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Thread: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

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    Default weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    (snip)"FDR's policies prolonged Depression by 7 years, UCLA economists calculate
    By Meg Sullivan| 8/10/2004 12:23:12 PM

    Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

    After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

    "Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

    In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.

    "President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."

    Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt's policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data.

    In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

    Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.

    "High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

    The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian found. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment, had entered into the collective bargaining agreements called for under NIRA.

    Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943."(snip)

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    so what is our president-elect proposing ? An apparent replay of FDR's 1930's public sector 'make work' programs ...

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    More unconstitutional crap, like FDR gave us. ohhh broher.

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    As I have pointed out for years; FDR prolonged the Depression by raising taxes and trying to balance the budget in 1937 which created the Recession of 1938.

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)


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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    from your link ...

    (snip)"But if the New Deal did not end the Great Depression, was it doing some good? Historical Statistics of the United States says yes: Except in the 1937-38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt's first term and, after the 1937-38 dip, around 11 percent.

    So on the numbers, the U.S. economy improved briskly during the New Deal. Things that are moving quickly and in the right direction, but still haven't reached their destination after a while, are things that have a long way to go—which is true of the U.S. economy recovering from 1932. Historians disagree on which part of the New Deal most encouraged economic growth, but at the least the New Deal did not prevent this recovery."(snip)


    This is a comparison made in a vacuum by only looking at YOY US growth and unemployment rates. If you look at growth statistics for other countries during the same years you will find a host of statistics that show the other countries economies grew faster and increased productivity faster. Analysis points to FDR's 'make work' public sector jobs creation, and the above market rate wages paid to those public sector workers, as the primary reason for slower US economic and productivity growth.


    You might want to read for some concise corroboration

    (snip)"Mounting evidence, however, makes clear that poor people were principal victims of the New Deal. The evidence has been developed by dozens of economists -- including two Nobel Prize winners -- at Brown, Columbia, Princeton, Johns Hopkins, the University of California (Berkeley) and University of Chicago, among other universities.

    New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and so-called "excess profits" taxes all went up.

    The most important source of New Deal revenue were excise taxes levied on alcoholic beverages, cigarettes, matches, candy, chewing gum, margarine, fruit juice, soft drinks, cars, tires (including tires on wheelchairs), telephone calls, movie tickets, playing cards, electricity, radios -- these and many other everyday things were subject to New Deal excise taxes, which meant that the New Deal was substantially financed by the middle class and poor people. Yes, to hear FDR's "Fireside Chats," one had to pay FDR excise taxes for a radio and electricity! A Treasury Department report acknowledged that excise taxes "often fell disproportionately on the less affluent." (snip)

    (snip)New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring.

    Other New Deal programs destroyed jobs, too. For example, the National Industrial Recovery Act (1933) cut back production and forced wages above market levels, making it more expensive for employers to hire people - blacks alone were estimated to have lost some 500,000 jobs because of the National Industrial Recovery Act. The Agricultural Adjustment Act (1933) cut back farm production and devastated black tenant farmers who needed work. The National Labor Relations Act (1935) gave unions monopoly bargaining power in workplaces and led to violent strikes and compulsory unionization of mass production industries. Unions secured above-market wages, triggering big layoffs and helping to usher in the depression of 1938.

    What about the good supposedly done by New Deal spending programs? These didn't increase the number of jobs in the economy, because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen -- we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing.

    For defenders of the New Deal, perhaps the most embarrassing revelation about New Deal spending programs is they channeled money AWAY from the South, the poorest region in the United States. The largest share of New Deal spending and loan programs went to political "swing" states in the West and East - where incomes were at least 60% higher than in the South. As an incumbent, FDR didn't see any point giving much money to the South where voters were already overwhelmingly on his side.

    Americans needed bargains, but FDR hammered consumers -- and millions had little money. His National Industrial Recovery Act forced consumers to pay above-market prices for goods and services, and the Agricultural Adjustment Act forced Americans to pay more for food. Moreover, FDR banned discounting by signing the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937)."(snip)

    ~
    Last edited by Melonie; 11-27-2008 at 06:08 AM.

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    http://www.usnews.com/articles/opini...able-task.html

    Even Franklin D. Roosevelt—whose New Deal worked America out of its Great Depression—would swoon.

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    Quote Originally Posted by Melonie View Post

    You might want to read for some concise corroboration
    Or people might want to skip it (depending on your point of view) because CATO is a far right think tank often considered to be a Republican propaganda group.

    For more perspective on groups like CATO check out this:

    One of my favorite parts in the above article reads as follows:

    "As long ago as 1964 even William F. Buckley understood that the thunder on the conservative right amounted to little else except the sound and fury of middle-aged infants banging silver spoons, demanding to know why they didn't have more—more toys, more time, more soup; "

    So funny yet so true!
    Last edited by Lucy in the Sky; 12-14-2008 at 12:48 PM.

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    Default Re: weekend commentary - new FDR Policy analysis (from a 'liberal' state college)

    Isn't it fortunate, wonderful really, that Barrack Obama has all of History's lessons, catalogued and dissected, and available at the push of a button, to be drawn upon as needed.

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