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As If an Invisible Hand Played a Losing Card: The Turn Towards Depression in September 2008

Wall Street Journal and Council on Foreign Relations Crashed-and-Burned Watch (Yet Another Amity Shlaes Edition)

Mr. Murdoch, your intellectual capital is depreciating rapidly. Call your office.

Paul Krugman writes that expansionary fiscal policy was not tried on a sufficiently large scale during the Great Depression--spending boosts were insufficient, and undermined by tax increases while unemployment was still high. Hence, he argues, recovery remained far from complete and unemployment remained high--until World War II came, and expansionary fiscal policy was tried on a sufficiently large scale, and unemployment dropped to 2%.

Amity Shlaes responds by arguing something... completely incoherent--flunking the Turing Test territory. And so Wall Street Journal publishers who give her space and Council on Foreign Affairs staffers who give her fellowships lose credibility, influence, and reputation.


The Krugman Recipe for Depression: Paul Krugman['s]... new book "The Return of Depression Economics," emphasizes the importance of New Deal-style spending. He has said the trouble with the New Deal was that it didn't spend enough.... The New Deal is Mr. Obama's context.... If he proposes FDR-style recovery programs, then it is useful to establish whether those original programs actually brought recovery.... New Deal spending provided jobs but did not get the country back to where it was before....

Stanley Lebergott helped the Bureau of Labor Statistics in Washington compile systematic unemployment data.... He intentionally did not include temporary jobs in emergency programs.... Michael Darby of UCLA has argued that make-work jobs should be counted. Even so, his chart shows that from 1931 to 1940, New Deal joblessness ranges as high as 16% (1934) but never gets below 9%. Nine percent or above is hardly a jobless target to which the Obama administration would aspire....

New Dealers raised taxes again and again to fund spending.... We know that the new administration is going to spend... it can just spend, Krugman-wise, and risk repeating the very depression we seek to avoid...