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The New Deal and The New New Deal
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| Contributor | ArmyDem |
| Last Edited | ArmyDem Feb 21, 2009 09:40am |
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| Category | Blog Entry |
| News Date | Friday, February 20, 2009 03:00:00 PM UTC0:0 |
| Description | The stock market reached a six-year low Thursday. Why? Some blame loose talk (including that of former Fed Chair Alan Greenspan) about nationalizing the nation's banks. Others blame Obama's new plan for helping homeowners who may not be able to pay their mortgages. But the real culprit is the accelerating decline in aggregate demand -- consumers, businesses, and exports. Companies are losing money because their customers are disappearing. That's precisely why the stimulus is so important -- indeed, why many of us fear it's too small.
One of the oddest of right-wing claims is that FDR's New Deal didn't pull America out of the Great Depression, so Barack Obama's "New New Deal" won't, either. While it's true that the New Deal didn't end the Great Depression, three points need to be impressed on the hard-pressed conservative mind:
1. The New Deal relieved a great deal of suffering by establishing social safety nets -- Unemployment Insurance, Aid to Dependent Children, and Social Security for retirees. Most have remained, a worthy legacy. But because the structure of the economy has changed (a much higher percentage of the working population is now employed part-time in several jobs or as independent contractors, for example), there are gaping holes in the safety net which a New New Deal should fill in order that the Mini Depression we're experiencing not cause excessive harm.
2. FDR's public-works spending did help the economy somewhat. By 1936, the economy was showing some life. Unemployment was declining and consumers were beginning to buy. But FDR cut back on public-works spending, and the economy sank back into its former torpor. A warning to Obama: Don't worry about so-called "fiscal responsibility" when aggregate demand still falls far short of the economy's total capacity. |
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