Daniel Gross Has Had Enough of George Will

George Will is truly remarkable:

Daniel Gross: December 31, 2006 - January 06, 2007 Archives: ECONOMIC ROYALISM WATCH: George Will's sneering attack on the minimum wage is typically awful. The first paragraph contains so much blinkered willful misreading of history that it deserves a prize. Here it is:

A federal minimum wage is an idea whose time came in 1938, when public confidence in markets was at a nadir and the federal government's confidence in itself was at an apogee. This, in spite of the fact that with 19 percent unemployment and the economy contracting by 6.2 percent in 1938, the New Deal's frenetic attempts had failed to end, and perhaps had prolonged, the Depression.

Lets review a bit. Will seems to think that "public confidence in markets was at a nadir" in 1938. Um, no. Public confidence in markets reached a nadir in 1933, when half the banks in the country had closed, when Wall Street was essentially out of business, when the Dow stood at its appalling lows, when employment was about 25 percent. In 1933 -- before the New Deal -- there was no securities industry, no banking industry, no mortgage industry, no capital formation or lending of any kind. That year, an estimated 40 percent of home mortgages were in default.

It was only with the passage of New Deal efforts--the SEC, the FDIC, the FSLIC--that the mechanisms of private capital began to kick back into gear. Don't take it from me. Take it from Federal Reserve Chairman Ben Bernanke, who wrote the following in Essays on the Great Depression: "Only with the New Deal's rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression."...

The argument that the New Deal's efforts "perhaps had prolonged, the Depression," is likewise a canard. One would be very hard-pressed to find a serious professional historian--I mean a serious historian, not a think-tank wanker, not an economist, not a journalist--who believes that the New Deal prolonged the Depression.... My confidence in George Will is at a nadir.

A normal person would not argue that the New Deal prolonged the Great Depression. A normal person would require a case that he or she could point to of a country that (a) relied on market forces alone to generate recovery, and (b) recovered fully from its Great Depression. But George Will is not a normal person.

Comments

[RT]

If George Will has a shred of intellectual honesty, he wouldn't be saying things like this:
* - - - -
But the minimum wage should be the same everywhere: $0. Labor is a commodity; governments make messes when they decree commodities' prices. Washington, which has its hands full delivering the mail and defending the shores, should let the market do well what Washington does poorly.
- - - - *
Can Will produce any instance where the U.S. Government had "ma[d]e messes" by setting a minimum wage? Of course not. Will he admit that the U.S. Government doesn't do any easily demonstrable harm by setting the price of this 'commodity'? No.

This 'commodity,' of course, is our labor, the stuff that our lives our made of. We spend a good part of our lives working, so that we may have food, clothing, a roof over our heads, and hopefully some fun as well.

One of the purposes of our government, as the Preamble to the Constitution reminds us, is to "promote the general Welfare," and you know what? A decent mimimum wage accomplishes exactly that. If raised to a sufficient level, it ensures that one may keep a roof over one's head through the money one earns, no matter how lowly the job.

That's a good boundary condition to place on the 'commodity' of our lives. Anything else is the placing of the market above the lives of flesh-and-blood people.

[jimbo]

If E. J. Dionne so willfully mischaracterized or mistated the facts, I suspect he would be off the WaPo's op-ed pages. I guess getting a pass on accuracy is a form of affirmative action for conservatives.

[Ken Houghton]

You would be hard-pressed, I hope and pray, to find an economist who believes the New Deal prolonged the Depression.

[Sceptic]

George "are there no prisons are there no workehouses" Will.
He lies constantly.
A typical 'conservative' intellectual.

[P O'Neill]

I think Ed Prescott just might have argued that the New Deal prolonged the Depression. The idea was definitely tossed around in Minnesota from time to time e.g.

http://minneapolisfed.org/research/qr/qr2311.pdf

[trotsky]

Last summer in California, we were reading about a labor shortage in California so stark that illegal-immigrant laborers were commanding $15/hour -- more than double the state's minimum wage, and I'd hazard that these folks aren't exactly in a strong negotiating position.

So what's the point of the minimum wage?

[PQuincy]

Thanks to Gross, also, for picking up the nastiness, as well as inaccuracy, of Will's piece (which Kevin Drum also highlighted). Reading Will's prose, I was struck more than once by the simple viciousness of the perspective it represented. After idly misrepresenting what was going on in 1938, he then attributes "New Deal Nostalgia" to the Democrats -- as though a generation's gratitude to the president who led the deployment of state power successfully to protect the general welfare (if you're a liberal) or to preserve the capitalist system in the United States (if you're a dead-ender Marxist or a conservative) meant nothing at all. Will and his ilk should still be thanking Roosevelt, if they were honest, but gratitude is one of the least likely characteristics one will find among his sort of pundit.

Will's antediluvian stance becomes equally clear when he dismisses the current increase as "feel-good legislative fluff." True enough, it won't affect his life a bit -- his taxes won't go up, the cost of services and goods will not likely change, so for him, well, it is fluff. But for low-wage workers (not just minimum, of course, as he tries to insinuate), the increase is all at the margin: those extra $40 or $60 a week -- what Will probably spends for lunch -- make a huge difference to a family just scraping by. I recall that my sister-in-law once had to scrape together pennies, literally, to buy cough syrup for one of my nieces. Would a $20 dollar bill have been fluff to her? Will shows right where he lives with this comment.

The closing comment, as Drum and others note, takes the cake: labor, Will asserts, is a commodity -- and the way he says it makes clear that he really does see it as _just_ a commodity. Of course, labor at $0 an hour is slavery, but that evidently didn't occur to him.

[David Graves]

It's the hectoring know-it-all tone that is enough to give bow ties a bad name.

[Rice history grad student]

From Stanford historian David Kennedy's (fairly) recent, Pulitzer Prize winning book on the great depression, _Freedom From Fear_:

“Whatever it [the New Deal] was, Roosevelt conclusively demonstrated in 1938 that it was not a recovery program, at any rate not an effective one.” p. 361 “It might be well to begin by recognizing what the New Deal did not do, in addition to its conspicuous failure to produce economic recovery. Much mythology and New Deal rhetoric notwithstanding, it did not substantially redistribute the national income.” p. 364

[andres]

"You would be hard-pressed, I hope and pray, to find an economist who believes the New Deal prolonged the Depression."

Ken: As Rice history grad student pointed out, even individuals in the history profession get it egregiously and maliciously wrong. However, economists are also to blame: most of the Chicago School, monetarists and New Classical alike, have little if anything good to say about the New Deal.

btw, sensible economists are agreed that the 1938 increase in unemployment was caused almost entirely by the Fed's incompetent decision less than a year earlier to increase reserve requirements. And of course, the Fed was not under Roosevelt' control and not part of the new deal. So the arguments of George Will and David Kennedy are highly uninformed at best and egregiously dishonest at worst.

[pjgoober]

In Marginal Revolutions comments Brad writes:
"I would like to see an example of a country that followed classical policies and yet emerged from the Great Depression more rapidly before I credit this argument."
http://www.marginalrevolution.com/marginalrevolution/2007/01/did_the_new_dea.html#comment-27352436

Around the time of the Great Depression, didn't many states have similiar economic policies? Furthermore, since the US is the largest economic power on earth with world markets generally following it's fortunes, recovering more rapidly than the US seems like it would be an extraordinary thing for another nation to do even if it had the "perfect" (whatever those are) economic policies.

Brad Delong further comments:
"..As best as I can see everybody except Nazi Germany was left with a large, stubborn legacy of structural unemployment in the late 1930s that was only cured by the enormous surges of demand of World War II."

But that opinion is mocked mercilessly in Brad Delongs 2005 post: The New Deal and the Problem of Idiocy (not Brad's words, but Lance Manion's approvingly cited words)
http://delong.typepad.com/sdj/2005/10/the_new_deal_an.html#comments

[JJ]

Professor of Economics Lee Ohanian of UCLA argues that New Deal arrangements prolonged The Depression. Here is a link to an interview where Professor Ohanian explains his views:
http://www.economicdynamics.org/News21.htm#n1

[Alan K. Henderson]

If I read Milton Friedman's "Free to Choose" correctly, he argued that the Fed's deflationary monetary policy is what caused and prolonged the Depression.

He pointed out that deflation was especially hard on people with fixed-rate loans, like mortgages. Income goes down, but the monthly payments stays the same, and the risk of default increases. That would seem to explain the bank failures.

He certainly didn't credit FDR's redistributionist policies. Such policies do exactly what the name says - they move wealth around, as opposed to facilitating the creation of new wealth, the key to any economic recovery. The best government can do is to reduce de jure and de facto taxes, deflation (and inflation) being examples of the latter.

[Tom Maguire]

Here is a link to the Ohanian paper:

http://www.economics.hawaii.edu/research/seminars/02-03/02-21.pdf

An excerpt:

Some economists suspect that President Franklin Roosevelt’s “New Deal” cartelization policies, which limited competition in product markets and increased labor bargaining power, kept the economy depressed after 1933.2 These policies included the National Industrial
Recovery Act (NIRA), which suspended antitrust law and permitted collusion in some sectors provided that industry raised wages above market clearing levels and accepted collective bargaining with independent labor unions. Despite broad interest in the macroeconomic impact of these policies, there are no theoretical general equilibrium models tailored to study
this question.

...Our main finding is that New Deal cartelization policies are a key factor behind the weak recovery, accounting for about 60 percent of the difference between actual output and trend output. The key depressing feature of New Deal policies is not government-sponsored collusion per se, but rather it is the policy linkage between paying high wages and being able to collude. Our model shows that high wages reduced employment directly in the cartelized
sectors of the economy, and also reduced employment in the non-cartelized sectors through general equilibrium effects. We conclude that the recovery from the Depression would have been much stronger if these policies not been adopted.

[anne]

Bread DeLong

"A normal person would not argue that the New Deal prolonged the Great Depression."

Agreed, completely.

There is a terrible problem that I realize in looking for a letter from Arthur Schlesinger has taken over the Internet accounts of the New Deal. Revisionists, mean-spirited conservative revisionists are everywhere re-writing and distorting New Deal history. The point is to show the New Deal as failure.

Suddenly, there is no legacy of brilliant accomplishment of Franklin Roosevelt. No wonder then attacking New Deal programs has become so simple a matter, and looking to these programs for ideas for present policy has become so difficult. I am startled and saddened.

[anne]

George Will is spouting rubbish as usual. Unemployment figures for the New Deal used by conservative revisionists do not include employment in New Deal programs, so the effect of unemployment is magnified making the New Deal appear to have largely failed in setting people to work.

Unemployment Rate

1929 -- 3.2%
1930 -- 8.7%
1931 -- 15.9%
1932 -- 23.6%
1933 -- 24.9% (20.9%)
1934 -- 21.7% (16.2%)
1935 -- 20.1% (14.4%)
1936 -- 16.9% (10.0%)
1937 -- 14.3% ( 9.2%)
1938 -- 19.0% (12.5%)
1939 -- 17.2% (11.3%)
1940 -- 14.6%
1941 -- 9.9%

The data in brackets account for workers employed in New Deal programs, which as Brad DeLong wrote at some point conservatives simply ignore.

[anne]

http://campaigningforhistory.blogs.nytimes.com/2007/05/21/when-government-was-the-solution/

May 21, 2007

When Government Was the Solution
By Jean Edward Smith

For more than a generation, Americans have been told that government is the problem, not the solution. The mantra can be traced back to Barry Goldwater's presidential bid in 1964. It provided the mind-set for the Reagan administration, and it has come to ultimate fruition during the presidency of George W. Bush.

On college campuses and at think tanks across the country, libertarian scholars stoke the urge to eliminate government from our lives. This thinking has led to the privatization of vital government functions such as the care of disabled veterans, the appointment to regulatory commissions of members at odds with the regulations they are sworn to enforce, the refusal of the Environmental Protection Agency to protect the environment, and the surrender of the government's management of military operations to profit-seeking contractors.

A look back at Franklin D. Roosevelt's presidency shows how differently Americans once viewed the government's role, how much more optimistic they were and how much more they trusted the president.

F.D.R., like his cousin Theodore, saw government in positive terms. In 1912, speaking in Troy, N.Y., F.D.R. warned of the dangers of excessive individualism. The liberty of the individual must be harnessed for the benefit of the community, said Roosevelt. "Don't call it regulation. People will hold up their hands in horror and say 'un-American.' Call it 'cooperation.' "

When F.D.R. took office in 1933, one third of the nation was unemployed. Agriculture was destitute, factories were idle, businesses were closing their doors, and the banking system teetered on the brink of collapse. Violence lay just beneath the surface.

Roosevelt seized the opportunity. He galvanized the nation with an inaugural address that few will ever forget ("The only thing we have to fear is fear itself."), closed the nation's banks to restore depositor confidence and initiated a flurry of legislative proposals to put the country back on its feet. Sound banks were quickly reopened, weak ones were consolidated and, despite cries on the left for nationalization, the banking system was preserved.

Roosevelt had no master plan for recovery but responded pragmatically. Some initiatives, such as the Civilian Conservation Corps, which employed young men to reclaim the nation's natural resources, were pure F.D.R. Others, such as the National Industrial Recovery Act, were Congressionally inspired. But for the first time in American history, government became an active participant in the country's economic life.

After saving the banks, Roosevelt turned to agriculture. In Iowa, a bushel of corn was selling for less than a package of chewing gum. Crops rotted unharvested in the fields, and 46 percent of the nation's farms faced foreclosure.

The New Deal responded with acreage allotments, price supports and the Farm Credit Administration. Farm mortgages were refinanced and production credit provided at low interest rates. A network of county agents, established under the Agricultural Adjustment Act, brought soil testing and the latest scientific advances to every county in the country.

The urban housing market was in equal disarray. Almost half of the nation's homeowners could not make their mortgage payments, and new home construction was at a standstill. Roosevelt responded with the Home Owners' Loan Corporation. Mortgages were refinanced. Distressed home owners were provided money for taxes and repairs. And new loan criteria, longer amortization periods and low interest rates made home ownership more widely affordable, also for the first time in American history.

The Glass-Steagall Banking Act, passed in 1933, authorized the Federal Reserve to set interest rates and established the Federal Deposit Insurance Corporation to insure individual bank deposits. No measure has had a greater impact on American lives or provided greater security for the average citizen.

The Tennessee Valley Authority, also established in 1933, brought cheap electric power and economic development to one of the most poverty-stricken regions of the country. Rural electrification, which we take for granted today, was virtually unknown when Roosevelt took office. Only about one in 10 American farms had electricity. In Mississippi, fewer than 1 in 100 did. The Rural Electrification Administration, which F.D.R. established by executive order in 1935, brought electric power to the countryside, aided by the construction of massive hydroelectric dams, not only on the Tennessee River system, but on the Columbia, Colorado and Missouri rivers as well.

To combat fraud in the securities industry, Roosevelt oversaw passage of the Truth in Securities Act, and then in 1934 established the Securities and Exchange Commission. As its first head he chose Joseph P. Kennedy. "Set a thief to catch a thief," he joked afterward.

By overwhelming majorities, Congress passed laws establishing labor's right to bargain collectively and the authority of the federal government to regulate hours and working conditions and to set minimum wages.

An alphabet soup of public works agencies — the C.W.A. (Civil Works Administration), the W.P.A. (Works Progress Administration) and the P.W.A. (Public Works Administration) — not only provided jobs, but restored the nation's neglected infrastructure. Between 1933 and 1937, the federal government constructed more than half a million miles of highways and secondary roads, 5,900 schools, 2,500 hospitals, 8,000 parks, 13,000 playgrounds and 1,000 regional airports. Cultural projects employed and stimulated a generation of artists and writers, including such luminaries as Willem de Kooning, Jackson Pollock, John Cheever and Richard Wright.

Roosevelt saw Social Security, enacted in 1935, as the centerpiece of the New Deal. "If our Federal Government was established … 'to promote the general welfare,' " said F.D.R., "it is our plain duty to provide for that security upon which welfare depends."

For the first time, the government assumed responsibility for unemployment compensation, old-age and survivor benefits, as well as aid to dependent children and the handicapped. At F.D.R.'s insistence, Social Security was self-funding – supported by contributions paid jointly by employers and employees. (In most industrialized countries, the government provides the major funding for pension plans.) "Those taxes are in there," Roosevelt said later, "so that no damn politician can ever scrap my Social Security program." ...

[anne]

http://campaigningforhistory.blogs.nytimes.com/2007/05/21/when-government-was-the-solution/

May 21, 2007

When Government Was the Solution
By Jean Edward Smith

The government's positive role did not end when the New Deal lost effective control of Congress in 1938. Neither Wendell Willkie, the G.O.P. standard-bearer in 1940, nor Thomas E. Dewey, in 1944 and '48, advocated turning back the clock.

The G.I. Bill of Rights, adopted unanimously by both houses of Congress in 1944, provided massive government funding to provide university and vocational training for returning veterans. The G.I. Bill changed the face of higher education by making universities accessible to virtually every American.

The Eisenhower administration continued to see government in positive terms. President Eisenhower added 15 million low-income wage earners to Social Security, and he launched the interstate highway system – which also was self-funding, through additional gasoline taxes. Only the federal government could have organized so vast an undertaking, the benefits of which continue to accrue.

The ideological obsession of the Bush administration to diminish the role of government has served the country badly. But perhaps this government's demonstrated inability to improve the lives of ordinary Americans will ensure that future efforts to "repeal the New Deal" are not successful.

Jean Edward Smith is John Marshall Professor of Political Science, Marshall University.

[anne]

Brad DeLong

"A normal person would not argue that the New Deal prolonged the Great Depression."

Agreed, completely, but we are passing through a time in which it is the intent of many wild conservatives to change the nature of history and leave no proper understanding of who we have been and how we have to be as we are.

[anne]

Notice that in 1938 the unemployment rate was not 19% but 12.5% even after the absurd tightening of the Federal Reserve induced a recession. Conservatives fought the New Deal, which nonetheless was a wonderful success and profided for continued success thereafter.

Unemployment Rate

1929 -- 3.2%
1930 -- 8.7%
1931 -- 15.9%
1932 -- 23.6%
1933 -- 24.9% (20.9%)
1934 -- 21.7% (16.2%)
1935 -- 20.1% (14.4%)
1936 -- 16.9% (10.0%)
1937 -- 14.3% ( 9.2%)
1938 -- 19.0% (12.5%)
1939 -- 17.2% (11.3%)
1940 -- 14.6%
1941 -- 9.9%

The data in brackets account for workers employed in New Deal programs.

[anne]

http://www.slate.com/id/2169744/pagenum/all

July 5, 2007

FDR's Latest Critics: Was the New Deal un-American?
By Eric Rauchway

http://www.slate.com/id/2169744/pagenum/all

Let's look at a figure [Amity] Shlaes gives twice in her book and again in her Wall Street Journal editorial: She has unemployment at 20 percent in the 1937-38 recession. That's appalling—almost as bad as 23 percent in 1932. Based on such a statistic, you could think the New Deal wasn't alleviating the Great Depression. But that number hides something: A third of the people Shlaes counts as unemployed had a job that the New Deal gave them through its relief programs....

Eric Rauchway is professor of history at the University of California, Davis.

[andres]

Thanks, anne. All this effort devoted to refuting a bow-tied, munchkin-faced troll like George Will. *sigh*. And yet in the face of Will's arguments, it is absolutely necessary. *SIGH*.

In my more cynical moments, I'm starting to believe that dishonest attempts to rewrite history should not come under First Amendment protection, and that a journalist should be subject to libel lawsuits if he attempts to rewrite history (ie attempts to libel past truth) as well as libelling contemporary individuals. Of course, I'm aware of how frequent arguments about history are and that such a suggested cure might be worse than the disease. Nevertheless, _something_ has to be done to prevent people like Will from lying about history in order to further their own ideological agenda.

[anne]

Thank you, Andres. I was astonished at the extent to which through the Internet Franklin Roosevelt has become a bumbler and worse and a defining period in American history thoroughly distorted as a disaster rather than a wonderful intimation of what we could and can be and move therein.

Immediately Brad DeLong was attacked for being an historian by those who deliberately falsify history.

[anne]

Despite the fierce opposition to Franklin Roosevelt and New Deal experiments and programs from the beginning, we were taken from 23.6% unemployment in 1932 to 9.2% unemployment in 1937. The progress was in every way remarkable and inspiring and resoundingly cheered in the election of 1936, and thereafter.

[anne]

There is a disdain for democracy shown by the wild revisionist conservatives who now show disdain for Franklin Roosevelt an the New Deal accomplishments. The accomplishments of the New Deal could not have been more thoroughly supported in elections, and these falsifying revisionists would pretend the accomplishments never were.

What the heck were voters voting for? Why was there such love for Franklin and Eleanor Roosevelt? People in need, people who were sensitive to the need of others, knew who cared and what worked, and they did not forget.

[anne]

http://www.nytimes.com/2005/04/18/opinion/18herbert.html?ex=1271476800&en=9f23787f95925a8f&ei=5090&partner=rssuserland&emc=rss

April 18, 2005

A Radical in the White House
By BOB HERBERT

Last week - April 12, to be exact - was the 60th anniversary of the death of Franklin Delano Roosevelt.... His hold on the nation was such that most Americans, stunned by the announcement of his death that spring afternoon, reacted as though they had lost a close relative.

That more wasn't made of this anniversary is not just a matter of time; it's a measure of the distance the U.S. has traveled from the egalitarian ideals championed by F.D.R. His goal was "to make a country in which no one is left out." That kind of thinking has long since been consigned to the political dumpster. We're now in the age of Bush, Cheney and DeLay, small men committed to the concentration of big bucks in the hands of the fortunate few.

To get a sense of just how radical Roosevelt was (compared with the politics of today), consider the State of the Union address he delivered from the White House on Jan. 11, 1944. He was already in declining health and, suffering from a cold, he gave the speech over the radio in the form of a fireside chat.

After talking about the war, which was still being fought on two fronts, the president offered what should have been recognized immediately for what it was, nothing less than a blueprint for the future of the United States. It was the clearest statement I've ever seen of the kind of nation the U.S. could have become in the years between the end of World War II and now. Roosevelt referred to his proposals in that speech as "a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race or creed."

Among these rights, he said, are:

"The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

"The right to earn enough to provide adequate food and clothing and recreation.

"The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.

"The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad.

"The right of every family to a decent home.

"The right to adequate medical care and the opportunity to achieve and enjoy good health.

"The right to adequate protection from the economic fears of old age, sickness, accident and unemployment.

"The right to a good education."

I mentioned this a few days ago to an acquaintance who is 30 years old. She said, "Wow, I can't believe a president would say that." ...