda (4.00 / 2)
For the last few years, the right-wing think tanks have done a good job of cranking out revisionist propaganda about the New Deal. Here are three recent bestselling books that present the right-wing perspective (with the date they were published):

The Forgotten Man: A New History of the Great Depression, by Amity Shlaes (WSJ reporter), May 27, 2008.

More academic:
Rethinking the Great Depression (American Ways Series), by Gene Smiley (Professor Emeritus of Economics, Marquette University), September 25, 2003.

FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, by Jim Powell (Cato Institute historian), September 28, 2004.

For a progressive view (accepted by most scholars), here is a much better book:

The Great Depression and the New Deal: A Very Short Introduction, by Eric Rauchway (historian, UC Davis), March 10, 2008.

And here are two older classics:

The Great Crash of 1929, by John Kenneth Galbraith, 1955.

The Great Depression: America 1929-1941, by Robert S. Mcelvaine (history professor, Millsaps College), 1993.

Challenging conservative strawmen (0.00 / 0)
And in this post, historian Eric Rauchman explains why many of the conservative strawman criticisms of the New Deal are stupid.

[ Parent ]
I might also recommend a some good websites (0.00 / 0)
One is called"Liberalism Resurgent", and another good website called "Critiques of Libertarianism"

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[ Parent ]
Boy, Thems Some Golden Oldies! (4.00 / 1)
Back in the 1990s, when I wasted far too much time debating with libertarians/conservatives online, those were 2 of the three top sites I used to link to and refer to.

The third, of course, was Talk Orgins.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

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Ahhh! (0.00 / 0)
You are an old useneter.

Were you ever in the weasles?

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[ Parent ]
Actually (0.00 / 0)
I used to get into even more fruitless email exchanges.  And I was a token leftist book reviewer on the actually center-right, virtually the only one writing there who vigorously engaged with the readers in the comment threads.

I did browse usenet some, and engaged much less often.  But my most memorable experiences were elsewhere.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
That is probably why you have maintained your (0.00 / 0)
sanity, and don't get ruffled easily, which is good!  You remind me alot of kangas.  Kangas was a usenet LSW and he was able to maintain your attitude even in the muck.

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Yeah, (0.00 / 0)
I didn't have any direct usenet exchanges with Kangas, but I did email him back and forth a couple of times.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Rauchway (4.00 / 1)
I was wrestling with a lot more information and much more unweildly post, which was going to inlcude a link and an excerpt to what Rauchway wrote about The Forgotten Man in Slate last year.  Since you brought it up, here's the beginning of what he wrote, which echoes themes that I've sounded in the past--the idea that conservatism is the original form of identity politics, and that its core concern is to paint liberals as alien freaks, projecting their own inner darkness out onto others:

FDR's Latest CriticsWas the New Deal un-American?
By Eric Rauchway Posted Thursday, July 5, 2007, at 7:18 AM ET

Seventy-five years ago this week, on July 2, 1932, Franklin D. Roosevelt accepted the Democratic nomination for president and pledged "a new deal for the American people." He promised public works, agricultural price supports, new mortgage markets, working-hours legislation, securities regulation, freer world trade, reforestation, and repeal of Prohibition. Congress passed laws for all these goals and added, in his first term alone, watershed management, legalization of labor unions, deposit insurance and a stronger Federal Reserve Board, and Social Security. All these remain: We live in the nation the New Deal made.

As Roosevelt pointed out, the New Deal wasn't so new. He claimed inspiration from the progressivism of Woodrow Wilson, under whose administration Congress created the Federal Reserve System, lowered tariffs, and tried to legalize unions. Republicans supporting him cited Roosevelt's cousin-uncle Theodore, under whose administration Congress began to regulate corporate accounting and passed truth-in-advertising and pure-food laws. Farm supporters of the New Deal drew on the decades-old tradition of populism, which opposed the gold standard and demanded that government assist rural residents as much as it assisted railroad corporations. What was new in 1932 was a basket case economy with 23 percent unemployment, offering the possibility of getting these American traditions together to fuel a national majority coalition-which is what the New Deal did.

Despite its deep American roots and its popularity across class, regional, religious, racial, ethnic, and to a degree even party lines, the New Deal never lacked critics. They came mainly from the corporate boardrooms and the white-shoe law firms. They could not deny the New Deal's popularity, so they challenged its Americanness. They claimed, as the attorney Frederick Wood did in 1935, that Roosevelt aimed at "some form of national socialism-whether Soviet, Fascist, or Nazi." Some duPont executives, annoyed that the New Deal was raising wage rates for black workers, created the American Liberty League for "encouraging people to get rich" instead of supporting Roosevelt. They made the 1936 election a referendum on the New Deal.

Roosevelt won this referendum by a record majority. He appealed most to the poor-pollsters found Roosevelt garnered 76 percent of the lower-income vote. But he won more than 60 percent of middle-income votes, and even 42 percent of upper-income votes.

If the New Deal survived that test, so did the white-shoe critiques. Today, Grover Norquist complains the New Deal was "un-American." And like-minded Amity Shlaes says in the Wall Street Journal that she wants "[t]o write sympathetically about the Liberty Leaguers." Which she does, in her new book, The Forgotten Man. Despite its subtitle, it's less "a new history of the Great Depression" than what Shlaes says it is: a resurrection of the duPont critique of the New Deal, circa 1935. The New Deal was un-American, she argues, and bad for business....

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Time Magazine, 1939: Common knowledge of factors causing the 1937-1938 recession (4.00 / 3)
In 1939, Time magazine reported on the previous recession, looking back.  What's funny is that in 1939, the causes of the right's beloved 'Roosevelt Recession' were quite commonly accepted to be the drop in federal spending given the new Social Security with-holdings.

However, in 2008, idiots like George Will try to go on TV each and every week and blame the New Deal for the Depression and claim that FDR made it worse or prolonged it, rather than do everything then seen as politically possible to resolve it -- except for failing to spend enough due to the whinings of the deficit hawks of his day in 1937.

Lauch Currie probably comes nearer to having a passion for anonymity than any other New Deal adviser. First evidence of Currie's growing technical weight in Washington came in the spring of 1938, when he wrote an influential memo on the Causes of the Recession.

Its prime theses, now commonplace:

1) U. S. Social Security taxes took so much out of the public pocketbook that the Government's net contribution was reduced during the crucial March-September period in 1937 to a monthly average of $60,000,000 from $335,000,000 during 1936.

2) "Compensatory" Federal spending to stimulate heavy industry might be more flexible if concentrated "in large part outside the regular budget." [i.e. -- "DEFICIT SPENDING"]

Outside the regular budget, accordingly, are to be the Federal corporations investing in self-liquidating projects (under the Lending-Spending Bill now before Congress).

Though Anti-Spending Henry Morgenthau frowned on original public works items in this Bill, he favors the rail equipment plank which Currie ingeniously formulated to please business. Cash-pressed railroads will be allowed to acquire cost-cutting equipment without running up more debt. They may just lease on an attractive hire-purchase basis, end by owning the equipment, thus stand to save millions a year and stimulate heavy industry without putting the U. S. Government into the equipment business or adding to the Government debt.

FDR documentary (0.00 / 0)
There was a 3 or 4 hour documentary on FDR (mostly complimentary) on the History Channel (I think) a couple days ago and I was yelling at the set that the completely screwed up thereason for FDR's temporary "unpoularity in 1938: it wasn't foreign policy but recession caused by cutbacks in the New Deal).  One more lie.

Notice a big change in Congress?  It's most likely caused by an economic downturn whether in 1838, 1858, 1930,1932,1894,1938, 1958,1982,etc.  1994 was weird that way as was 1974 (Watergate).

Dow Jones and GDP show same pattern (0.00 / 0)
The chart only shows private investments, but you can see a similar dip in this chart of the Down Jones industrial average from 1930-1939:

And it's not as fine-grained, but here's a graph of the GDP from 1929-1940:  

Yup! It's MACRO Economics. (0.00 / 0)
Or, in this case, make that smackro-economics.  As in right upside the head.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

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