In this piece from today’s Wall Street Journal, Princeton University’s Alan Blinder argues that it would be a good thing to let the Bush tax cuts expire and distribute more money in the form of unemployment benefits, because unemployed people would spend the money immediately while upper-income taxpayers, if allowed to keep more of their income, wouldn’t spend it all. His conclusion offers a reading of FDR’s legacy that I keep encountering, and that always confuses me:

In the 1930s, FDR taught us that heedless self-interest is both bad morals and bad economics. Letting the upper-bracket Bush tax cuts expire and using the revenue to finance more unemployment benefits would be just the reverse.

Blinder needs to be reminded of this quote from FDR scholar David Kennedy, writing for Time in June 2009: “It’s old news that F.D.R.’s New Deal did not end the Depression.” Old news? If only!

I rarely call on Paul Krugman to make a point, but back in 2008 he argued that the New Deal didn’t work because during the 1930s, while spending expanded massively, so did taxes. Marginal Revolution’s Alex Tabarrok expands on the argument here; as Tabarrok explains, Krugman’s point rests on this from E. Cary Brown:

The primary failure of fiscal policy to be expansive in this period is attributable to the sharp increases in tax structures enacted at all levels of government. Total government purchases of goods and services expanded virtually every year, with federal expansion especially marked in 1933 and 1934. [But] the federal Revenue Act of 1932 virtually doubled full employment tax yields…

When supporters of stimulus-by-spending explain the New Deal’s failure to end the Depression by pointing out that it was “modestly expansionary” because of the tax increases, isn’t that an argument for opposing the expiration of the Bush tax cuts and asking the president to give up on his planned tax increases?

A final strike against Blinder is that he uses projections from Mark Zandi, whose models only show that the stimulus is working — in spite of growing unemployment and the lack of recovery — because the answer is built into the equations of Keynesian models. Here is a job for an economist: Take apart and demolish these reality-defying macro models once and for all.