Evaluating the New Deal

An excellent article by Jonathan Chait in the New Republic evaluating conservative claims against the New Deal.

Part of what I like is that he makes it clear that liberals are not muddle-headed about the New Deal. Some parts did not work and should not be repeated, while many parts did work and should not be repealed.

At the bottom of this post, I’ll include a New Deal summary that I compiled for myself while tracking all of the arguments coming out the economic crisis. I’ve found it helpful, and maybe you will, too. (I’ve done this before with this summary document of the causes of the economic crisis.)

Here you go:

First, whenever beginning a conversation about the New Deal, let’s make sure what we mean by the New Deal, because most economists – both liberals and conservatives – can agree that certain elements were good and certain elements were bad:

• Both support the social safety net provisions – unemployment benefits, Social Security, etc.
• Both agree the National Recovery Administration was a mistake.
• Both agree that raising taxes in a downturn is a mistake.
• Both agree that balancing the budget is a mistake during a recession (1937).
• Both agree that, under normal economic conditions, monetary policy (money supply) can fix downturns.
• Banking crises must be avoided to prevent credit crises.
• Don’t increase bank reserves in the middle of a recession (constrict the money supply).
• Don’t raise tariff barriers and precipitate lower trade in a recession.
• Both agree that the bank holiday and FDIC insurance were great developments.

However, there remains disagreement to this day on several issues:

• Efficacy of stimulus via fiscal policy. (Liberals say Roosevelt was too conservative. Conservatives want tax cuts, permanent in some cases, or they want the Fed to do more specialized monetary policy.)
• The impact of monetary policy by leaving the gold standard and depreciating the currency
• Whether true economic growth occurred
• Whether to count government jobs in unemployment figures of the time
• The impact of bolstering unionization.
• The efficacy of Glass-Steagel regulation

There seems to be this fundamental impasse between left and right interpretations of the New Deal:

• Left – The stimulus and work programs of the New Deal were the only thing available to stabilize, ameliorate and prepare for long-term growth of the U.S. economy. It had failings, but in the stimulus zone, it wasn’t tried enough.

• Right – The economy would have recovered more quickly if it had all been left alone. Hoover tried things that ruined the economy and so did Roosevelt.