US 'Economic Stimulus' Budget Review

[Don Corleone]

Okay, do you want me to focus on the stimulus package and TARP reform, or do you really want to continue the NR debate, even though you keep telling me to drop it (though you're the one that brought it up). I suspect you're pissed that I didn't let you do a drive-by on it, and that's why you keep trying to get the last word, then say "now, back to the topic". If we're going to stay on topic, then let's stay on topic.

You said the NRO editors are good at what they do in a tongue-in-cheek sense. You had just gotten done saying they're an advocacy machine for the Republican party, and then you say "and they're very good at it".

They would describe themselves as thoughtful essayists that consider current events from a particular perspective. They don't make any bones about that, but the key point is thoughtful essayists on current events, not Republican shills.

Now, if it makes you feel better to dismiss everyone out of hand that doesn't subscribe to your world-view, there's nothing I can do to stop you. But I'm not going to let it walk by unquestioned.

And as for the Economist, they advocate free-trade and globalization (things I agree with), but they also take some pretty strong stance on the need for central banks, controling currencies and interfering in functioning markets (things I don't) . In other words, they take an editorial stance. Does that somehow dismiss their viewpoint as invalid? Should I say something like "they're an advocacy rag for the world bank, and they're very good at what they do"?

[Lemur]

[D]o you really want to continue the NR debate, even though you keep telling me to drop it (though you're the one that brought it up).

I'm sorry, when did I tell you to drop it?

And as for the Economist, they advocate free-trade and globalization (things I agree with), but they also take some pretty strong stance on the need for central banks, controling currencies and interfering in functioning markets (things I don't) . In other words, they take an editorial stance.

Most publications take some sort of editorial stance. As another poster pointed out, it's a question of degree. Do you see any functional difference between The Economist and National Review? (I'm assuming you're read enough of both to offer an informed opinion.)

I thought your point about "homeowners' ability to live with the mortgages they currently have" was very astute. I have wondered about that myself; why do you read and hear about banks (a) jacking up interest to unpayable levels, (b) refusing to negotiate with the homeowner, and then (c) foreclosing? It makes no economic sense on any level. Obviously, people who bought more property than they could handle will have to lose their homes, and that sucks, but what about people who get the (a) (b) (c) treatment? Would a mere $30 billion in the FDIC have stopped that bleeding, as Graham proposed?

-edit-

You said the NRO editors are good at what they do in a tongue-in-cheek sense. You had just gotten done saying they're an advocacy machine for the Republican party, and then you say "and they're very good at it".

Forgot to address this. Why do you declare that I'm being tongue-in-cheek or sarcastic? I think they are very good at what they do. And they make no bones about being a partisan organ. A memorable quote from the election season past: "Obama's the enemy — a far-left Democrat. We should be attacking him at every weak point. That's politics. A pro-Obama emailer whines to me that the Pastor Wright business is 'a Swift Boating of Obama.' Well, duh!"

Here's a not-terribly balanced post from today: "The economy began to collapse when the Democrats captured the House and Senate and we then knew that the lower tax rates on individuals, capital gains, and dividends would end after 2010. We are in the early stages of the Reid/Obama/Pelosi recession and nothing they are even talking about doing will help."

Do these strike you as the sorts of things you would read in Newsweek, The Economist or any mainstream news magazine?

[Crazed Rabbit]

Feel free to show me where I said that they were "worthless."

You didn't say exactly that, but you did say:

We aren't going to have an intelligent or enlightening discussion based purely on their spin.

Now what does that mean when I'm posting in a forum where the point is debating?

Unfortunately, the source is purely partisan, so I would honestly need a corroborating source before I would accept their accounting. These are the same people who proudly cited a Congressional Budget Office report that turned out not to exist. That was a week ago. To quote St. Reagan, "Trust but verify."

As I said, they're very good at what they do, but what they do has nothing no bearing on trying to get at the truth of any subject. They exist to aid a particular side in politics. There's nothing wrong with that, but it's naive to treat them like a normal news source.

A normal news source? Like what, exactly? The NYT? CNN? MSNBC?

Ad hominem would mean that I'm attacking a person instead of an idea. How is it ad hominem to point out, accurately, that National Review is a purely partisan organ? Please explain.

You're attacking the source, not the article.

As for the actual topic, the stimulus/pork bill, I find it a very hard subject to approach with a useful perspective. Obama is betting that Keynesian theories will put the brakes on the downward spiral, but in truth those theories have never been tested. So we're looking at a trillion-dollar gamble on an unproved economic theory. Also, the Congressional Dems have larded up the bill, which only serves to confuse the issue, and was strategically idiotic of them.

The basis of Keynes' theory is that prices of goods and labor don't adjust fast enough in changing conditions; they don't reach equilibrium, and that the government can fix that through spending. There's not much proof for that, especially since Keynes wrote his theory in 1936, when the gov't of the US was actively trying to not let wages and prices of goods adjust, and interfering in the market so that they did not adjust. So Keyne's argument for government intervention almost becomes an example of why the government shouldn't interfere.

On the other hand, I don't hear any reasonable counter-proposal coming from any cohesive group. Republicans saying "tax cuts!" strike me as borderline ridiculous; perhaps if some economist could make a proper argument for their "tax cuts will solve anything" position, I'd understand it better.

These one time rebates aren't going to help much; likely less than 50% will be spent, the rest saved or used to pay off bills. And heaven forbid we cut taxes on the rich.

Here's an interesting take from Bruce Bartlett:

The problem is that fiscal stimulus needs to be injected right now to counter the liquidity trap. If that were the case, I think we might well get a very high multiplier effect this year. But if much of the stimulus doesn't come online until next year, when we are likely to be past the worst of the slowdown, then crowding out will greatly diminish the effectiveness of the stimulus, just as the critics argue...

Thus the argument really boils down to a question of timing. In the short run, the case for stimulus is overwhelming. But in the longer run, we can't enrich ourselves by borrowing and printing money. That just causes inflation.

The trick is to front-load the stimulus as much as possible while putting in place policies that will tighten both fiscal and monetary policy next year.

How we actually accomplish that is way beyond my fiscal/economic understanding. But it certainly sounds reasonable.

I don't buy the need for huge loads of spending as 'overwhelming' and neither do a lot of economists.

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth

Specifically, in the realm of taxes, we need to cut the corporate tax (higher than most of 'socialist' Europe), the capital gains tax, and broadly cut down the huge amount of regulation that makes it much more difficult for small businesses.

As for this "we're robbing our children" outrage: I understand it, and I'm sympathetic to it, but where the **** were you people for the last eight years as a Republican president loaded us up with a yearly trillion-dollar deficit? Is it just me, or are you being freakishly selective?

I've been against Bush's big government spending for a long time, at least from the medicare increase.

CR

[Don Corleone]

Okay, Lemur, there comes a point where friendship and decorum dictate that an issue be dropped. I'd say we've passed that point. I plead no lo contesto on the charge of National Review being the print version of Limbaugh's radio show, as I already know you've got your fingers in your ears to any rebuttals.

I thought your point about "homeowners' ability to live with the mortgages they currently have" was very astute. I have wondered about that myself; why do you read and hear about banks (a) jacking up interest to unpayable levels, (b) refusing to negotiate with the homeowner, and then (c) foreclosing? It makes no economic sense on any level. Obviously, people who bought more property than they could handle will have to lose their homes, and that sucks, but what about people who get the (a) (b) (c) treatment? Would a mere $30 billion in the FDIC have stopped that bleeding, as Graham proposed?

Well, this is what happens when you incentivize troubled assets, no? When you make defaulted mortages worth their full value, what reason does the bank have to see to it that the mortage doesn't go into default? So many things about TARP were so poorly thought out (or were shrewdly thought out, but not with the stated goal in mind), and this would be prinicipal among them.

It's not that banks aren't working with homeowners to come to agreeable terms. The healthy ones are actually leading on this. Many reigional and local banks are pro-actively contacting homeowners whose 5-25, 7-23 ARMS are about to convert and working with them to set up terms they can actually meet.

It's the larger banks, the ones that are beating a path to Treasury's front doors, that are putting the thumbscrews to the homeowners. Why shouldn't they? Either the homeowner pays, with everything they've got, and the bank makes unprecedented profits on what is a relatively secure loan, or the homeowner is forced to default, and the Treasury reimburses the bank for the failed loan, and the bank winds up with the collateral, aka the house, to boot. Heads the bank wins, tails, guess what, they win again..

[Crazed Rabbit]

The Congressional Budget Office says Obama's stimulus plan will lead to a lower GDP in the long run.

CR

[Lemur]

Specifically, in the realm of taxes, we need to cut the corporate tax (higher than most of 'socialist' Europe), the capital gains tax, and broadly cut down the huge amount of regulation that makes it much more difficult for small businesses.

Hmm, so in your view, tax cuts really can solve the majority of our current economic problems. Why didn't we see something along these lines proposed while George W. Bush was still in office? Surely an agenda of deep deregulation would have stood a better chance under a Republican President ...

Either the homeowner pays, with everything they've got, and the bank makes unprecedented profits on what is a relatively secure loan, or the homeowner is forced to default, and the Treasury reimburses the bank for the failed loan, and the bank winds up with the collateral, aka the house, to boot. Heads the bank wins, tails, guess what, they win again..

That just makes my head hurt. Ow. Ow.

I'll be quite blunt: I don't have enough of an economics background to know what to root for here. It's clear to me that we are in deep doo-doo. It also stands to reason that if we wait around long enough and do nothing, it will probably fix itself. But nobody knows how long that will take, and nobody really wants a decade of recession. I am leery of the Dems and their porkish tendencies, but then again, over the last eight years I've gotten used to everybody and his dog loading up every bill with pork. The only difference now is that the people doing it have a (D) on their names, and the folks with an (R) have experienced a prison conversion and re-discovered Adam Smith.

I've heard quite a few people drawing comparisons with the Great Depression, often claiming that FDR lengthened the depression, and that only the Nazi menace truly ended the hurting. Does anyone here thing the Great Depression is a useful yardstick? Any lessons we should take from it?

-edit-

The Congressional Budget Office says Obama's stimulus plan will lead to a lower GDP in the long run.

An interesting bit from that:

CBO said there is no crowding out in the short term, so the plan would succeed in boosting growth in 2009 and 2010.

The agency projected the Senate bill would produce between 1.4 percent and 4.1 percent higher growth in 2009 than if there was no action. For 2010, the plan would boost growth by 1.2 percent to 3.6 percent.

CBO did project the bill would create jobs, though by 2011 the effects would be minuscule.

So in the short-term the stimulus would work?

[drone]

An interesting bit from that:

CBO said there is no crowding out in the short term, so the plan would succeed in boosting growth in 2009 and 2010.

The agency projected the Senate bill would produce between 1.4 percent and 4.1 percent higher growth in 2009 than if there was no action. For 2010, the plan would boost growth by 1.2 percent to 3.6 percent.

CBO did project the bill would create jobs, though by 2011 the effects would be minuscule.

So in the short-term the stimulus would work?

The point of boosting growth in 2009/2010 at the cost of long term decline: Nov 2, 2010. Or am I just being cynical?

[Lemur]

Well, not to be too starry-eyed, but I thought the point was to get us out of the liquidity trap.

[Don Corleone]

I personally think the comparisons to the Great Depression are inappropriate. We may find ourselves in our own 'not-so-small' Depression, but the root causes, and therefore the appropriate solutions, only marginally mirror each other.

Some important differences:

-In 1932, agriculture represented a substantially larger portion of our GDP, and we experienced several back-to-back crop failures on cash crops.

-Global currency was experiencing an artificial downward push, because Germany was being forced to make reparations payments and was inflating their money supply.

-We were actually still on the gold standard, so our currencies were technically more closely tied with other currencies that were also on the gold standard.

-With as irresponsible as we currently are, our margin rates are nowhere near what they were in the late 20's. We talk about 5% being riverboat gambling... Joe Kennedy made his bones on Wallstreet by selling 1% margin plays.

-The level of home ownership wasn't what it currently is.

Not to say we don't have our own new issues these days:

-Even the most astute minds on Wall Street are having trouble understanding some of the more advanced mortgage backed securities and credit default swaps. Any layman you meet who tells you they understand it is full of . Paulson himself admitted he couldn't get his mind around the problem, nor could Greenspan. When you hear them say "We don't know how to value the losses", they're not saying "we don't know how much the value has shrunk". They're being literal. They have no earthly idea how to value some of these tools.

-Municipalities are in a precarious position hitherto unthinkable. Arizona, California and about 8 other states are about to default on outstanding bond payments. Just 1 year ago, it was unthinkable that a state bond wouldn't even rate at investment grade. That is going to to torpedo the bond market and artificially hold interest rates up, no matter what the Treasury and the Fed try to do to remedy the situation.

-The average American consumer has a net negative worth. Now, we can argue whether that's because of concentration of wealth by greedy fatcats or foolish consumers, but the net result is the same. The consumer demand market is historically inelastic right now.


In short, we can't keep saying "This is what we did in 1932, and it worked", or for that matter "It didn't work in 1932, so we shouldn't do it know". The two events are similar mainly in their magnitude and reach, not in nature.

Personally, the midst of a deep-reaching recssion is the wrong time to switch economic course. Until now, our economy has increasingly been driven by consumer spending, right or wrong. Making the decision to abandon that plan and rely on government spending to prop up our GDP is going to introduce its own host of problems. I would argue we should focus on bandaging the system we currently have (prop up consumer spending) and when things calm down, evaluate whether we want to rebalance the GDP percentages.

That means addressing the home mortgage crisis from the homeowner side. Neither the Democrats nor the Republicans want to do that. Democrats want to take advantage of the situation to grow government spending as a portion of GDP. They have romantic visions of a new generation of Roosevelt devotees to quasi-socialism (all those comparisons in the news aren't by accident).

But by the same token, now is not the time for trickle-down economics either. No matter how much the Republicans want it to be otherwise, corporate America is not going to generate economic activity with any money they get. Your average CEO is running scared . Any money he can get, he's going to sock away, improve his balance sheet and turn to his investor analysts and point out that he's beating the competition in his sector. That's an incredibly short-sighted view, but that's what they're paid to do. If you're the CEO of Caterpillar, you're not supposed to care about the macro-economy, you're supposed to care about large equipment sales and your own finances.

No, I think the only right answer is to remove both filters to the consumer, government and corporate and find ways to inject capital directly into consumer spending, as its the only way to stimulate economic activity again. However, it has to be large scale. As CR rightly points out, rebates or small cuts aren't going to cut it. You have to convince the average consumer that 1) they're not going to be homeless if they consume and 2) the income truly is disposable, they don't need to sock it away. Otherwise, the consumer is no better than the aforementioned corporate executive.... you'll just wind up with a much larger number of much smaller money pools.

[Don Corleone]

If you want to avoid the Liquidity Trap, all you have to do is declare a moratorium on all Capital Gains taxes.

[Lemur]

Thanks for the analysis, Don. Very helpful.

I still feel as though a crazy amount of political posturing is going on, much of it in bad faith. Take Senator McCain, who campaigned promising that he would bring broadband to rural areas. It was part of his stump speech.

Well, now that he's Senator McCain and not a Presidential Candidate McCain, rural broadband is the definition of wasteful spending.

Sen. John McCain (R-AZ) is employing his classically reductive reasoning to undercut broadband spending. “The American people are figuring it out. This is not a stimulus bill, it is a spending bill," he said Thursday. Of course, the terms "stimulus" and "spending" are essentially synonymous, but the semantic distinction he's making is two-fold: between government and consumer spending, and between short-term and long-term spending. Republicans want short-term capital infused into the economy by way of consumer spending.

Anyway ...

[Don Corleone]

I couldnt' agree more. The whole goal of the stimulus is to stop hemoraghing of jobs, and deflation, in the economy, right? Well, we all know the industries that are losing jobs right now: construction, manufacturing, financial services and technology. Two industries that have actually held up pretty well? Health care and education.

So where is 66% of the stimulus money going? You guessed it... health care and education. So yeah, we're going to solve the economic problems by giving money to... those that don't currently need it.

You could argue financial services is covered under TARP, but construction, manufacturing and technology companies and workers? So sorry, you're not in the Democratic playbook.

[LittleGrizzly]

To be honest with the great depression, its hard to know what overall effect FDR had, but in comparison to Britian and other allied countrys America recovered much sooner whereas Allied countrys didn't begin to recover until rearmament for ww2 began..

[Major Robert Dump]

The great depression wasnt lengthened by the all the spending, it was lengthened by price fixing.

I could honestly give 2 craps about pet projects in the stimulus bill because everyone does it, and now its the democrats turn. Until they change the manner in which earmarks are added (undemocratic imo) and the manner in which this country uses deficit spending and the federal reserve this garbage is just going to repeat itself. People like Tom Coburn in congress are an extinct dinosaur, a minority, and while we need more like him it won't happen.

Boohoo, theres pork.

[Lemur]

The great depression wasnt lengthened by the all the spending, it was lengthened by price fixing.

How certain is that as a conclusion? Just curious. Oh, and apparently , if you go by the numbers, FDR's stimulus did a pretty good job at the time ...

[Alexander the Pretty Good]

The great depression wasnt lengthened by the all the spending, it was lengthened by price fixing.

I could honestly give 2 craps about pet projects in the stimulus bill because everyone does it, and now its the democrats turn. Until they change the manner in which earmarks are added (undemocratic imo) and the manner in which this country uses deficit spending and the federal reserve this garbage is just going to repeat itself. People like Tom Coburn in congress are an extinct dinosaur, a minority, and while we need more like him it won't happen.

Boohoo, theres pork.

And people wonder why I want to dodge taxes...

[Crazed Rabbit]

How certain is that as a conclusion? Just curious. Oh, and apparently , if you go by the numbers, FDR's stimulus did a pretty good job at the time ...

Really? You malign National Review and then pull this out?

That FDR lengthened the depression through really stupid actions is a matter of historical economical fact. So MRD's conclusion is very certain.

So in the short-term the stimulus would work?

For those people planning on dying in less than ten years.

CR

[LittleGrizzly]

That FDR lengthened the depression through really stupid actions is a matter of historical economical fact.

http://en.wikipedia.org/wiki/New_Dea...the_Depression

Prolonged/worsened the Depression
A number of economists believe the New Deal delayed economic recovery.[52] A 1995 survey of economic historians asked whether "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of those in economics departments 27% agreed, 22% agreed 'with provisos' (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed.

A matter of historical fact for the economists you cited perhaps but its not everyone else's historical 'fact'. There is no wde ranging agreement on the matter and according to these figurers a higher percentage don't think FDR's policys served to lengthen and deepen the great depression. With the figures in even higher disagreement for historians probably because they look at the comparison with other allied countries who were determined to stick with smith's policys and had to wait for rearmement for WW2 before they're recovery began whereas US started recovering sooner...

[Lemur]

A matter of historical fact for the economists you cited perhaps but its not everyone else's historical 'fact'.

But ... but two UCLA economists wrote a paper saying otherwise! Do you understand? Not one, but two!

[Devastatin Dave]

Here's a very telling statement from John "Did you know I served in Vietnam" Kerry said about the importance of passing this legislation...
http://www.weeklystandard.com/weblog..._whats_the.asp

Our country is dead...

[Devastatin Dave]

For those people planning on dying in less than ten years.

CR

Sounds like the majority of our sneators and congressmen!!! Its like these global warming alarmists, there making so much money right now knowing by the time their predictions might come true, they'll be worm meat. Al Gore is the greatest personal capitalist and snake oil salesman the world has ever known...

[Seamus Fermanagh]

A comment on the "Source War" in this thread:

There is nothing wrong with using the National Review as a source. The whole point in citing sources is to make your reader aware of where you got your information so that they may evaluate the data or opinion profferred in light of the editorial stance/journalistic standards of the source noted.

Because a source takes a partisan stance, it cannot be logically assumed that all information presented therein is incorrect. YES, if a notably conservative source is being cited, opinions and inferences presented should be evaluated as coming from that perspective. That does not automatically mean that everything presented is


Jefferson owned slaves. Does this invalidate everything he said about human freedom?

Henry Ford bought into the Great Jewish Conspiracy theory. Does this mean that all his innovations in manufacturing are therefore suspect?

Mohandas Ghandi advocated a combat role for Indians in South Africa during the 1906 war. Does this render anything he said regarding non-violence as the correct means for political change invalid?


In other words, a little perspective please....

[Lemur]

Fair enough. Thanks for the balanced perspective, Seamus.

A recent Nobel laureate in economics weighs in ...

A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.

It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated. [...]

As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.

And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?

[Seamus Fermanagh]

As to the stimulus package.

The Senate will strip it down a bit from 1.3T down to about the 1.0T level. It will then pass. The conference bill will drag it back up to 1.1T or so.

This conference bill will pass the Senate with 2-5 GOP votes, it will pass the House party line. Obama will declare victory. Pelosi will declare victory. McCain will declare it was necessary. Baehner [sic?] will declare it's a boondoggle. We'll all go on doing pretty much what we've already done.

Is it more of an omnibus paying for loads of Democratic party favored changes rather than jobs stimulus -- yes. What did you expect? The won the election and they have the power. That's how the game is played.

[Crazed Rabbit]

A matter of historical fact for the economists you cited perhaps but its not everyone else's historical 'fact'. There is no wde ranging agreement on the matter and according to these figurers a higher percentage don't think FDR's policys served to lengthen and deepen the great depression. With the figures in even higher disagreement for historians probably because they look at the comparison with other allied countries who were determined to stick with smith's policys and had to wait for rearmement for WW2 before they're recovery began whereas US started recovering sooner...

That survey was almost a decade before the paper came out, and since then there's been more research done on the topic. It is pretty much fact.

Bernanke, chairman of the federal reserve, believes it (The Fed) played a key role in causing the depression (He actually apologized for it).

There are many others, like Milton Friedman, who hold the same views:

"Admirers of FDR credit his New Deal with restoring the American economy after the disastrous contraction of 1929—33. Truth to tell–as Powell demonstrates without a shadow of a doubt–the New Deal hampered recovery from the contraction, prolonged and added to unemployment, and set the stage for ever more intrusive and costly government."
–Milton Friedman, Nobel Laureate, Hoover Institution

As the great American economist Irving Fisher

Oh, that partisan Kruggy. There's a really funny quote from Fishing from 1929 (80 years ago!) - anyone care to guess what he says?

But ... but two UCLA economists wrote a paper saying otherwise! Do you understand? Not one, but two!

Oh my, what a rebuke! Truly, I wish I had a partisan website where the author could regurgitate leftist talking points and put up two graphs that ever so neatly go along with what he says! Truly, I am undone for relying on such fools as published economists and not a partisan blogger!

CR

[LittleGrizzly]

There are many others, like Milton Friedman, who hold the same views:

Milton Friedman is a huge adovocate of smith's theory's, he was keynes rival back in the day, not that he's not a great economist (he is, from what i have read) but he is someone who is going to disagree, i actually read a little bit of his view's and he was of the opinion that the reason for the depression in the first place was hoover not actually following smith's free market ideals...

That survey was almost a decade before the paper came out, and since then there's been more research done on the topic. It is pretty much fact.

The facts of the matter are America recovered quicker than other allied countries which where following smith's ideal of the free market, these countries continued in a slump until they began rearming. Im sure there are parts of FDR's new deal which did actually cause harm, but it is arguable that the new deal actually lengthend the depression or shortened it, various brilliant economists such as Friedman and Keynes have argued differing views and i would say it is difficult to pick one or the other as 'fact'

[LittleGrizzly]

If you want some economists who disagree...

http://mediamatters.org/items/200901080005

extracts from article...

He later asserted that "President Roosevelt waged what could only be called a jihad against private enterprise." However, Hume's assertion that "the New Deal failed" has been flatly rejected by some prominent economists, including Nobel Laureate Paul Krugman, who has said that Roosevelt did not go far enough to end the crisis and that his attempts to balance the budget hindered recovery.

In a November 10, 2008, New York Times column, Krugman wrote that Roosevelt's policies included "long-run achievements" that "remain the bedrock of our nation's economic stability" and that Roosevelt's short-term successes were constrained because "his economic policies were too cautious."
Krugman further wrote:

Now, there's a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse. So it's important to know that most of what you hear along those lines is based on deliberate misrepresentation of the facts. The New Deal brought real relief to most Americans.

During a roundtable discussion on ABC's This Week on November 16, responding to Washington Post columnist George Will's assertion that "the first New Deal didn't work," Krugman stated, in part: "Roosevelt got the economy moving somewhat. By 1937, things were a lot better than they were in 1933." He continued, "Then he was persuaded to balance the budget, or try to, and he raised taxes and cut spending and the economy went back down again. And it took an enormous public works program known as World War II to bring the economy out of the Depression."

It is a commonly accepted fact that wars, get economys going, it is only sensible to assume you can have an even greater effect if instead of using it all to wage a war you use all the spending on improving infrastructure and the economy in general...

Similarly, in a January 6 column, Dean Baker, co-director of the Center for Economic and Policy Research, wrote: "In reality, any careful reading showed that the New Deal policies substantially ameliorated the effects of the Great Depression for tens of millions of people. The major economic failing of the New Deal was that President Roosevelt was not prepared to push the policies as far as necessary to fully lift the economy out of the Great Depression." Baker continued:

Roosevelt was too worried about the whining of the anti-stimulus crowd that he confronted. He remained concerned about balancing the budget when the proper goal of fiscal policy should have been large deficits to stimulate the economy. Roosevelt's policies substantially reduced the unemployment rate from the 25 percent peak when he first took office, but they did not get the unemployment rate back into single digits.

Further, in a November 17 post on his personal blog, University of California-Berkeley economics professor Brad DeLong wrote, "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 [sic] 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."

Even the federal reserve chair, someone appointed by George Bush

Progressive economists are not alone in crediting Roosevelt's policies for easing the economic crisis. As Newsweek senior editor Daniel Gross noted on his blog on January 4, 2007, Federal Reserve Chair Ben Bernanke -- appointed by President George W. Bush -- wrote in his Essays on the Great Depression, "Only with the New Deal's rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression."

This is with just a quick look, stating such things as facts is simply right wing propaganda, there is argument among economists over the issue, only those with a view to push would tell you otherwise...

[Don Corleone]

I think what everyone is failing to recognize is that when you look at Keynsian economic theory (and it's latest prophet, Paul Krguman) or the Austrian school (ala Milton Friedman), you have two inherently different definitions of success.

Folks on the Austrian side look at wealth generation. Folks on the Keynsian side look at standard of living. Neither are wrong, but when you argue back and forth over who's correct, you have to understand it's an apples & oranges argument.

One thing I don't think Paul Krugman is being completely forthwright on is that the methods of GDP stimulus advocated by Keynes were never intended to be long term strategic policies: by Keynes or by FDR for that matter. Even FDR's crown jewel, social security, was meant to be a stop gap measure until pensions and personal savings could accrue to a point where people could look to their own needs.

You don't win an argument on which is better: Capitalism or Socialism, because they argue different points. I'd even go so far as to say the two are not necessarily mutually exclusive. But sound-byte economics, as practiced by politicians, the media, and yes, here in our beloved Backroom, benefit nobody.

One thing I find amazing as I go reading up on 1930's era economics... even a so-called dyed in the wool demand-sider like FDR, a blind adherent who zealously followed Keynes' most radical theories, understood that defecits by the Federal government trash the credit market in the long run in ways that make them inherently dangerous.

Is there anybody, in either party, who would actually commit to National Debt reduction? Is there any hope that your average American can move beyond the current levels of ignorance to understand the toll defecits and national debts take on your long term prosperity, and demand an end? Or at the end of the day, have we decided to just say " the kids, I'm going to get mine..."

Do larger European governments like France, Germany and UK keep large debts on the books?

[LittleGrizzly]

I would like to point out that im not arguing one that one is better than the others... they both have thier own benefits... and i would personally say that each has its benefits and using a cycle of both, saving a little in the good times and investing in the bad is the best way imo...

One thing I find amazing as I go reading up on 1930's era economics... even a so-called dyed in the wool demand-sider like FDR, a blind adherent who zealously followed Keynes' most radical theories, understood that defecits by the Federal government trash the credit market in the long run in ways that make them inherently dangerous.

FDR actually wanted a conservative budget, it is why he slashed spending and increased prices quite quickly (in one of the quotes in my post above)

Do larger European governments like France, Germany and UK keep large debts on the books?

I know the UK has a fairly sizeable one... i now its smaller but im not sure how it compares to the size of our economy in contrast to yours..

I agree to many are far too selfish these days, we should save a little and get rid of previous debts in the good times, and then invest the savings and build up small debts in the bad times...

[Husar]

Well, on that one TV show(not that much of a show, more like a science and everything around it kind of program) they said at the moment every eigth tax Euro in Germany goes to paying the interest of our national debt. I think that sounds like a huge debt, in fact it's over a trillion euros IIRC, they also showed that there.
the government had this plan to somehow be debt-free by 2012 or so but it looks like the recession etc. delayed that until about 294768, including all future delays of course.