The Corner

New New Deal

I agree with Jim Powell that FDR made many mistakes that prolonged the Great Depression. In addition to raising taxes, I specifically mentioned the NIRA and his manipulation of the gold price. Powell mentions some others that are well documented in his book.

But he fails to address my central point, which is that deficit spending was too small in the 1930s. If he believes that the recovery would have been faster if spending had been cut to the level of revenues, I would like to hear it.

When congressional Republicans criticize the New Deal today, it is principally for deficit spending, not for all the other things that Roosevelt did that Powell rightly criticizes.

I would just add that I do not believe that budget deficits are inherently stimulative. However, when we are in a liquidity trap, as we were in the 1930s and I believe we are today, deficits are essential to make monetary policy effective. Monetary policy provides the real stimulus. But it doesn’t work when interest rates are close to zero.

– Bruce Bartlett is a former Treasury Department economist and the author of Reaganomics: Supply-Side Economics in Action and Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.

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