The false meme that deficit spending prolonged the Great Depression

Cardinal Fang · Jul 19, 2012

mbig said:
You posted As If I had said SS was a failure.

No, I posted as if the referenced meme that SS was a failure was a failure, intending to critique those of any "lean" who advance it. As you had indicated up front what sort of "lean" is almost exclusively associated with advancement of that meme, it is hard to see how you can now have come to count yourself as having been among those criticised.

mbig said:
You misunderstood and now, as with the rest of your post, are just emptily argumentative/transparently and defensively dismissive.

No, I'm just attempting to stick to the facts. The rest of the chips can fall where they may.

mbig said:
Anyone who thinks the Impact from the 1929 Crash ended in 1933 doesn't understand even basic economics or history.

Which of the fellows of the National Bureau of Economic Research did you want to single out for this ignorance of basic economics and history? Try to keep in mind that there is a difference between saying that things are good or bad and saying that things are getting better or worse. It is the difference bewteen a curve and its first derivative. A recession is a period during which things are in fact getting worse, such as December 2007 to June 2009 or August 1929 to March 1933. An expansion is a period during which things are in fact getting better, such as June 2009 to date or March 1933 to May 1937.

mbig said:
Since you do understand it, one can only assume you are again Porked and emptily argumentative.

You may assume whatever you like, but there are certainly more plausible interpretations than the one you suggest here.

mbig said:
In 1934 we were still way Below 1929 GDP and had some further dips (as noted) later in the well known LOST Decade of Thirties.

The "lost decade" appellation is usually, though not all that aptly, reserved for Japan during the 1990's. It otherwise doesn't matter how 1934 might have compared to 1929 in terms of expansion or recession. Here are actual real GNP data for the time period in billions of 1958 dollars...

1929 -- 208.6
1930 -- 183.5
1931 -- 169.3
1932 -- 144.2
1933 -- 141.5
1934 -- 154.3
1935 -- 169.5
1936 -- 193.0
1937 -- 203.2
1938 -- 192.9
1939 -- 209.4
1940 -- 227.2
1941 -- 263.7

Can you find the points of inflection in that series where GNP goes from getting worse to getting better or vice versa?

mbig said:
It's absolutely Accurate to say "didn't really end until WWII" as we didn't exceed 1929 until 1941 and we did Because of the Spending for That War.

No, that isn't accurate on either count. It would be accurate to say that recovery from the severe recession of 1929-33 was long and difficult and interupted by a second, much milder recession between May 1937 and June 1938. It would be accurate to say that government spending increased sharply beginning late in 1941 and took off after that. Here are pertinent data in billions of chained 2008 dollars. The data shown are for the sum of all government consumption and investment expenditures followed by the total that was for national defense purposes...

1937:.....5.1....1.3
1938:.....5.7....1.4
1939:.....6.0....1.5
1940:.....6.5....2.5
1941:....18.0...14.3
1942:....54.1...51.1
1943:....86.5...84.2
1944:....96.9...94.5

mbig said:
No kidding. I not only didn't say oterwise, I said "spending exploded for WWII.

I was again refering to your inaccurate claim that high marginal tax rates helped us pay WWII-related debt. Deficit charts aren't the appropriate evidence for supporting claims about debt.

mbig said:
I note you [conspicuously] didn't quote the chart which shows the increase in the top marginal rate did indeed take us into yearly Surplus and reduce the debt for several years:

The top marginal tax rate in 1945 was 94%. In 1944, it had been 94%. In 1946 and 1947, it was 91%. As was already noted, trivial reductions in debt outstanding during the late 1940's were rapidly overtaken by events and reduced to distant memory.

mbig said:
You misread my political stance, and just as tellingly, have shown your posts are ego driven, notwithstanding Any facts or politics. You look more coherent against Right Wing hacks. Not so good now despite the mindless partisan 'likes'. Last Word away.

While right-wing hacks often appear to be wrong all of the time, others are not immune to the same sort of shortcoming on a perhaps less consistent basis. You made several inaccurate representations in this thread, and I corrected them. End of story.

mbig · Jul 19, 2012

http://history1900s.About.com/od/1930s/p/greatdepression.htm said:
The Great Depression

Historical Importance of the Great Depression: The Great Depression, an immense tragedy that placed millions of Americans out of work, was the beginning of government involvement in the economy and in society as a whole.

Dates: 1929 -- early 1940s

http://en.wikipedia.org/wiki/Great_Depression said:
[.....]
World War II and recovery

The common view among economic historians is that the Great Depression ended with the advent of World War II. Many economists believe that Government Spending on the war caused or at least accelerated recovery from the Great Depression, though some consider that it did not play a very large role in the recovery. It did help in reducing unemployment.[9][54][55]

The rearmament policies leading up to World War II helped Stimulate the economies of Europe in 1937–39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilisation of manpower following the outbreak of war in 1939 ended unemployment.[56]

America's entry into the war in 1941 finally eliminated the last effects from the Great Depression and brought the U.S. unemployment rate down below 10%.[57] In the U.S., Massive War Spending doubled economic growth rates, either masking the effects of the Depression or essentially ending the Depression."..."

So it is 100% Accurate to say the Depression didn't really end until WWII and because of it's spending.
You pointing we had a Technical turn in 1933 (tho leaving out another downturn in 1937) is NOT rebuttal to the Gist of my statement which Was a Gist: "didn't Really end until WWII".

I might also add on a technical note: You don't source any of your numbers (Not that we Need a source in this "gist" case).
When you quote/chart down to the exact dollar in a recitation of years/GDP/etc, you should post a source. Even if that source has other numbers that work against you. Which is why I suppose you don't.

haymarket · Jul 19, 2012

The lesson is that massive government spending at the right time ended the Depression.

Cardinal Fang · Jul 19, 2012

mbig said:
So it is 100% Accurate to say the Depression didn't really end until WWII and because of it's spending.

No, such a statement would walk right past declining unemployment rates and increasing GNP numbers starting in 1933, thus belying two of the key indicators that economically literate people first turn to in making assessments of economic growth or decay. Would you similarly claim that we remain stuck today in the depths of the disastrous Great Bush Recession and likely will remain so for at least several more years?

mbig said:
You pointing we had a Technical turn in 1933 (tho leaving out another downturn in 1937) is NOT rebuttal to the Gist of my statement which Was a Gist: "didn't Really end until WWII".

There was nothing technical about it. You want to use personal emotion-based standards to decide these things. NBER doesn't do that. And of course I in fact noted the 1937-38 recession at least twice and posted the data that highlight it. You are so out of arguments that you resort to patently phony assertions in order to say anything at all.

mbig said:
I might also add on a technical note: You don't source any of your numbers (Not that we Need a source in this "gist" case). When you quote/chart down to the exact dollar in a recitation of years/GDP/etc, you should post a source. Even if that source has other numbers that work against you. Which is why I suppose you don't.

You may assume that all of the data cited were taken from the official sources for them. You know, like NBER. Data for Depression era GNP for instance were from The Statistical History of the United States from Colonial Times to the Present, a collection of official source data published by the Census Bureau. Data for WWII era federal total and national defense-related spending were taken from the National Income and Product Accounts of the United States as prepared by the Bureau of Economic Analysis. Any other questions?

DA60 · Jul 19, 2012

snodog said:
Hoover did increase spending somewhat but he never gave up on trying to balance the budget with his many tax increases. The deficit was not large enough.

Here are the facts:

Federal Budget Receipts and Outlays

Hoover not only ran total deficits at least as high as FDR did during his first four years, but he also ran deficits far higher in terms of % of GDP (on average) compared to FDR's first 4 years.

Bigfoot 88 · Jul 19, 2012

DA60 said:
Here are the facts:

Federal Budget Receipts and Outlays

Hoover not only ran total deficits at least as high as FDR did during his first four years, but he also ran deficits far higher in terms of % of GDP (on average) compared to FDR's first 4 years.

Indeed

Scribd

cpwill · Jul 19, 2012

JP Hochbaum said:
The thread isn't about who adopted the policies, but what they policies did an their effects on unemployment.

Actually since you are arguing that FDR inherited a mess and then put in radically new policies to fix said mess, it does in fact matter when those policies were implemented.

Cardinal Fang · Jul 19, 2012

DA60 said:
Here are the facts:

Not surpisingly, this is actually just another dose of dishonesty and distortion. FY 1933 was signficantly tilted by FDR's First 100 Days programs. The Hoover stamp was all but eradicated. Hoover's proposed budget for FY 1934 was simply abandoned. No serious scholar would contend that Hoover had anything to do with FY 1934 at all.

JP Hochbaum · Jul 19, 2012

DA60 said:
Here are the facts:

Federal Budget Receipts and Outlays

Hoover not only ran total deficits at least as high as FDR did during his first four years, but he also ran deficits far higher in terms of % of GDP (on average) compared to FDR's first 4 years.

Pay close attention to actual "outlays" here:

Hoover:4.7, 4.6, and 6.5 (this last year was actually FDR's)

FDR's; 6.4, 8.2, 7.6

FDr increased outlays by 50%, Hoover was a victim of weak tax receipts. He didn't actually go anywhere close to where FDR did in spending.

JP Hochbaum · Jul 19, 2012

cpwill said:
Actually since you are arguing that FDR inherited a mess and then put in radically new policies to fix said mess, it does in fact matter when those policies were implemented.

I said "who", not "when", lol.

snodog · Jul 20, 2012

DA60 said:
Here are the facts:

Federal Budget Receipts and Outlays

Hoover not only ran total deficits at least as high as FDR did during his first four years, but he also ran deficits far higher in terms of % of GDP (on average) compared to FDR's first 4 years.

It was by all accounts and purposes FDR's budget in 1933-34. Do you guys on the right also blame Bush for Obama's stimulus package spending in 2009?

imagep · Jul 20, 2012

snodog said:
It was by all accounts and purposes FDR's budget in 1933-34. Do you guys on the right also blame Bush for Obama's stimulus package spending in 2009?

If Bush would have been elected for a third term, I find it highly likely that he would have enacted some sort of actions to try to end the recession. It may have been a similar stimulus package, which instead of rewarding democratic cronies it would have rewarded republican cronies. After all, he has already tried giving taxpayers "free money" and that didn't work, so he likely would not have tried that tactic again.

But I don't blame Bush for the Great Depression, or for FDR's budget in 1933-34, if that makes you feel any better about Bush.

snodog · Jul 20, 2012

imagep said:
If Bush would have been elected for a third term, I find it highly likely that he would have enacted some sort of actions to try to end the recession. It may have been a similar stimulus package, which instead of rewarding democratic cronies it would have rewarded republican cronies. After all, he has already tried giving taxpayers "free money" and that didn't work, so he likely would not have tried that tactic again.

But I don't blame Bush for the Great Depression, or for FDR's budget in 1933-34, if that makes you feel any better about Bush.

Bush may have very well had his own stimulus, we will never know. The stimulus was indeed crony capitalism but I believe it kept us from Great Depression 2.0.

Instead of the stimulus I would have preferred sending out a credit card to everyone on their birthdays loaded with $10,000 and did this every year until unemployment was negligible. But I am open to other options since there are a number of ways to turn the economy around. All we have to do is pick one, I just want a good economy again.

And no the Great Depression is ONE thing I DON'T blame Bush for! :lol:

Cardinal Fang · Jul 20, 2012

imagep said:
If Bush would have been elected for a third term, I find it highly likely that he would have enacted some sort of actions to try to end the recession. It may have been a similar stimulus package, which instead of rewarding democratic cronies it would have rewarded republican cronies. After all, he has already tried giving taxpayers "free money" and that didn't work, so he likely would not have tried that tactic again.

Well, that in fact WAS the Republican "alternative" stimulus proposal in 2009. A bit less than half a trillion dollars worth of even more tax cuts for the rich and mega-corporations. This is their answer to literally everything.

imagep · Jul 20, 2012

snodog said:
Bush may have very well had his own stimulus, we will never know. The stimulus was indeed crony capitalism but I believe it kept us from Great Depression 2.0.

Instead of the stimulus I would have preferred sending out a credit card to everyone on their birthdays loaded with $10,000 and did this every year until unemployment was negligible. But I am open to other options since there are a number of ways to turn the economy around. All we have to do is pick one, I just want a good economy again.

And no the Great Depression is ONE thing I DON'T blame Bush for! :lol:

I agree about the $10,000 preloaded credit card. It would have been far more stimulative than what O' did. It would have allowed each individual to use the money as they felt best fit for their particular situation. Those who needed it to buy milk and bread could (in leu of foodstamps and unemployment and welfare), those who needed it to save their house from foreclosure could (fixing the banking crises), those who needed to pay down consumer debt could use it for that, those who needed it to purchase a new car could use it that way (saving the auto industry) and those who needed it to expand their business could (reducing small business unemployment). Anytime that individuals are left to their own to make their spending decisions the money will be better utilized (or so conservatives claim). In a way, "free money" would have been a conservative answer, and even a more libertarian answer - probably at less cost that the spendulous bill plus all of the little spendulouses and QE 1 and 2 and the bank bailouts and the bailout of the auto companies.

The down side of that would be the possibility of inflation, sense such plan would be fiscal spending (as opposed to QE which is monetary policy and generally non-inflationary). But if all the free money did was to increase production (by increasing the amount of stuff we purchase), there actually might not have been any inflation, because as long as there are enough products for the amount of money chasing them, we don't have inflation. Essentially, the money would have been backed by increases in production, or at least the lack of decreases in production.

Cardinal Fang · Jul 20, 2012

snodog said:
The stimulus was indeed crony capitalism...

How so?

snodog said:
...but I believe it kept us from Great Depression 2.0.

It had a lot of help. No single thing was responsible for that.

snodog said:
Instead of the stimulus I would have preferred sending out a credit card to everyone on their birthdays loaded with $10,000 and did this every year until unemployment was negligible.

Bad method. It invites people to devote the windfall to savings and/or paying down debt. This is the very reason why the Bush stimulus of 2008 performed so poorly. ARRA gave small amounts to a lot of people over a long time and got a much bigger stimulus bang for the buck out of it.

snodog said:
I just want a good economy again.

We all would. Well, except for the Republcians hoping that a bad economy will help them at the polls in November. Which, come to think of it, may be most of them.

imagep · Jul 20, 2012

Cardinal Fang said:
Well, that in fact WAS the Republican "alternative" stimulus proposal in 2009. A bit less than half a trillion dollars worth of even more tax cuts for the rich and mega-corporations. This is their answer to literally everything.

One thing that really frustrated me, as a small business person, was that the part of the spendulous bill that was designated for small business never actually got used and benefited virtually no small businesses. If I remember correctly, it was only a fraction of 1% of the total spendulous, and it was in the form of a loan guarantee program for small businesses that was so complicated that almost no banks decided to participate. Someone told the that Bank of America was the only major bank that was participating, but that they added additional qualifications to what the government required, such as having to have been a BoA customer for a minimum of 5 years.

The only thing that I got from the government was that I did take advantage of cash for clunkers. I didn't particularly support the program, it seemed a little ludicris to me, but I had an old delivery van that needed a couple thousand dollars of work, and wasn't worth more than $1000 bucks even if I had the work done to it, so I used it as a $5000 trade in on a car for my son. Super good deal, for me, and the car companies, but maybe not so good for the taxpayer, or for people who sell and purchase old clunkers as it depleted the supply of them. I have an acquantance who sells clunkers, he said that the program decimated his business as he was unable to purchase clunkers at a price low enough to resale them to people who couldn't afford more than a $500 or $1000 car.

Cardinal Fang · Jul 20, 2012

imagep said:
The down side of that would be the possibility of inflation...

Well, yes, considering that the cost of the idea would have been in excess of $3 trillion annually. That's about 20% of what GDP was at the time. Might have been some inflationary pressure arising out of that...

Cardinal Fang · Jul 20, 2012

imagep said:
One thing that really frustrated me, as a small business person, was that the part of the spendulous bill that was designated for small business never actually got used and benefited virtually no small businesses.

The original bill included about $50 billion in relief targeted to businesses, though not all of it restricted to small businesses. Still, a lot more than nobody took advantage of accelerated expensing and the ability to use currrent business losses to offset prior year taxes and thereby earn a refund. Numerous bills have been enacted since ARRA that target and help small business, from further tax breaks and credits to hiring credits. Not every bill has been tailored to reach every small business, but almost every small business that's not actually a hobby in disguise should have found something to pick up on.

imagep said:
The only thing that I got from the government was that I did take advantage of cash for clunkers. I didn't particularly support the program, it seemed a little ludicris to me, but I had an old delivery van that needed a couple thousand dollars of work, and wasn't worth more than $1000 bucks even if I had the work done to it, so I used it as a $5000 trade in on a car for my son. Super good deal, for me, and the car companies, but maybe not so good for the taxpayer...

Cash-for-clunkers was not a good deal when viewed from an energy standpoint, or from a stimulus standpoint, or from a jobs standpoint. But as a kill-a-lot-of-birds-with-one-stone package that also injected some enthusiam and optimism into a still-on-stun economy, there were not a lot of programs that could have stood with it.

imagep said:
...or for people who sell and purchase old clunkers as it depleted the supply of them. I have an acquantance who sells clunkers, he said that the program decimated his business as he was unable to purchase clunkers at a price low enough to resale them to people who couldn't afford more than a $500 or $1000 car.

There has been a lot of phony sobbing over this, but the numbers don't support it. If you delve into price histories by vehicle type since cash-for-clunkers, what turns up is that increases in average used car prices have been concentrated among larger SUV's, sales of which plummeted with soaring gas prices in 2008 and the then ensuing economic crisis. A resulting lack of lease-returns and trade-ins for these models that were never sold new to begin with is what has fueled price increases as the demand for larger SUV's has returned. There have not been unusual moves in average used car prices for the older, smaller vehicle classes typical of what was crunched up.

DA60 · Jul 20, 2012

snodog said:
It was by all accounts and purposes FDR's budget in 1933-34. Do you guys on the right also blame Bush for Obama's stimulus package spending in 2009?

1) I disagree - Hoover is responsible for the FY budgets he put forward (just as all POTUS's are). And the 1933 and 1934 FY budgets he put forward included massive deficit spending.
My point is that Hoover deliberately and massively ramped up spending during his term - especially after the first year.

2) I am not 'on the right' - Bush 'jr' sucked as a POTUS as well.

And considering GWB did the first stimuli, the auto bailouts, TARP (which he had Paulson ram down the banks throats - whether they wanted it or not), approved the Fed bailing out AIG and the massive QE1...I assume he would have kept spending like an idiot had he somehow got a third term.

Both GWB and Obama are macro-economic morons, in my opinion.

Cardinal Fang · Jul 20, 2012

DA60 said:
1) I disagree - Hoover is responsible for the FY budgets he put forward (just as all POTUS's are). And the 1933 and 1934 FY budgets he put forward included massive deficit spending. My point is that Hoover deliberately and massively ramped up spending during his term - especially after the first year.

This is either continuation of a pattern of deliberate dishonesty or evidence of a thorough lack of knowledge of the relevant history. Hoover worked and campaigned tirelessly throughout 1932 to cut spending, increase taxes, and balance the budget. Perhaps you can somehow square his comments below with your recent claims, or more likely you cannot.

In opening the final session of Congress in 1932, Hoover stated...

We should endeavor by increase of taxes and rigid curtailment of expenditures to balance the budget for the next fiscal year except to the extent of the amount required for statutory debt retirements. We should assure its balance, including stautory debt retirements, for the fiscal year following.

In announcing his FY 1933 budget, Hoover stated...

The welfare of the country demands that the financial integrity of the federal government be maintained. This is a necessary factor in the rebuilding of a sound national prosperity. This budget -- with its recommended reductions in appropriations and increases in revenues -- presents a definite program to this end involving three steps: first, a material reduction in the anticipated deficit for the current fiscal year (FY 1932); second, a relation between receipts and expenditures for the fiscal year 1933 which will avoid a further increase in the public debt during that year; and third, a balanced budget for 1934.

In a speech in Detroit on October 22, 1932, Hoover boasted that comparing expenditures for the current year (FY 1933) with those in the year ended June 30 last (FY 1932), a reduction of $1,000,000,000 had already been accomplished That claim would of course prove to be thoroughly inaccurate, as Congress was to pass what were then called "supplemental deficiency appropriations" just two months later, and then of course, a whole new ball game came to town on March 4, 1933.

Would you happen to have anything to offer in rebuttal? Maybe words from a different President Hoover or something?

American · Jul 23, 2012

JP Hochbaum said:
Mises rarely tells the whole story. It blatantly left out the tax increases that led to the high deficit and only mentioned the decrease in spending outlays. As we know, raising taxes in a recession is also a no no.

Thank you very very much for this.

JP Hochbaum · Jul 23, 2012

American said:
Thank you very very much for this.

Well I am not a typical liberal, low taxation is a must for now.

The false meme that deficit spending prolonged the Great Depression

Cardinal Fang

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