Let's freeze gubmint spending...

[bullypulpit]

This is the "NEW" economic strategy put forth by House Minority Leader John Boehner(R-OH). Freeze government spending as America, and the world, stumble towards the abyss of economic disaster. This hearkens back to the Golden Age of the GOP during Ronald Reagan's presidency...a very different time and a very different world. Never mind that Reagonomics failed then too. Rather than invest the money siphoned to corporations and the wealthy on new infrastructure and technology, American corporations bought up their smaller competitors in an orgy of mergers, the end result being less competition in the marketplace, decreased productivity and more economic power in fewer hands. There was no "trickle down" of prosperity to anyone outside the rarified atmosphere of America's top 1%.

Desperate for ideas in the face of their growing irrelevancy, the intellectual bankruptcy of the GOP leadership reveals itself in their continued reliance on the discredited ideas. Reaganomics...tax cuts for the wealthy...continuing with the policies that have led us to our current straights...They propose to essentially do nothing in the face of an economic crisis which could dwarf the scope and magnitude of the Great Depression.

The GOP has become the party of Hoover...He did nothing after the stock market crash of 1929...history has shown us the consequences of inaction. The shanty towns that resulted from Hoover's paralysis became known as "Hoovervilles". Should Representative Boehner's plan of inaction gain a foothold, will the shanty towns that rise amidst the ruins of the nation's economy be known as "Boehnervilles"? That would be unfortunate given the phonetic pronunciation of Representative Boehner's name. As we all learned in school, "When two vowels go walking, the first one does the talking."

[PostmodernProphet]

freezing spending is not enough....it needs to be cut....

[avatar4321]

Okay... take out all the well poisoning from your post, what exactly is the problem you have with freezing our expenses? Seems quite logical that when times are tough you dont increase spending by insane amounts.

[DannyR]

I would guess that the problem with freezing spending is that he believes the government should be using deficit spending to stimulate the economy now.

Just curious, but does anyone have a historical analysis of if that actually works? Or ANY type of recession busting action for that matter? I've seen lots of theories on the best way to get one out of a recession, but very little proof for any method.

[Joe Steel]

I would guess that the problem with freezing spending is that he believes the government should be using deficit spending to stimulate the economy now.

Just curious, but does anyone have a historical analysis of if that actually works? Or ANY type of recession busting action for that matter? I've seen lots of theories on the best way to get one out of a recession, but very little proof for any method.

Government spending ended the Great Depression.

Even if you don't believe the New Deal did it (which would be wrong because the New Deal was working,) deficit-financed, government spending for WWII did end the Great Depression.

[avatar4321]

Government spending ended the Great Depression.

Even if you don't believe the New Deal did it (which would be wrong because the New Deal was working,) deficit-financed, government spending for WWII did end the Great Depression.

It only took a decade of government spending to get out of the depression if your analysis is accurate.

Let's stop pretending here. Creating inflation is not going to help the economy.

[Joe Steel]

It only took a decade of government spending to get out of the depression if your analysis is accurate.

The New Deal was working. Slowly, perhaps, but it was working. FDR was trying things no one had even dreamed before so he can be excused for not getting it right immediately.



Let's stop pretending here. Creating inflation is not going to help the economy.

Inflation only occurs when the economy can't supply enough to meet increased demand. That's not the case in a recession. We have plenty of unused capacity.

[bullypulpit]

It only took a decade of government spending to get out of the depression if your analysis is accurate.

Let's stop pretending here. Creating inflation is not going to help the economy.

If you look at GDP from 1929 to 1941, you'll see that it started to increase as FDR's New Deal programs were initiated...

<center><img src=http://www.princeton.edu/~pkrugman/depression_gdp.png></center>

It dropped in 1937 when congressional Republicans pushed for, and got, a cut back in funding for New Deal programs. It is also worth noting that four years after FDR took office, the GDP had exceeded the GDP pre-crash.

As for the length of time involved, Roosevelt took office in 1933. His policies were on track to reach 1941 levels a year or two earlier when congressional Republicans briefly derailed those policies. As for those who continue to claim that the private sector can restore the economy, have you noticed? The private sector is tanking. The federal government is thus the buyer of last resort, and is the only entity able to put enough cash on the table to stimulate economic growth. Like it or not, the fact is that Keynesian economics works. The New Deal is the proof. Obama's greatest pitfall in his policies directed at stimulating economic growth is that he will fail to act boldly enough.

The proof is there, you have but to open your eyes and SEE it.

[avatar4321]

I would argue that if anything the new deal was slowing the natural recovery.

[PostmodernProphet]

<center><img src=http://www.princeton.edu/~pkrugman/depression_gdp.png></center>


I find it interesting to see the results of the actions that Herbert Hoover took in response to the 1929 crash......

his primary response had two prongs.....he increased federal spending by 50% and he raised income taxes from a maximum rate of 25% to 63%....

the response of the economy was a decline in GDP......

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/28/AR2008112802370.html

[Kathianne]

Bully, your trendline chart is great, well except for the measurements for growth. Sheesh. This is more a reflection of 1930-1940, then beyond. Uh note the growth between the 70's-80's. ;)

http://www.infoplease.com/ipa/A0104575.html

[5stringJeff]

The New Deal was working. Slowly, perhaps, but it was working. FDR was trying things no one had even dreamed before so he can be excused for not getting it right immediately.

Actually, FDR prolonged the Depression with all of his government expansionism.


Inflation only occurs when the economy can't supply enough to meet increased demand. That's not the case in a recession. We have plenty of unused capacity.

Again, wrong. Inflation is not a function of supply and demand of normal goods. It's a function of supply of money. Whenever the money supply expands without a corresponding expansion of wealth, there is inflation. In the current recession, in which there's actually destruction of wealth (in the form of falling home prices and falling investment values) and an increase in the money supply (in the form of increaed government borrowing) there will be high inflation. I give it a year.

[Yurt]

Actually, FDR prolonged the Depression with all of his government expansionism.



Again, wrong. Inflation is not a function of supply and demand of normal goods. It's a function of supply of money. Whenever the money supply expands without a corresponding expansion of wealth, there is inflation. In the current recession, in which there's actually destruction of wealth (in the form of falling home prices and falling investment values) and an increase in the money supply (in the form of increaed government borrowing) there will be high inflation. I give it a year.

while i believe that to be true, can you prove that?

[5stringJeff]

while i believe that to be true, can you prove that?

Here's the short version: How FDR Made the Depression Worse (https://mises.org/freemarket_detail.aspx?control=258).

Here's the long (e-book, 409 pages) version: America's Great Depression (http://mises.org/rothbard/agd.pdf)

[Kathianne]

Actually, FDR prolonged the Depression with all of his government expansionism.



Again, wrong. Inflation is not a function of supply and demand of normal goods. It's a function of supply of money. Whenever the money supply expands without a corresponding expansion of wealth, there is inflation. In the current recession, in which there's actually destruction of wealth (in the form of falling home prices and falling investment values) and an increase in the money supply (in the form of increaed government borrowing) there will be high inflation. I give it a year.
I don't think it will take a year. What's scarier, many of us are taking pay cuts or freezes, now, when we'll be facing inflation shortly.

[Yurt]

Here's the short version: How FDR Made the Depression Worse (https://mises.org/freemarket_detail.aspx?control=258).

Here's the long (e-book, 409 pages) version: America's Great Depression (http://mises.org/rothbard/agd.pdf)

i predict the silence of the dems.....

[Joe Steel]

Actually, FDR prolonged the Depression with all of his government expansionism.

Nonsense.

The unemployment level was decreasing and GDP was increasing as a result of FDR's programs. Whether anything else would have been better is speculative at best.


Again, wrong. Inflation is not a function of supply and demand of normal goods. It's a function of supply of money.

You're wrong.

Inflation can be caused by an imbalance in supply and demand:


Demand-Pull Inflation - This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies.

Inflation: What Is Inflation? (http://www.investopedia.com/university/inflation/inflation1.asp)

[Yurt]

Nonsense.

The unemployment level was decreasing and GDP was increasing as a result of FDR's programs. Whether anything else would have been better is speculative at best.



You're wrong.

Inflation can be caused by an imbalance in supply and demand:

but your "anything else" is a fact....:poke:

[sgtdmski]

This is the "NEW" economic strategy put forth by House Minority Leader John Boehner(R-OH). Freeze government spending as America, and the world, stumble towards the abyss of economic disaster. This hearkens back to the Golden Age of the GOP during Ronald Reagan's presidency...a very different time and a very different world. Never mind that Reagonomics failed then too. Rather than invest the money siphoned to corporations and the wealthy on new infrastructure and technology, American corporations bought up their smaller competitors in an orgy of mergers, the end result being less competition in the marketplace, decreased productivity and more economic power in fewer hands. There was no "trickle down" of prosperity to anyone outside the rarified atmosphere of America's top 1%.

Oh yes, Reaganomics failed, despite the fact that the country experience the longest peacetime economic prosperity ever, 86 months of continuous expansion. If that is failure, I'll take it.

Prosperity hit everyone under Reagan, the median average income for everyone increased by nearly $4000. Yet under Carter, Bush I and Clinton, that same median income had decreased by $1500.


Desperate for ideas in the face of their growing irrelevancy, the intellectual bankruptcy of the GOP leadership reveals itself in their continued reliance on the discredited ideas. Reaganomics...tax cuts for the wealthy...continuing with the policies that have led us to our current straights...They propose to essentially do nothing in the face of an economic crisis which could dwarf the scope and magnitude of the Great Depression.

Reagan cut taxes accross the board, tell the truth!!! Reagan took the tax code from 14 separate indexes down to 4. In doing so, Reagan actually increased the number of people who had no tax burden. In doing so he also caused the top 1% of earners increase their share of the tax revenue from 5.8% to 7.6%.



The GOP has become the party of Hoover...He did nothing after the stock market crash of 1929...history has shown us the consequences of inaction. The shanty towns that resulted from Hoover's paralysis became known as "Hoovervilles". Should Representative Boehner's plan of inaction gain a foothold, will the shanty towns that rise amidst the ruins of the nation's economy be known as "Boehnervilles"? That would be unfortunate given the phonetic pronunciation of Representative Boehner's name. As we all learned in school, "When two vowels go walking, the first one does the talking."

Hoover, in response to the Market Crash did two things, increase government spending and raised taxes. Sound familiar. Sounds like the same plan Obama has right now. Hoovers result, the depression continued.

In the face of a recession, Reagan, cut taxes and tried to reduce federal spending. Result 86 months of economic growth.

Yeah I will take the failure. You really should study history and understand what is going on, then your arguments will not be picked apart so easily. Quit relying on the rhetoric.

dmk

[bullypulpit]

Oh yes, Reaganomics failed, despite the fact that the country experience the longest peacetime economic prosperity ever, 86 months of continuous expansion. If that is failure, I'll take it.

Economic growth during the Reagan years was anemic, at best, particularly in light of economic growth under the Clinton administration


Prosperity hit everyone under Reagan, the median average income for everyone increased by nearly $4000. Yet under Carter, Bush I and Clinton, that same median income had decreased by $1500.

Poverty rose and in terms of inflation adjusted dollars the median income rose as a result of the wealthiest Americans incomes rising sharply, thus skewing the overal results.


Reagan cut taxes accross the board, tell the truth!!! Reagan took the tax code from 14 separate indexes down to 4. In doing so, Reagan actually increased the number of people who had no tax burden. In doing so he also caused the top 1% of earners increase their share of the tax revenue from 5.8% to 7.6%.

<blockquote>"...the famous "tax cut" of 1981 did not cut taxes at all. It's true that tax rates for higher-income brackets were cut; but for the average person, taxes rose, rather than declined. The reason is that, on the whole, the cut in income tax rates was more than offset by two forms of tax increase. One was "bracket creep," a term for inflation quietly but effectively raising one into higher tax brackets, so that you pay more and proportionately higher taxes even though the tax rate schedule has officially remained the same. The second source of higher taxes was Social Security taxation, which kept increasing, and which helped taxes go up overall." - <a href=http://mises.org/article.aspx?Id=1544>Murray N. Rothbard </a></blockquote>



Hoover, in response to the Market Crash did two things, increase government spending and raised taxes. Sound familiar. Sounds like the same plan Obama has right now. Hoovers result, the depression continued.

In the face of a recession, Reagan, cut taxes and tried to reduce federal spending. Result 86 months of economic growth.

Yeah I will take the failure. You really should study history and understand what is going on, then your arguments will not be picked apart so easily. Quit relying on the rhetoric.

dmk

<blockquote>Convinced that a balanced federal budget was essential to restoring business confidence, Hoover sought to cut government spending and raise taxes. But in the face of a collapsing economy, this served only to reduce demand further. - <a href=http://encarta.msn.com/encyclopedia_761584403/great_depression_in_the_united_states.html>MSN Encarta</a></blockquote>

And, BTW, if you'd been paying attention you would have noticed that some 42% of the recent stimulus package consisted of TAX CUTS, with 95% of Americans getting a tax cut.

<blockquote>"...the most embarrassing, failure of Reaganomic goals is the deficit. Jimmy Carter habitually ran deficits of $40-50 billion and, by the end, up to $74 billion; but by 1984, when Reagan had promised to achieve a balanced budget, the deficit had settled down comfortably to about $200 billion, a level that seems to be permanent, despite desperate attempts to cook the figures in one-shot reductions." - Murray N. Rothbard </blockquote>

Perhaps YOU should be the one studying history, rather than regurgitating GOP talking points. Buh-bye now.

[Joe Steel]

but your "anything else" is a fact....:poke:

Nonsense.

The Republicans were proposing nothing more than the same thing that caused the problem. When FDR listened to them in 1936, the progress stopped and numbers turned around. When he returned to the New Deal, the numbers began to improve again. That's very persuasive evidence of the success of the New Deal and the failure of the proposed alternatives.

[Jagger]

freezing spending is not enough....it needs to be cut....

How much should we cut the socialist jobs program known as the U. S. Military?

[Jagger]

what exactly is the problem you have with freezing our expenses? Ronald Reagan, my favorite socialist, never froze federal spending. In fact, he was a strong advocate of big socialistic spending and budget deficits to stimulate the economy in times of economic recession.

[PostmodernProphet]

How much should we cut the socialist jobs program known as the U. S. Military?

we need to cut your intake of recreational drugs.....

[Jagger]

Oh yes, Reaganomics failed, despite the fact that the country experience the longest peacetime economic prosperity ever, 86 months of continuous expansion.
The real principles of Reaganomics were:


Increase taxes seven times more often than you lower them.
Increase federal government spending.
Never even try to balance the federal budget. Run big budget deficits, instead.
Increase the number of federal employees.
Expand redistribution of income.
No more deregulation.

[5stringJeff]

You're wrong.

Inflation can be caused by an imbalance in supply and demand:

Demand-Pull Inflation - This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies.


If there's "too much money chasing too few goods," then indeed, it is an issue of there being too much money in the supply. To counter, money should be pulled out of the money supply.

And if aggregate demand is rising faster than aggregate supply, that's not inflation. That's simply higher prices due to demand. That's supply and demand 101. You see, rising prices do not equal inflation. Rising prices are merely a sign of inflation.

[Jagger]

Reagan, my favorite Republican liberal socialist, expanded the size and scope of the federal government, raised taxes, ran up huge deficits and the result was economic growth. If it worked for Reagan, I don't see why it wont work for Obama.

[PostmodernProphet]

If it worked for Reagan, I don't see why it wont work for Obama.
because if Reagan was a socialist, Obama is somewhere to the left of Trotsky.....

[bullypulpit]

Here's the short version: How FDR Made the Depression Worse (https://mises.org/freemarket_detail.aspx?control=258).

Here's the long (e-book, 409 pages) version: America's Great Depression (http://mises.org/rothbard/agd.pdf)

As posted earlier, the numbers don't lie...

<img src=http://www.princeton.edu/~pkrugman/depression_gdp.png>

The GDP took a nosedive in 1937 when congressional Republicans fought for, and got, a cut in spending on New Deal projects.

[Yurt]

a high gdp, alone, is not an absolute true indicator of an economy's health or the health of its citizens money or standard of living. just look at some ME countries, or india for example. high gdp's with low standard of living.

so simply pointing out that gdp rose, does not at all disprove that roosevelt prolonged the depression or made it worse.

[5stringJeff]

As posted earlier, the numbers don't lie...

<img src=http://www.princeton.edu/~pkrugman/depression_gdp.png>

The GDP took a nosedive in 1937 when congressional Republicans fought for, and got, a cut in spending on New Deal projects.

If by "nosedive," you mean it decreased by .29% (from $6.81B to $6.79B), then yes, it did decrease. Now, please show that the three-tenths-of-one-percent decrease in GDP was due to decreased spending on New Deal programs and not other causes, such as price and wage controls.

[jon_forward]

FDR's new deal MAY have been very slowly making a difference during the great depression,throwing large amounts of cash at massive unemployment tends to make things look much better then they really were. The entry of the USA into WW2 and the following build up of factorys, ect are what ended the depression.