The Unemployment Rate Under Reagan VS FDR
By Spencer
There is a lot of comentary going on around about the depression and I thought I would put my two cents in.
First, I would just like to point out that the depression consisted of two distinct recessions, 1929-33 and 1937-38 separated by a full scale economic recovery from 1933 to 1937. It has become very common to see right wing analysis that is based on trends from 1933 to 1938, or a
trough to trough comparison. When I see this comparison in an article my first reaction is that the author is either very ignorant and does not know what they are talking about, or two, they are deliberately cherry picking the worse comparison they can make to support their point of view. But, using trough to trough data series is a very biased approach and it immediately makes me very suspicious of the author’s objectivity.
The second point I would address is that a lot of data is presented in isolation. For example, take the unemployment rate. If you say the unemployment rate in 1938 was 17.2% it obviously going to sound terrible. But that is not the issue. Rather, the issue is what does the drop in the unemployment rate from the 25.2% peak in 1933 imply about the success or failure of policy. The issue should be how does the drop in the unemployment rate under FDR and the New Deal compare to normal. In other words, what standard should you use to evaluate whether economic growth between 1933 and WW II was weak, strong or average.
I would suggest that the correct time frame to use is from 1933 to 1940. This is FDR’s first two
terms and in 1940 the build-up for WW-II was just starting and did not yet have a significant impact. It is not a trough to trough comparison. Rather it is a trough to mid-cycle comparison. From 1933 to 1940 the unemployment rate fell from 25.2%to 14.6%, a 42.1% decline. So is this good or bad? The peak post WW II unemployment rate was in 1982 when it peaked at 10.8% and averaged 9.7% for the year. Over the next seven years the unemployment rate fell to 5.3%
in 1989. This is a 45.8% drop as compared to the 42.1% drop under FDR. Under Kennedy-LBJ the unemployment rate fell from 6.7 to 3.6%, a 46.8% drop. Under Clinton it fell from 7.5% to 4.2%, a 43.75%. Considering that FDR experienced the 1937-38 recession while the other three periods were not interrupted by a recession, the difference between a 42.1% fall and the other 45.8%, 46.8% and 43.75% declines does not seem to be a significant difference. This set of data implies that economic growth under FDR was about normal, neither especially strong or weak.
I did a chart comparing the unemployment rate under FDR and Reagan. To make the data comparable I multiplied the Reagan data by 2.5 so that it was on the same scale for both data sets. I could have charted one data set on one axis and the other data set on the opposite axis. But it is easy to make such charts misleading by mis-scaling one axis. This approach avoids that problem.
When I look at this chart I reach the conclusion that there is no significant difference between the drop in the unemployment rate under FDR and Reagan, especially since FDR has a second recession during this period and Reagan did not.
The republicans and/or right wing think tanks love to brag about how strong the economy was under the Reagan supply-side, low tax rate policies. They use the drop in the unemployment rate to demonstrate how well their policies worked. But this data set implies that FDR’s policies was just as successful as Reagan’s.
Maybe Brad DeLong, a respected liberal economic historian can tell be what is wrong with this line of analysis. I’m sure others will.
P.S. Happy Birthday to the USMC.
FDR’s policy did not pull America out of Depression Jobs & moral boost from entering & winning WWII did. Huge deficit & debt problems that the United States faces today can be traced back to FDR entitlement programs, Social Security, Medicare, Welfare, Obamacare and on and on.
Liberals need to get a clue. They know nothing about economics.
Liberals know how to do very few things: Kill babies, have homosexual sex, support & endorse terrorists & borrow money they never intend on paying back which is called stealing. That’s about it.
Liberals know how to do very few things: Kill babies, have homosexual sex, support & endorse terrorists, let illegal aliens into the United States & borrow money they never intend on paying back which is called stealing. That’s about it.
The reason the economy recovered between 1933 and 1938 is because the government spent 3 1.2 times the GDP in stimulus. If we did this today it would be like spending $53 trillion dollars (borrowing $53 trillion). Once the money ran out because of the high debt it caused the double dip recession in 1937. We are still paying the price for FDR’s failed policies. The strong unions which killed american jobs for example. The big example is Social Security. This was a poorly executed program. High taxes and big government spending are a direct result of FDR. Of course the economy thrived when the government was borrowing the equivalent of $53 trillion dollars.
You don’t get to scale Reagan’s rate for your analysis. Full employment is considered about 4% so Reagan decreased unemployment by about 85% of what was humanly attainable while Roosevelt only decreased about 35% of what was attainable, with much lower hanging fruit. Keynes died a long time ago but we still see his ghostly footprint today.
Don’t forget No other president in history of the USA was elected to 4 terms. Any president regardless of party could experience double recessions if they got to serve 12 terms. With the presidents we have had the last 30 years (not counting Reagan) its a good thing they don’t get more than 2 terms.