Robert Reich and the New Deal Religion

The New New Deal is a quest for power, not truth      

At times I would like to thank Robert Reich’s parents for bringing him to our planet because he makes it easy for people like me to pick him off from time to time as an exemplar of liberal claptrap. He simply buys into whatever is the current trend of liberal thinking. Yet the man has an audience, which is not difficult to understand in a world where Keynes passes for a real economist. Mr. Reich is a bright man but he is an apologist, one who defends his faith. 

On his blog today Mr. Reich blasts what he calls “conservative claptrap” about the New Deal. He says, “One of the oddest of right-wing claims is that FDR’s New Deal didn’t pull America out of the Great Depression, so Barack Obama’s ‘New New Deal’ won’t, either.”

Odd indeed. The man obviously hasn’t done any reading in depth on the subject. On the other hand, most free market supporters have been taught the fable of the miracle of FDR’s New Deal, ad nauseam. I will bet that Mr. Reich has read nothing about the criticisms of the New Deal.

Here’s what he says:

1. The New Deal relieved a great deal of suffering by establishing social safety nets.”
The problem with this is that he has no idea what caused the Depression. In fact, FDR (and Hoover) turned a garden variety recession into a major depression by programs that hindered and destroyed any recovery. The result was that the New Deal inflicted much more suffering on the people than it relieved.

2. FDR’s public works spending did help the economy somewhat . . . A warning to Obama: Don’t worry about so-called “fiscal responsibility” when aggregate demand still falls far short of the economy’s total capacity.”
Even Paul Krugman noted that massive fiscal spending by the government didn’t work during the Depression. Krugman said, ““F.D.R. did not, in fact, manage to engineer a full economic recovery during his first two terms.” Both Reich and Krugman are saying that such stimulus didn’t work because not enough was spent. I would like to ask them both when has Keynesian stimulus ever worked? They can’t say because it never has worked.

 3. “The Second World War pulled the nation out of the Great Depression because it required that government spend on such a huge scale as to restart the nation’s factories…”
Well, that’s not quite true. There was full employment because 8.6 million men were drafted into the armed forces. And there was a full war manufacturing effort, but consumption and investment declined. The real reason the economy recovered after the war was that many of the New Deal policies were scrapped,  business was unleashed, and we became productive again.

There is still a lot of controversy about the New Deal. Liberals accept as gospel that FDR and the New Deal saved us. It is relevant because the New Deal is set up as an exemplar for President Obama. In fact, Mr. Obama believes it. But it’s a fable bordering on religious faith. Mr. Reich is a High Priest of this religion. Like most shaman he mouths the liturgy for only one purpose–to gain power over you and me.

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1 comment to Robert Reich and the New Deal Religion

  • Lloyd G

    “The Second World War pulled the nation out of the Great Depression because …” the world’s other industrial powers were in rubble. The US had the market for manufactured goods to itself for at least a decade.

    Helping things along was a return of trade. Prior to the war trade between nations had largely stopped because most countries adopted protectionist measures that effectively stopped imports(meant to save jobs at in the respective countries, ironically — that other country’s imports are your country’s exports, and vice versa).

    After the war the barriers were down, any demand for manufactured goods meant that American co.s got the business.
    As mentioned, the US had the market for manufactured goods to itself for a decade, and dominated that market for another couple of decades — into the seventies. Then along came Japanese autos and consumer electronics, Airbus, China, etc. — and the relative position of the US slipped. This positional change is only now being really felt.

    We were able to fool ourselves for 20+ years, convincing ourselves that we were still on top of our game, by taking on enormous amounts of debt and continuing to live the high life.
    In hind sight, it’s amazing that other countries subsidized our delusion. It’s especially amazing to me that it does not bother ‘liberal’ economists like Reich and Krugman that Chinese factory workers, who make (maybe) 30 cents an hour, have been subsidizing out-of-control consumption in the US. Where’s the ‘economic justice’ in that arrangement?

    Long post short, the US enjoyed what economic (and political) dominance it had post-WW II because we made stuff. President Obama’s plan (embraced by the likes of Reich and Krugman) — to have 3 … or 4 … or (who knows? eventually) 20 million Americans engage in massive public works, painting bridges, filling potholes, whatever — will do nothing to improve the US relative status in the world.

    With unemployment and hardship spiking upward, I’m all for the gov’t's making sure nobody starves or freezes to death — but providing the bare necessities to the least fortunate among us (‘dinner napkin’ calculation: 5 million unemployed X $10K worth of emergency assistance each per year = $50 billion) would not create the kind of massive gov’t Krugman and Reich envisage.