Suburban Guerrilla

Feed on: Posts; Comments

Boldly Go

Nov 10th, 2008 at 8:47 am by Susie

And F.D.R. wasn’t just reluctant to pursue an all-out fiscal expansion — he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections.

What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.

This history offers important lessons for the incoming administration.

The political lesson is that economic missteps can quickly undermine an electoral mandate. Democrats won big last week — but they won even bigger in 1936, only to see their gains evaporate after the recession of 1937-38. Americans don’t expect instant economic results from the incoming administration, but they do expect results, and Democrats’ euphoria will be short-lived if they don’t deliver an economic recovery.

The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.

In short, Mr. Obama’s chances of leading a new New Deal depend largely on whether his short-run economic plans are sufficiently bold. Progressives can only hope that he has the necessary audacity.

Posted in Politics As Usual, Recession Depression

2 Responses to “Boldly Go”

on 10 Nov 2008 at 9:08 am1Arthur James

In December 1933,the economist John Maynard Keynes wrote an open letter to President Roosevelt, which began:

“You have made yourself the trustee of those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out.”

(quoted from Donald Markwell,”John Maynard Keynes and International Relations: Economic Paths to War and Peace”, Oxford University Press, 2006, page 176)

Although the circumstances are different, exactly 75 years later President-elect Obama is in something like the same position. People around the world see him as the trustee of their hopes, both for better international relations and for revival of the world economy.

As in FDR’s time, when Depression led remorselessly to war, so today, the two may be more closely connected than we would like to think.

President Obama must ensure that the US provides leadership in dealing with the global economic crisis of our day. This, too, is one of the lessons - probably not widely enough appreciated - of FDR’s time, and of Keynes’s insights (see Markwell’s book quoted above).
on 10 Nov 2008 at 9:21 am2JJ

But we’ve already got a war! TWO Wars!

Now what?

Comments RSS

Bad Behavior has blocked 11734 access attempts in the last 7 days.

Boldly Go

2 Responses to “Boldly Go”

Leave a Reply

My Liberal Identity:

Recent Posts

Archives

Categories

Tags

Pages