This post is by Jeff Carter
from Points and Figures
Click here to view on the original site: Original Post
My friend who is a PhD Economist at the University of Chicago shared this article with me. Lots of Old Wives Tales get spun so much over time, people believe them. It’s when you go through the data that you find out if they are true or not.
Look at yesterday in Illinois. They came out with a study blaming the deficit on the last governor. If you believe that, you might want to enroll in some accounting and finance courses.
This study took a look at the New Deal. Since Democrats proposed a Green New Deal, it might be a good time to sift through the data on the old one to see if it was any good. Two UCLA economists did just that. Here is what they found.
After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.
“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”
In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
The Depression doomed a generation to lower wages and worse outcomes than they otherwise would have. FDR’s policies were a direct reason why they had worse outcomes and lower wages. But that’s not what you learn in school.
In school, you learn that FDR and WW2 got us out of the Depression. That is just flimsy logic.
In Freedom From Fear, Kennedy shows how FDR used public policy to create a permanent Democratic majority. It was sold on the premise of “good for the people”, but the policies weren’t really for the good of the people as the data shows. For example, price supports and farm subsidies weren’t economically rationale, but it got farmers to vote Democratic.
If you think WW2 got us out of the Depression, you believe in the “Broken Glass Theory of Economics”. Depending on how you total it up, 60-70 million people died in WW2. Think of the opportunity costs of all those lives. Think about the opportunity costs for someone living in total abject fear versus being a productive member of society and the steps they had to take to survive. Think of all the money spent on arms, material and try and think how that money would have been better spent building economic growth. Think of all the destruction of land and cities and the cost to rebuild them. What if that money would have been spent on growth?
When economic historians look back at Obama’s policies, I think the same will be said. His policies, and politics were against economic growth. QE forever (which he didn’t control) was very harmful to America and the world economy.
Right now, we have a lot of people in policy positions that truly do not understand economics or economic policy.