He misses two important threads.
Had John McCain won last November, very few of the New Deal denialists would be out in public--instead, the Republican legislators and their tame intellectuals would be enthusiastially rallying behind McCain's tax cut-based Keynesian fiscal stimulus package right now.
Amity Shlaes was fired from the Financial Times for lying about the Bush administration's preparedness to deal with Hurricane Katrina. Surely this deserves a mention?
Jonathan Chait:
Wasting Away in Hooverville: A generation ago, the total dismissal of the New Deal remained a marginal sentiment in American politics. Ronald Reagan boasted of having voted for Franklin Roosevelt. Neoconservatives long maintained that American liberalism had gone wrong only in the 1960s. Now, decades after Democrats grew tired of accusing Republicans of emulating Herbert Hoover, Republicans have begun sounding ... well, exactly like Herbert Hoover.... When Republicans announce that the New Deal failed--as they now do, over and over again, without any reproach from their own side--they usually say that the case has been proven by the conservative columnist Amity Shlaes in her book The Forgotten Man.... Whether or not The Forgotten Man actually persuaded conservatives that the New Deal failed, in the time of their political exile, which is also a time of grave economic crisis, it has become the scripture to which they have flocked.
When they say that the New Deal "didn't work," conservatives almost always mean New Deal fiscal stimulus.... And then, in turn, they confuse New Deal fiscal stimulus with Keynesian economics.... When people worry about losing their jobs, they sensibly cut back on their spending. But that decision, in turn, reduces demand for goods and services, which results in reduced income or lost jobs for other workers.... The recession was therefore a failure of collective action that required government action. Government needed to encourage spending by reducing interest rates or, failing that, to inject spending into the economy directly by deliberately running temporary budget deficits.... [T]he essential framework constructed by Keynes--that recessions are caused by a failure of demand, and that at the very least government should not respond to an economic slowdown by paring back its largesse--is no longer in dispute. Even a right-wing Republican economist such as Gregory Mankiw, a former Bush advisor, writes that "if you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes."
[E]verywhere you look, conservative pundits and elected officials have embraced the pre-Keynesian nostrums. Citing The Forgotten Man, they insist that efforts to stimulate the economy are not just insufficient but also counter-productive.... It is 1932 again in the Republican Party....
Now here is the extremely strange thing about The Forgotten Man: it does not really argue that the New Deal failed. In fact, Shlaes does not make any actual argument at all, though she does venture some bold claims, which she both fails to substantiate and contradicts elsewhere. Reviewing her book in The New York Times, David Leonhardt noted that Shlaes makes her arguments "mostly by implication." This is putting it kindly. Shlaes introduces the book by asserting her thesis, but she barely even tries to demonstrate it. Instead she chooses to fill nearly four hundred pages with stories that mostly go nowhere. The experience of reading The Forgotten Man is more like talking to an old person who lived through the Depression than it is like reading an actual history of the Depression.... Having been prepared for a revisionist argument against the New Deal, I kept wondering if I had picked up the wrong book.
Many of Shlaes's stories do have an ideological point, but the point is usually made in a novelistic way rather than a scholarly one. She tends to depict the New Dealers as vain, confused, or otherwise unsympathetic. She depicts business owners as heroic and noble. It is a kind of revival of the old de haut en bas sort of social history, except this time the tycoons from whose perspective the events are narrated appear as the underappreciated victims, the giants at the bottom of the heap....
Shlaes begins every chapter with a date (say, December 1936), an unemployment percentage (15.3) and a Dow Jones Industrial Average. The tick-tick-tick of statistics is meant to show that conditions did not improve throughout the course of Roosevelt's presidency. Yet her statistics are highly selective. As those of us who get our economic information from sources other than the CNBC ticker know, the stock market is not a broad representative of living standards. Meanwhile, as the historian Eric Rauchway has pointed out, her unemployment figures exclude those employed by the Works Progress Administration and other workrelief agencies. Shlaes has explained in an op-ed piece that she did this because "to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects." So, if you worked twelve hours per day in a coal mine hoping not to contract black lung or suffer an injury that would render you useless, you were employed. But if you constructed the Lincoln Tunnel, you had an anxiety-inducing make-work job.
In response to this criticism, Shlaes has retreated to the defense that unemployment was still high anyway. "Even if you add in all the work relief jobs, as some economists do," she has contended, "Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice--as a nightmare." But Roosevelt inherited unemployment that was over 20 percent! Sure, the level to which it fell was high by absolute standards, but it is certainly pertinent that he cut that level by more than half. By Shlaes's method of reckoning, Thomas Jefferson rates poorly on the scale of territorial acquisition, because on his watch the United States had less than half the square mileage it has today.
Shlaes's actual critique of the New Deal is not easy to pin down. Defining what she believes depends on whether you are reading the book itself or her incessant stream of spin-off journalism. In one article she adopted the classic right-wing line taken up by Andrew Mellon, Hoover's treasury secretary: "Mellon--unlike the Roosevelt administration--understood that American growth would return if you left the economy alone to right itself." This is the conclusion that most excites Shlaes's conservative admirers....
If your understanding of the New Deal is limited to the simple notion that Roosevelt spent a lot of money and tamed unemployment, then this story might sound like a persuasive piece of evidence for Shlaes. Yet there is a tip-off within the story that ought to give even the uninformed reader pause: the part where the Treasury Secretary promises to balance the budget. That doesn't sound very New Deal-ish, does it? And indeed it is not. The historical fact is that Roosevelt's administration contained warring factions with often wildly differing ideas. FDR came into office promising to slash the federal budget, but he moved in fits and starts toward a Keynesian policy of fiscal stimulus. After the elections of 1936, though, his more conservative advisors prevailed upon him to roll back the budget. Liberals, including Keynes, protested that this would jeopardize the fragile recovery. And events vindicated them: after impressive growth, the economy plunged back into a recession within a depression.
That Roosevelt see-sawed between Keynesianism and budget-balancing has been conventional wisdom among mainstream historians and economists for decades. The MIT economist E. Carey Brown wrote this in 1956. Keynes made the same point in a pleading letter to Roosevelt in 1937. Economists disagree about the extent to which Roosevelt's fiscal expansion helped. Many give more credit to his abandonment of the gold standard--which Shlaes, naturally, also decries. The fact that he retreated from Keynes in 1937 and that this retarded the recovery, though, bears little dispute....
[I]ntellectual coherence is not the purpose of Shlaes's project. The real point is to recreate the political mythology of the period. It does not matter that Shlaes heaps scorn on Roosevelt for doing things that liberals also scorn. Anything that tarnishes his legacy, she seems to think, tarnishes liberalism by association.... If the New Deal failed so miserably, one might wonder why voters continued to endorse it. In Shlaes's telling, Roosevelt's first challenger, Alf Landon, lost in 1936 because he "failed to distinguish himself" from Roosevelt. It is certainly true that Landon hailed from the party's moderate wing and shied away from the root-and-branch condemnation of the New Deal favored by, say, Hoover. But as the campaign wore on, Landon's rhetoric grew increasingly harsh. If Roosevelt returned to office, he warned, "business as we know it is to disappear." Voters who opposed the New Deal may not have had a perfect choice, but they did have a clear one. It also takes quite a bit of ideological credulity to believe, as Shlaes apparently does, that Roosevelt's twenty-point victory represented anything other than massive support for his program. Landon himself later remarked that "I don't think that it would have made any difference what kind of a campaign I made as far as stopping this avalanche is concerned."...
The final unanswered question that must nag at the minds of the true believers is how the Depression managed to develop even before Roosevelt assumed office. After all, his bungling caused the economy to stall for years, yet the Depression was already more than three years old before Roosevelt even took office. Shlaes's answer is to implicate Hoover as a New Deal man himself.... This part of Shlaes's argument has generated enormous enthusiasm on the right. At last the cultural baggage of Roosevelt's predecessor--Hoovervilles, Hoover flags, and the like--has been lifted off the shoulders of conservatism and onto the real culprit, which is liberalism. Senator Kyl proclaimed on the Senate floor last fall that "in the excellent history of the Great Depression by Amity Shlaes, The Forgotten Man, we are reminded that Herbert Hoover was an interventionist, a protectionist, and a strong critic of markets."... There is indeed a revisionist scholarship that recasts Hoover as an energetic quasi-progressive rather than a stubborn reactionary. William Leuchtenburg... settles on a more traditional conclusion. Leuchtenburg shows that Hoover's history of activism consistently left him with the belief in the primacy of voluntarism and the private sector, a faith that left him unsuited to handle a catastrophe like the Depression.... Shlaes's attempt to equate Hoover's disdain for short-sellers and Roosevelt's regulation of the market presumes that there is no important difference between expressing disapproval for something and taking public action against it....
[N]ow we have come to a time when leading Republicans and conservatives--not just cranks, but the leadership of the party and the movement--once again sound exactly like Herbert Hoover. "Prosperity cannot be restored by raids upon the public Treasury," said President Hoover in 1930. "Our plan is rooted in the philosophy that we cannot borrow and spend our way back to prosperity," said House Minority Leader Boehner in 2009. They have come to this point by preferring theology to history, by wiping Hoover's record from their memories and replacing it with something very close to its opposite. It is Hoover, truly, who is the Forgotten Man.
