Strengthening Constitutional Self-Government

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The New Deal and Unemployment

Almost as interesting as this graph from the Heritage Foundation showing that the New Deal did not work in solving the unemployment problems of the Depression, are the arguments now employed by leftist groups against it. They’re mad that Heritage didn’t include government "make work" jobs as employment--even though the government never included those numbers when they counted them back in the day. So, like Burger King, Heritage let them have it their way. The result was the same. But I still don’t think those guys will eat their hamburger.

Discussions - 6 Comments

I noticed something strange in the graph tracking unemployment. It identifies 1937--a year when unemployment surged after four years of improvement--as the year when the "New Deal, part 2" began. While 1937 marked the start of FDR's second term, what historians call the "Second New Deal" was launched much earlier--in 1934-35. The surge in unemployment in 1937 was largely the result of large cuts in federal spending. That's not to say that New Deal programs weren't partially to blame as well; 1937 was also the year when Social Security taxes began to be collected. But Heritage seems to want to establish a direct link between the increased unemployment and the Second New Deal, and they're being a bit dishonest about it.

You make a fair point, John. But here's a question: if the surge in unemployment in 1937 was largely the result of large cuts in federal spending, doesn't this suggest that government money was artificially propping up employment in the years immediately preceding 1937--i.e., in the years when the Second New Deal was actually being implemented? In other words, when federal spending was cut back, those jobs created (or simply not lost) because of the demand that existed as a result of government spending could not be sustained by the real demand for goods and services in the market. In other words, it still seems fair to say that it did not work in solving unemployment.

Yes, that's all correct. But the way that Heritage is trying to frame the issue is likely to open them up to accusations that they are bending the facts to suit their political agenda.

Oh, I can't possibly imagine that AEI would EVER bend any facts to suit their political agenda! Actually, I didn't even realize that they had a political agenda, unless one considers getting to the pure, unadulterated truth of various matters a political agenda.

If you enjoyed the AEI report, you'll positively love this classic tome!

The point is that Federal spending to generate employment is's a hothouse flower. It doesn't solve the underlying economic problems...only postpones the pain until something does fix the fundamentals, like a big honking war. And, unfortunately, like any drug, the "high" leaves the user worse off in the long run.

Now, has anyone seen Niall Ferguson's "The Ascent of Money" on PBS? It clearly demonstrates how invasive the Federal Government has been in the mortgage market, and how this has directly and indirectly turned us into a nation of debt-junkies.

Conservatives are correct in their fundamental belief that we lack to wisdom and knowledge to engage in large-scale Federal social engineering. What we are experiencing today is the law of unintended consequences. If you force banks to make unwise loans, they will engage in unwise ways of "securitizing" those loans. It's all a Federally-inspired house of cards, and I'm sure Obamarama will give us more of the same. God help us.

First, are the banks not going to get their money? I thought we bailed them out. Second, so the New Deal was bad... What will work then. Do you beleive that for the good of the economy we need to start world war 3? I would really like to hear more constructive ideas, that may win back the nation and then, as John, would say the government. What about tarrifs designed to decrease or reverse outsorcing? is that such a crazy idea, it would hurt in the very short term but once people had jobs again they could afford to buy things. the current make in china and sell it in the west can't work. People can't mass produce what they can't afford to buy.

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