Wednesday, February 18, 2009

Defending the New Deal

Scott Lehigh of the Boston Globe attempts to defend the New Deal:

The argument that the New Deal failed is easy to make.

You start with unemployment figures that exclude those who labored in work-relief programs like the WPA or its various cousins. Yes, that's passing strange, given the many worthwhile tasks those public employees accomplished, but sophistry has its demands.

Next you present a misleading juxtaposition of that exclusionary unemployment data, noting that the 19 percent joblessness rate in 1938 wasn't all that much better than the 25 percent of 1933, FDR's first year in office.

Then you add the well-worn 1939 quote from Henry Morgenthau Jr., FDR's treasury secretary, that government spending hadn't produced a recovery, and, for professorial effect, perhaps even toss in George Santayana's observation about those who cannot learn from history.

Presto: You've got yourself a paint-by-numbers conservative polemic.

But what do unemployment figures from the era actually show? The best regarded data excluding public-works employees traces a steady decline in joblessness through the first five years of the New Deal, from 25 percent when FDR took office to 14.3 percent in 1937. Then, however, joblessness rose, hitting 19.1 percent in 1938 before dropping back to 14.6 percent in 1940 and 9.9 percent in 1941.
For the record, here are the unemployment stats for the 1930s:
1930 8.7%
1931 15.9%
1932 23.6%
1933 24.9%
1934 21.7%
1935 20.1%
1936 16.9%
1937 14.3%
1938 19.0%
1939 17.2%
As you can see it's rather obvious why Lehigh cherry-picked 1937. But leaving that detail aside, consider the fact that unemployment didn't drop below 14% until 1941 -- eight years after FDR took office -- and this is offered up as a defense?

Update: I emailed Scot Lehigh to tell him that I was rather unimpressed with his New Deal defense. His one sentence response:
I bet you would have if you were one of the 25 percent (or higher, in some estimates) without a job.
Lehigh suffers from a lack of imagination and the ability to critically analyze. You can't simply point out that unemployment declined and argue that therefore the New Deal was a success. Rather you have to make the case that the New Deal reduced unemployment more than would otherwise be the case if either no government action was taken or a different course of action was taken.

The U.S. economy has recovered from every economic recession and depression it has ever suffered. It is unrealistic in the extreme to think that 25 percent unemployment would have continued in perpetuity. The fact that we had double digit unemployment right up until the onset of World War II (ok, I am rounding up on the 9.9 percent unemployment in 1941) is more of a damning indictment of the New Deal than a cause for uncorking champagne.

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