The 1920s Depression: Glenn Beck, Thomas Woods, and "Benefits" of Cutting Taxes to Combat a Recession, Part 2
by cactus
Last week I wrote a post about some nonsense Glen Beck was peddling, with said nonsense originating with Thomas Woods. Woods claimed a smorgasbord of things, the dollar meal version being:
1. lefties talk up how the New Deal (big gubmint, tax hikes) saved the economy from the Great Depression but it didn’t
2. there is a conspiracy of silence about the recovery from the 1920s Depression because it shows that if the government does nothing (with the possible exception of cutting taxes), the economy will roar, as it did throughout the 1920s
Last week I put up a graph showing the marginal tax rates and the recessions from 1920 to 1940. The graph of the data doesn’t quite mesh with the words that Woods chooses to use. What we see is that while Republican administrations were happily cutting marginal tax rates in the 1920s, the economy kept going into recession after recession culminating with Great Depression. In fact, between the end of the 1920s Depression and the start of the Great Depression (not including either one), the economy was in recession 30% of the time. Conversely, once the New Deal started and the Big One ended in ’33, there was only a single recession before WW2 started.
Today we’re gonna do something different. We’re going to look at economic growth and see how well that meshes with Woods’ storyline. Now, the problem is… where do we find data? After all, the Naitonal Income and Product Accounts tables were not being calculated back in the ’20s. But… Woods quotes a number or two on GNP, which he gets from Smiley on GNP. Smiley, in turn, pulls his GNP data from the Historical Statistics of the United States. I’m always leery of using pre-1929 national accounts data from the HSUS since its made up of interpolations, but I guess its as good a source for that data as one is likely to find. Either way, they’re clearly good enough for Woods, so I cannot imagine he would object to us poking around.
Anyway, I had to enter the data by hand, and I’m using a mini-mini laptop right now, so hopefully I didn’t screw up anything, but here’s what real GNP per capita in 1958 dollars (I’m not changing the HSUS data at all…. I want to make sure Woods would approve) looks like:
Sorry about the step figure look, but I wanted to get the recessions (the gray bars) as accurate as possible… and while that data is monthly, real GNP per capita from the HSUS is yearly. Now, Woods’ focus is on the recoveries… but the the graph doesn’t exactly scream at you that the Mucho Tax Cuts and Deregulation Roaring ’20s massacred the Drab Socialist New Deal period. As a result, he adds a lot of verbage which I do encourage you to read. I prefer to take a different approach, though. I created the graph below, which I think is pretty self-explanatory.
So there it is. All of Woods’ verbiage boils down to this… relative to the New Deal policy he excoriates, his example of success is a time of slower growth, more time spent in recession, and it all culminates in what may be the worst economic situation this country has ever faced.
Now, you may be thinking… Woods doesn’t realize that the policy he is promoting produced worse results than the one he is attacking. But I disagree. I believe he knows what the data shows. I provided a few examples last week where Woods seemed to me, at least, to be very misleading. One technique for doing that which I pointed out last week was to cite someone else when passing off incorrect data, but not to point out that the data was wrong. That allows Woods not to outright lie, but it does lead readers to believe something which is not true. Here’s another example… Woods states:
Instead of “fiscal stimulus,” Harding cut the government’s budget nearly in half between 1920 and 1922. The rest of Harding’s approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third. The Federal Reserve’s activity, moreover, was hardly noticeable. As one economic historian puts it, “Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction.”
Now, Woods is very carefully not stating himself that the Fed did nothing. He himself states that the Fed’s actions were hardly noticeable. That may be… I have no way to measure that with the poor data that is available to us now. But Woods goes farther. He tells us that an economic historian has stated that “the Fed did not move to use its powers to turn the money supply around and fight the contraction.” Which is stronger than hardly noticeable. Does Woods agree with this statement? Well, he doesn’t quite say so. But what he never writes is this – “well, this dude says the Fed did nothing, but he is wrong.” And by not doing that, by telling us what some historian said but not indicating we should not believe that historian, Woods is, in effect, endorsing that economic historian’s statement. And by now, after two posts, you should realize that I’m only bringing this up because the Fed actually did something.
As we can see on page 440 of this document from the FRASER collection at the Federal Reserve of St Louis, back in that era, there could be different rates at different Federal Reserve Banks. And just about all the big ones had rate cuts in 1921 before the end of the recession. Take the New York branch, the most important one. The rate was 7% at the start of the year, was cut to 6.5% in May, cut again to 6% in June, and cut again to 5.5% in July, the month the recession ended. One can argue that the Fed moved a little late – which would make “hardly noticeable” potentially true, but it certainly makes “the Fed did not move” BS. This is just one of several examples where, in my opinion, Woods is careful not to lie by commission. But readers will read it and conclude something that is untrue.
So there it is. After two posts, I conclude:
1, the Roaring 20s prior to the start of the Great Depression were a period of deregulation, many tax cuts, and many recessions with very short lived recoveries. The culmination of the Roaring 20s was a great economic disaster, perhaps the worst in American history. None of this applies to the New Deal Era prior to the start of World War 2.
2. Over the length of the Roaring 20s “recovery” and the New Deal recovery, growth was quite a bit faster during the New Deal years.
3. Woods writes carefully and precisely enough that it is hard to conclude that he does not realize 1 and 2.
4. Knowing what Woods appears to know, and knowing that economic policy has tremendous consequences on people’s lives, Woods is nevertheless willing to promote policies that did much more poorly than he implies and to attack policies that did much better than those he promotes
5. Glen Beck is either in on the con or he’s being had.
Increase in production must be matched by a increase in demand. This means as worker productivity increases then worker wages must increase or government spending must increase to balance out the increase in productivity. If that does not happen then business will fail and the rich will not invest in new business. They will end up putting their money into some speculation that will boom and bust and cause a recession. To prevent this cycle workers must be paid more as productivity increase and the government spending must increase to balance the increase in producivity.
cactus,
Without rehasing our previous discussion, I would like to point out two items of your latest post.
1) Very nice graphs and numbers.
2) You do know that beating up on Woods and Beck is the mental equivalent of beating baby seals with a club. I thought liberals were against that….
Islam will change
Cactus –
Thanks for posting this.
BuffPilot –
While what you say is kinda-sorta true, it is still important to get real information out their to counter the big lies. Beck is anintellectual lightweight, but millions are duped by his bullshit. What can you say about Woods? Spreading cherry picked data and/or mis-information with the intent to decieve in suport of any ideology is no less a lie than coming out directly with an in-your-face whopper. Libertarians and Austian Economicts do it all the time.
Cheers!
JzB
for historic gdp data go to measuring worth.
http://www.measuringworth.org/datasets/usgdp/result.php
oods states, “The national debt was reduced by one-third.” According to annual data, posted as of mid-year at
http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm
The peak debt was in 1919, at $27,390,970,113
Harding died in 1923, when the value of the dept was $22,349,707,365, or 82% of the 1919 max.
Two thirds of the 1919 max is $18,351,949,976. With continued year over year deficit reductions, this level was not appraoched until 1927, at $18,511,906,932.
One is forced to conclude that either Woods cannot read data tables and do simple math, or he is a bare-faced liar.
Cheers!
JzB
Of course, that should be WOODS states.
JzB
This may be a dumb question. But… in an effort to better understand the effects of stimulus, what happens when gross debt is subtracted from GNP or GDP. In the chart above for example, the one with the steps, what effect does total debt have between the years of 1930, before the New Deal, and then in 1940 after the New Deal… but before WW2. It would seem that an analysis such as that would be very telling. Something so obvious has almost certainly been done but seemingly not getting much consideration?
Peter John
Mostly agree but I think you may have the direction backwards in your first sentence. An increase in demand WILL LEAD to an increase in production. Why would anyone produce first and wait for the demand to come? So the trick is to get income in the hands of people first so they can go around demanding things to be produced. Yours is really a supply side scenario and supply side economics is………. so passe’.
You are dead on about the speculative activites of the rent seeking class and the damage it does (and has already done)
Ah, but Say’s law says that supply creates its own demand. Sorry to go all supply side voodoo on you.
Not a dumb question at all. But gross debt will swamp gdp. I think you want to use DGP in a year minus same year deficit.
But the problem is finding a complete source with a consistent data set.This has the budget information to 1790, but GDP only goes back to 1940.
http://www.whitehouse.gov/omb/budget/fy2010/assets/hist.pdf
JzB
What this discussion neglects is that there was a one sector depression in the economy in the 1920s that did not recover agriculture. It had made out like bandits when europe was off line as far as ag was concerned from 1914 to 1919. Then Europe came back and prices tumbled and remained low until the Ag adjustment act of FDR. What this does suggest is that in addition to the various international distortions of the 1920 such as reparations and the german hyper inflation, having 20 to 30% of the population in a depressed industry results in an unbalanced economy, which is unstable.
Then you had as recently greed dominate the financial industry, and the good ole amerian desire to get rich quick take over. I suspect that get rich quick being part of our national psyche is a large part of the cause of many of our panics, crashes and depressions in history. We as a nation are on the lookout for things that are to good to be true becasue we think there is an easy road to riches.
Lyle,
We did actually cover quite a lot of the period history in part 1. Here is one of my contributions that is similar to what you said:
Woods is wrong. Beck is a nut. And Cactus, admittedly, has the history a little less than comprehensive.
The story is thus: Farmers did exceptionally well during the war. But food prices at the end of the war were too high to allow the necessary shift to manufacturing. The USDA field agents therefore were evidently instructed not to reduce production levels even though it was obvious that the demand for staple goods would fall as Europe’s farmland came back into service.
This caused a glut that drove down not only food prices but also the cost of labor . In 1921 the ‘yellow dog’ union busting campaign began. By 1929, before the crash, 71% of the population was living in poverty. Farm incomes by 1929 had fallen to 25% of what they had been at the end of war.
So it is conceivable, and more likely true, that the Depression of 1920-21 ended when the Great Depression ended. ‘The Economy that Roared’ was actually just a statistical illusion that hid the fact that a redistribution of wealth occurred on a grand scale. But the wealth that was the result of hard work and good intentions by not just farmers but by the nation as a whole, was ultimately squandered by the financial sector, the culmination of which being of course the crash of 1929. Those who were most affected by the depression of 1920-21 did not however recover their gains, ‘ever’ in most cases. It would not be until 1941 that farm incomes would reach the depreciated levels of 1929.
Ray L. Love
Jazz,
Obviously…Your new to this arguement here at AB. Why don’t you explain to the rest of us exactly how WWII plays a role in the economic recovery? Can you list the changes to the economic policy that had to change right after the War?
Can you explain to us how the impact of the Dust Bowl effected GNP, and if those conditions required some New Deal Policies?
Are recognizing the Strawman arguement that Cactus has set up? The original point of the arguement from the two gentlemen listed above was the size of government and wealth creation. Does this post address that, or this a case Gotcha on one insignificant point?
Hmmmm, No!
Actually, there are many large companies who will produce willy-nilly regardless of demand and reduce price to unload it. Even Toyota just went down this path recently. And to cite the recent past, productivity has increased while wages have remained stagnant or decreased. The rich don’t fool around with labor driven service or manufacturing, they do love that asset appreciation profit making stuff though.
Spencer:
Thanks. I just added this to my Spencer File
My wife and I have owned a very small manufacturing business for about 20 years. For us, and we are fairly typical, we are forced to speculate on demand as part of the design process, and in some cases the speculation begins with financing. Otherwise, if a producer waits until demand exists, the time reqired for set-up and distribution may have the goods in the marketplace after the demand is gone or satisfied by a more foreward looking competitor. It is this ‘speculating’ that makes or breaks a producer, it is also one of most interesting aspects.
I would say the ag stuff is true based upon the experiences of my Grandfather in S Indiana. In addition at the time you had over built the Ag sector moving farms into areas where long term ag is not possible only ranching. (Western OK which has not recovered from this crash yet is a good example. I recently drove Ok 30 from Erick to Hollis, and felt as if in a time warp in the down towns. Nothing much in the downtowns had changed since 1920, and there were lots of downtown store fronts with curtians at the window) This was of course the heart of the dust bowl. So another factor was that Ag had moved past its natural limits into country that is ranch country.
buff,
Thanks. But by nature I’m only a liberal on social issues. I’m a reformed conservative on economic issues – it took a while to realize that almost all the classical and neoclassical and Austrian stuff I was taught didn’t mesh with the facts. And conservatives – even reformed ones – don’t mind clubbing baby seals. At least not the intellectual variety of baby seal.
Jimi,
Go back and reread Woods’ first five paragraphs. He is the one who brings up a comparison between the New Deal and the recovery from the 1920s Depression.
Thanks.
JaB,
I was toying with the idea of discussing his unemployment and debt figures. Maybe a third post. But here’s the thing with debt… there are a zillion ways to slice it and dice it, and I am absolutely certain – based on how precise he is – that in one of those ways, there was a cut of 1/3. Based on what I’ve seen of his work, it will be a very misleading way to look at things, I’m sure, but I am also sure somehow there is an interpretation of debt that and his sentence that makes it true. I just didn’t have the time or patience to figure out precisely how.
Also, budget data is for fiscal year.
I had a post – and you’ll find it in my upcoming book too – looking at growth net of debt. But the post and the chapter only go back to 1952.
Lyle,
I agree with you (and thanks to Ray Love for pointing out more info – that isn’t a piece of history with which I’m all that familiar).
Cactus,
“According to the endlessly repeated conventional wisdom, the Great Depression of the 1930s was the result of capitalism run riot, and only the wise interventions of progressive politicians restored prosperity. Many of those who concede that the New Deal programs alone did not succeed in lifting the country out of depression nevertheless go on to suggest that the massive government spending during World War II is what did it.1 (Even some nominal free-marketeers make the latter claim, which hands the entire theoretical argument to supporters of fiscal stimulus.)”
This is the only place it is mentioned. He isn’t comparing difference in the strength of recovery he is comparing the strategy of recovery. His point is focused on the fact that you can’t blame the recovery policies of the twenties for causing the Great Depression. And you should know better than anybody that this is a comparison between Apples and Oranges, which makes your arguement look like a political play not his. The point was that the Keyensian Way is not the only way, and we still have yet to find proof that it even works.
cactus,
That would still give some indication of the effects of the debt, and I would think, that– would make for some interesting material. From 1952 part of the debt from WWII would still be in play and of course the GI bill was larger than the New Deal. It would seem that all of the discussion about the effectivness of deficit spending should have been resolved a long time ago?
Jimi,
I have been too busy being to lurk around here, but……………………
Your first sentence in response to #5 needs a reaction: “This is crap and it makes you look like an idiot.”
The 1920’s is more relevant to the 1950’s, nothing to do with the US depleted and plunder as it is today.
The post starts out taking Woods and Glenn ‘Goebbels’ Beck (looks like the guy on Raiders who melted at the end) on for saying tax cuts stop recessions, then moving out with irrelevant historical analogies.
Cutting taxes only works if the government does not borrow to spend what should have been funded with the money that would have been raised with the cut taxes! And worse in the ’00’s the borrowed spending was for militarists’ waste and war profits, antithesis of any increase in productivity in the economy. Woods wrote about Seymour Melman on this point and I think that paper had some good scholarship behind it.
What Bush and his cabal did was cut taxes and still rape the productive economy borrowing and paying interest for things like war waste profiteering and doing nothing to raise national productivity.
Nothing like the 1920’s US.
The wealthy and the Chinese/Japanese lent the US money they all should have paid in taxes and tariffs. Great deals if you can swing them but the goose laying these eggs soon starves.
In the 20’s if they cut taxes they did not increase US G borrowing. If anything the US G contracted after WW I.
There are numerous and huge differences between post WW I and Post Cold War. Most have to do with pillaging the US productive sector, not whether there was or was no New Deal.
I do not think you should use that tone here.
rl love:
I agree for small firms.
Cactus,
1. “The Roaring 20s prior to the start of the Great Depression were a period of deregulation, many tax cuts, and many recessions with very short lived recoveries. The culmination of the Roaring 20s was a great economic disaster, perhaps the worst in American history. None of this applies to the New Deal Era prior to the start of World War 2.”
How are they short lived recoveries? The overall trend is upward all the way through the decade. The peak of the Stock Market in September 1929 was 381.71, the crash came and bottomed out to 194 in two days, and then recovered back to 295 in six months. You did not even address that the Smoot-Hawley tariff debate started shortly before the stock market crash. You don’t think that American buisness was pricing that debate in? WOW!
The unemployment rate in 1921 was 20% and the decade saw an average of 3.3% unemployment.
2. Over the length of the Roaring 20s “recovery” and the New Deal recovery, growth was quite a bit faster during the New Deal years.
When you have a bigger dip your gonna have a stronger recovery…No? What specific policy dictates this during the 30’s. Why haven’t you addressed the effects of the ramp up to war, and the recovery of the grain-belt? You want to view the data thru lenses of strict data points…Fine, but what policies have cause this? Why haven’t addresed the deficit and debt during this period? Recovery during the 30’s strong….Great…Now tell me why?
3. Woods writes carefully and precisely enough that it is hard to conclude that he does not realize 1 and 2.
You haven’t provided the evidence or the reasoning to conclude #1 & #2 mean anything, therefore your critique of Woods is a Strawman
4. Knowing what Woods appears to know, and knowing that economic policy has tremendous consequences on people’s lives, Woods is nevertheless willing to promote policies that did much more poorly than he implies and to attack policies that did much better than those he promotes.
What policies? The overall arguement is about the size of government and wealth creation. Just because you compared two different senerios in two different time periods that produced two different results means nothing. Harding and Cooolidge policy’s worked during the twenties, and there is no evidence out there that says their strategy had anything to do with the cause of the Great Depression.
From 1920 to 1929, 25% of all family farms were either sold or foreclosed upon. By 1929 farm incomes had fallen to 25% of what they had been at their peak in 1918.
In 1920 the agriculture sector supported 40% of the population. By 1930 that number had fallen to 25%.
By 1929 71% of population was living below poverty.
At best… it is misleading to assume that unemployment averaged 3% during the 1920s. Whether that is commensurable to the claim of 20% unemployment in 1920, I do not know. But I do know that it is not possible that unemployment was only 3% on average in the 1920s if consideration is given to how much more reliant the economy was then on the agricultural sector.
Says Law, a result of the neoliberals pathetic attempt to find physics like laws that can describe market activity. They were afflicted with physicist envy and wanted their own equivalent of the Laws of Thermodynamics. Only one problem, the laws of thermodynamics are NEVER violated. Says Law is violated multiple times a day. As opposed to voo doo economics a better term for Says Law is “Field of Dreams Economics” (if you build it they will come) nice movie script but lousy way to derive economic policy. This is not to say that at times one makes a supply sided decision to speculate but you are speculating that someone has money to spend on what you are going to offer.
The trouble with the supply sided thinking running amok is its not sustainable. Demand side decisions will always work. Like the classic answer to the question you ask to someone you are getting to do some work for you. Q- Can I get you to do it this way instead? A- “I’ll do it any way you want you just have to pay for it”
run754441
You are right about large companies that can over produce and then undercut to get market share but no one should mistake this for normal market activity or at least not good competetive market activity. Only companies that have monopolistic capabilities and desires behave like this. Again,not behavior that can be emulated by all participants.
Jimi –
What the hell do your comments have to do with mine?
I said absolutely nothing about WWII, the dust bowl or GDP.
?????
You did not even address that the Smoot-Hawley tariff debate started shortly before the stock market crash. You don’t think that American buisness was pricing that debate in? WOW!
I’m neither an economist nor a historian, but I am capable of graphing data in the public domain.
http://jazzbumpa.blogspot.com/2009/02/more-on-smoot-hawley.html
Besides being a totally irrelevant red herring in a discussion of 1920, the idea that Smoot-Hawley had anything to do with the stock market crash of 1929 is pure fantasy.
IIRC, Tariffs were raised in the ’20-21 time frame, and were considered to have contributed to the quick recovery. S and H thought they could once again use the same method, and it would be harmless, based on that prior experience.
But 1920 was a oversupply depression, and limiting imports might actually have helped. Not that the U.S, was much of an importer in those days, anyway. In contrast, 1929 was a finance and demand collapse depression.
One size does not fit all.
Cheers!
JzN
>In fact, between the end of the 1920s Depression and the start of the Great Depression (not including either one), the economy was in recession 30% of the time. Conversely, once the New Deal started and the Big One ended in ’33, there was only a single recession before WW2 started.
This is one of your biggest fans telling you this is lame. And I don’t have to tell you why.
>But what he never writes is this – “well, this dude says the Fed did nothing, but he is wrong.” And by not doing that, by telling us what some historian said but not indicating we should not believe that historian, Woods is, in effect, endorsing that economic historian’s statement.
Ah, the Mankiw technique!
>Harding cut the government’s budget nearly in half between 1920 and 1922.
What about this? True? I know where to find the FRASER collection, but am not too inclined at the moment to enter it all…
Jimi,
His focus is on the 1920s Depression. He talks about tax cuts in the context of that Depression. He talks about unemployment in the context of that Depression. He talks about Fed action in that Depression. He talks about the Great Depression as a foil to that Depression. He talks about the Japanese experience as a comparison to the 1920s Depression. And he goes off in the middle and spends some time talking about Austrian theory. His article, in short, was all over the place. Blame him for that, not me.
Now, I didn’t cover all of these topics in the two posts, but I covered several of them. And I noted that in each instance, a reader who took Woods’ writing at face value would come away with an impression that was at odds with the facts.
Now, if I were to look at, say, his claims about unemployment during the 1920s Depression next, which is only mentioned 2 times (in adjoining paragraphs)… would that be a strawman too?
As I noted, his essay was all over the place. He kept bringing up example after example to make his point. And I knocked down about half of his key examples – showing he was misleading. I don’t know what I could have done that wouldn’t qualify as a strawman to you.
Jimi,
“The overall trend is upward all the way through the decade. “
The only reason anyone would bring this up is because we just lived through eight years of Bush. But in the last century, an upward trend is common. 30% of a decade spent in recession (and that leaving out the 1920s Depression and the Great Depression – I didn’t count what that would be including those two events) was very unusual.
In fact, I think the last 100 years have only three seen three protracted periods of “marginal rate tax cuts plus deregulation.” The Reagan years were mildly successful. Then there was the 1920s (recession after recession) and the Bush 2 years. The Nixon/Ford years might qualify too. I’m not sure we’re talking about periods most Americans want to experience again.
“When you have a bigger dip your gonna have a stronger recovery”
I keep hearing that. Feel free to point out the evidence.
“Recovery during the 30’s strong….Great…Now tell me why? “
Ummm… I’ve had posts here noting the recovery was very strong if you only focus on the Great Depression to 1938 recession years, leaving out the War years entirely. So that’s not it.
“ Harding and Cooolidge policy’s worked during the twenties, and there is no evidence out there that says their strategy had anything to do with the cause of the Great Depression. “
Go back to my comment about leaving out the 1920s Depression and the Great Depression and you still see the country in recession 30% of the time. By this standard, the Nixon/Ford and Bush 2 years were pretty damn good too and Carter was positively brilliant.
Steve Roth,
“This is one of your biggest fans telling you this is lame.”
Yes, the 37 38 recession was big. But that is why I put up the graphs which show precisely the magnitude of the drop. I didn’t want to get caught up in a discussion about that recession (since its causes, frankly, were trying to do what Woods would recommend wrt a balanced budget during a period of weakness), but I also wanted it clear that even with that recession, growth in the New Deal era still beat growth from the 1920s Depression.
Thanks for posting this. The quibbling about some of the finer epistemological within the comments, I think, detracts from the larger point here, Woods and Beck are full of it. I mean, analyzing policies are one thing, completely missing the dates of tax cuts, and then using them as arguments for your policy analysis is another. Even worse is failing to look at the causes of one financial downturn, and using those aforementioned arguments about tax cuts and the Federal Reserve for today’s problems.
I appreciate the attention everyone, from all ideological perspectives, is giving this. It might not seem like a big deal, but I think you all would be surprised how much this kind of crap plays in the world of the slightly-educated working class, angry white man know-it-alls that I work with (I’m a career firefighter). Many people hear things from media like Beck and Limbaugh, and just eat it up. This is especially true for cases where there are claims about a grand conspiracy by the Left to keep us all ignorant of the truth of supply-side eonomics or that the Federal Reserve is an instrument of Satan himself. The silly arguments these people buy ARE relevant, because thousands, if not millions, of people hear them and have their votes influenced by their sophistry. This is not unimportant.
Personally, I have no dog in this hunt, I only know that bullcrap is bullcrap, and it is good to have people out there able to point out how bad it really stinks. Thanks guys.
jazzbumpa
Youll learn to mostly ignore Jimi. He believes every problem that has ever arisen throughout history is solely due to not heeding true conservative principles. (I know “conservative principles” is an oxymoron)
“It would seem that all of the discussion about the effectivness of deficit spending should have been resolved a long time ago?”
Actually it has been resolved but too many people refuse to admit it. I think its the word “deficit” that is attached to it that makes it such a visceral reaction. We dont like deficits, it makes us feel we are lacking something which, as Americans especially, cannot be tolerated.
I propose we drop the word deficit and just call it spending or investment. The govt is investing in something. Now we can just ask “what should they invest in?” That is actually a much more accurate description of what is happening. Who could argue we dont need investment?
The great thing about it is that the return on the investment doesnt go to the govt (it doesnt need return) but to the citizens. In the form of jobs for some, bonds in portfolios for others and eventually those with jobs will be customers for other new businesses.
Greg
may be a little more subtle than that. suppose people are hand carding wool and selling all they can make. along comes a machine that produces ten times the output for the same labor input. likely this product could be sold if the people had money (Peter John’s point). But even if not all of it is sold, the productivity increases and nine out of ten wool carders are laid off.
hmmm
since writing that i see that many here have a more sophisticated understanding than i have. my point was tiny and only directed at the “words”. i suspect the reality is well understood… except by believers in Say’s law.
jimi
where did you pick up “you’re new around here”? seems to me i saw that line levelled at your co-idiots. question is did you pick it up because you thought it was effective, or did it just start a jingle in your head? like all the other stuff you believe.
jazza
i am not sure, but my guess is that GDP and debt are very different categories of things. GDP is a measure of actual goods and services produced. “debt” tracks the paper used to keep track of those things and who ends up with claims on future production. a ratio of government debt to GDP can give an estimate of what level of production would be necessary to ‘pay for’ the goods and services the government has consumed. But you certainly wouldn’t want to subtract one from the other to tell you anything meaningful.
jimi
do you know what a strawman is?
cactus
i think jimis point that the “recessions” of teh 20’s were mild in a period of overall growth could be valid. but other commenters here have pointed out that the “growth” was froth on top of some really troubled times. the “growth” did not reach the farmers or most of the workers.
Is it you Coberly….Are you a Strawman?…Please guide me o’ wise one….
Uh-huh!
Coberly,
I believe I picked it up from you….My favorite Co-Idiot!
jimi
i don’t mind being a co-idiot. but you definitely did not pick up that line from me.
just as long as you remember that i am your “…friend, the honorable co-idiot from across the isle.”
think of it like this:
it is meaningful for me to think about the number of horses i have per acre. it is not meaningful for me to subtract the number of horses i have from the number of acres.
coberly,
I disagree. Knowing how GDP minus debt, at a given point in time, compares to a GDP minus debt at a different point in time, might indicate whether asset values are rising due to debt increases, or due to growth rates from productivity gains. According to Greenspan/Bernanke at least, there is no way to measure ‘bubbles’; although it ‘seems’ (I don’t actually know this) that when total private debt is rising faster than real GDP that over-valued assets are… inevitable?
One of the shortcomings of economic analysis is that gains are often assigned to given period only to vanish at some later point beyond the scope of the period being analyzed. Claiming ‘growth’ in the 1920s for example is like claiming to have had a gainful episode in a casino because at one point the winnings had piled up only to be lost back at some later point in time. In the step-chart above for example the GNP high-point comes in 1940 but it is misleading as compared to years with lower amounts of debt, whether due to deficit spending or otherwise, and it would seem better if each basic type of debt were separated out for the sake of understanding what is what?
That the Fed was very active in the 20s depression is quite obvious in the price level which never returned to its pre WWI level.
But GDP and debt are both dollar denominated. You can legitately add or subtract them.
OTOH, if you add five female pigs to five male deer, it’s also dollar denominated: you have ten sows ‘n’ bucks.
JzB who refuses to appolgive
So Glenn Beck lied. And in other news, water is wet.
– Badtux the Snarky Penguin
It’s true, if by budget he means spending, but for ’23, not ’22.
1920 $6358 (in millions)
1922 $3289
1923 $3140
http://www.gpoaccess.gov/usbudget/fy06/pdf/hist.pdf
Data on Pg 21.
I guess ’22 actually is pretty close to half. But this seems a bit cherry picked. War budgets were large, and 1920 spending was only a third of 1919 ($18.493) Budget amounts were falling because the war was over. The 1923 value is about 4.5x the aprox. $700+ million of the last several pre-war years. The rest of the 20’s, spending stayed right around $2,900 million, just about 4x the pre-war norm.
So, it looks like Wood’s statement is true, but basically irrelevant.
And this is in the same context as his “nation debt reduced by a third” statement, so he should have used total Federal debt outstanding to be anywhere cose to honest, not some obscure data count.
JzB
love
i knda thinka know what you are getting at. too tired to really think at the moment, but i remain fairly sure that you are trying to add (or subtract) things that are far more different than apples and oranges.
Dean,
“The silly arguments these people buy ARE relevant, because thousands, if not millions, of people hear them and have their votes influenced by their sophistry. This is not unimportant.”
So that explains the percise reason why the Democratics have complete control of the House and Senate, and why Obama won the election? Every poll out there for the past 50 years indicates this is a center-right or generally conservative country.
Cactus cherry picked an issue of whether or not the Federal Reserve acted in a fashion that helped the recovery of the Great Dpression. Just because the strength of the recovery between the early twenties and the early thirties was different, doesn’t mean Woods and Beck are liars. It only means that Two different problems with two different solutions produced two different results.
It is absolutely relevant to today, because the people who believe in Keyensian economics want even more spending without there ever being any proof that this method will produce the results that are consistent with the standard of this country. Woods’ point was that there are other ways that aren’t government reliant that can work, and have a history of working, but do not fit the political agenda of those who want to change away from the free-market capitalist system.
The graph is in percent change, so the atmosphere of the times is very important and the intensity of the drop is very important, and what cactus has done here is nothing more than a Voodoo Data Firewalk….Nothing has been resolved….except a little gotcha game with Woods.
And Yes you do have a dog in this hunt…do have kids or grandkids? Aren’t you concerned about the decision making of this country as we move forward, and most certainly your kids and grandkids will pay for.. Aren’t you concerned about passing a standard of living similar to what you have enjoyed over your life in this country?
Love,
The economy wasn’t reliant on agriculture during the Twenties. Manufacting, Transportation, and Communication had made large advances. Argiculture income did fall over the Tewnties for two reason: Technology, and the quick turnaround of Europe after WWI in Agriculture.
If you look strictly at years 1921 thru 1929 the unemployment numbers and the growth in GNP were very strong and we could only dream of getting to that point today. 4.2% annual growth GNP and 4.5% average unemployment and 3% average (nonfarm).
Jimi,
We could once again get 4.2% annual growth and 4.5% average unemployment if we were to remove the safety nets and push the poverty level up to 71% like we did in the 20s. When people are impovrished enough and they have no other way to get food they will work for cheap. The problem is that such an exploitive strategy proved to be well short of sustainable, and, less than wise… much like your comment is…
…I did not say that the economy was “reliant on agriculture during the twenties”; I said that :”But I do know that it is not possible that unemployment was only 3% on average in the 1920s if consideration is given to how much more reliant the economy was then on the agricultural sector”. That means ‘then’ as opposed to now. In other words it not commensurable to compare an economy with 25% to 40% of the workforce supported by agriculture to what we have now. Any measurment of unemployment then would have needed to consider agricultural unemployment to be of any commensurable value so as not to be misleading because of the demographics. Even at the low point of 25% of the population the agricultural sector was still employing about the same number of people as what the manufacturing sector was. But those in agriculture were not as often unemployed as they were just broke, as I made references to in the comment above. The point being that the gains of the 1920s were in part just an illusion much like the gains of the 2000s.
jzB
i should give this up. but pending a more convincing argument, i think just because you can demonimate two different classes of things in the same metric, does not make their sum meaningful.
i can count apples and i can count cars. if you ask me how many apples and cars i have and i tell you four, have you learned anything useful? (except that i have between zero and four cars and between zero and four apples.)
GDP data from that period is a bit strange. Different data sets, even from HSUS, give dramatically different numbers. Woods’ value of -17% does not stand the test of time.
http://jazzbumpa.blogspot.com/2010/04/close-look-at-gdp-change-in-1920-21.html
Cheers!
JzB
Oh, my. Woods says this: “There was nothing at all unusual about the pattern of American wealth in the 1920s.” Excpt that there was a greater disparity than at any tiime in the next 70 years.
Graph here: http://polarizedamerica.com/images/MPR_Figure_1_2_A.jpg
From this source:
http://polarizedamerica.com/
Scroll down after linking to the second graph.
Is Woods a liar, or what?
jimi
what you don’t understand is that cactus can answer your last question yes and still not agree with you.
you have, my opinion, not meant as snark, a pretty simple minded view of the economy. much of what you say is true, but not true enough. all that libertarian stuff has been tried and it didn’t work. if for no other reason than that there are bad guys who will use their “freedom” to steal from you. and in the end you have to have a government. and if you are not careful about the way you design a government,the bad guys will steal the government from you. and then really set in earnest to steal from you. i am pretty sure those bad guys would start by convincing the simple minded people that they wanted to free them from government interference and taxes.
the double post is the systems way of dealing with a reply on a page that has already been filled up. attempts to delete one of the posts deletes both of them. so read it twice already.
but we are catching up.
Coberly,
No…I do understand many here can answer that question “Yes” and still disagree with me. The issue here is the 500 lb. Gorilla in the room, the game playing here at AB, where most of the economic arguements are not really over the data, it is the absolute refusal to admit that many here have an ideological/political agenda that requires such drastic change in this country that American’s Economic and Personal freedom are not only at risk, many here are actually advocating their elimination, and i’ll admit that mabye some don’t realize that’s actually what their advocating.
If you know your history, you should’ve realized that the larger the expansion of government the larger the requirement for a political “gestapo” to maintain the state.
If you know your history, you should’ve realized that decisions based on fairness will result in fairness for no one. We are in the red zone right now, and when we get to the point where the minority can’t support the majority it will only be our freedom that can be used for trade.
Sure…….Socializing seems like a civil and honorable thing to do on paper, but in reality tell me where it has worked.
Who is kidding who here? All this B.S. about spending ourselves into a Black-Hole with no consequences is riduclous. You can only believe that if you are confident your gonna have growth some time in the near future to compensate…Nobody believes that is coming anytime soon, over the years we have tied our hands behind our back, probably because our leaders and many citizens believe in completing a Utopian Ideological Agenda instead of maintaining and expanding on the methods that have made this country so powerful and wealthy.
It’s the “Legislate to lowest common denominator just like our Commie friends, because I don’t want them to hate me anymore.” IT’S PATHETIC!
jimi
let us try to be careful. i agree with much of what you say here. but the danger is that we escape from the frying pan into the fire. i have no doubt that “liberals” left to run rampant would… uh, go too far. But the answer is not to give goverment over to the malefactors of great wealth.
I don’t know what you mean by “socializing.” but it is obvious to me that the New Deal worked. Not all of its programs, but the general idea that government could interfere in the economy to ease the misery caused by “economic forces.” Especially when you recognize that economic forces almost always turn out to be political forces (where the power is).
I tend to agree about unlimited deficits. But that means spending on dubious military, and dubious bank bailouts. I don’t see much “social spending” that is quite as dubious. Social Security is a model of fiscal prudence. The welfare programs seem to me to be not very well thought through, but maybe as good as ordinary humans can manage. Medicare is a disaster not because it is social spending, but because it has not found a way to control the monopoly pricing of the health care industry.
I don’t see any Utopian Ideological Agenda in our leaders. I see leaders on the intellectual “take,” if not money take, of the Big Money bright boys.
“Government” will expand like all power if it can. It will not likely be for the good. The American system of checks and balances was supposed to prevent that. But the size of government will not be “because of” liberal programs. It will be because the people who want power have seized it. Today that means “business interests.” Tomorrow it could be “people’s revolution,” but only if your friends are so successful in grinding down the people that they get desperate. Once they get desperate they will act as the troops for the next generation of Big Government bad guys.
Coberly,
I also don’t really disagree with what your saying, I just have a different prespective. Although, I believe that you can’t, on one hand admit that the Free-Market System facilitated the standard of living that is the envy of the world, and then on the other hand claim that it is Corporate America that has become the enemy.
The Corporate Gangsters are the minority, and Americans need to be very careful not to throw the baby out with the bath-water.
Also, we can’t demonize the system for it’s faulty results, it is the gangsters who have manipulated the system, therefore the gangster is the enemy and not the system.
With an education system focused on an Ideology instead of the fundamentals this situation was bound to arise at some point. You more than anybody should understand that once we turn this corner, the only way back will be a walk along the path of violence and chaos wearing a T-shirt that claims “Second Place is the First Loser.”
We were catching up a few years ago. It’s actually far worse now. Top 1% had over 33% of total wealth in 2007. It keeps getting farther out of balance.