Recently at Reason.tv: Obama's new New Deal—as bad as the old New Deal?

Nobel laureate economist and New York Times columnist Paul Krugman says he wants President-elect Barack Obama to enact "something like a new New Deal." Historian Douglas Brinkley has said that Obama could come to office with a "sweeping legislative agenda which will be Johnson-like or New Deal-like." An aide close to Obama told New York magazine that "A lot of people around Barack are reading books about FDR's first hundred days."

On the cusp of a deep economic recession, and with a staggering amount of bailout money being offered to struggling industries, pundits and political advisers are advocating that the incoming Obama administration construct a new New Deal. 

But is the popular narrative about the old New Deal-that Keynesian economics and top-down planning rescued America from the Great Depression-accurate? Reason.tv's Michael C. Moynihan talks to UCLA economist Lee Ohanian, who argues in work written with colleague Harold Cole, that the New Deal's massive intervention into the economy actually prolonged the economic crisis by seven years. 

"Obama's New New Deal" is written and produced by Michael C. Moynihan. Director of Photography is Dan Hayes.

Emdbed code and related links available here. Podcast available here.

Comments

[Dave W.]

He should enact something like the New Deal. That would be a deterrent in the future to wealthy people behaving as they did during the Bush years.

[joe]

But is the popular narrative about the old New Deal-that Keynesian economics and top-down planning rescued America from the Great Depression-accurate?

Nobody's talking about the central planning aspects of the Early New Deal - the setting of prices and efforts to create a planned economy. "New New Deal" refers to the big infrastructure projects.

[sage]

"New New Deal" refers to the big infrastructure projects.

I'm sure there will be plenty of top-down planning there. I'm also sure it will be as helpful as the old new deal was.

[Lord Tacohead]

I've seen Krugman assert on his blog on several occasions that the New Deal wasn't anything close to Keynesian because fiscal expansion was so moderate. Seems like he would know what he's talking about, but the word "Keynesian" continues to get thrown around a lot with regard to FDR's domestic policies. IANAE, so does anyone want to comment on this and hopefully enlighten me?

[phalkor]

I'm going to seize on these new infrastructure projects like a rapacious leech. Suck from the teat of government largesse and twiddle my thumbs with glee as each project goes gloriously over-budget with dismal productivity. I know somebody is getting screwed, but it surely won't be me!

That sounds awful, but I'm sure somebody is doing a silly dance right now because they know their pockets are about to be lined with government waste.

[R C Dean]

Nobody's talking about the central planning aspects of the Early New Deal - the setting of prices and efforts to create a planned economy.

What do you think the car czar is going to do? Not to mention all the mandates that already apply (I'm thinking right now about the wage mandates, I forget the name, not to mention the affirmative action requirements to the infrastructure deals)(and no doubt more will be added)?

People who don't work in this area don't know about the vast panoply of federal regulations that apply to you, generally across your entire operation, if you take federal money. I've advised against taking dozens of grants because taking a grant for a few thousand involves agreeing to all kinds of mandates that can cost hundreds of thousands.

I regard that kind of thing as a species of central planning, even if it isn't Old School "make x widgets and charge y dollars for them".

[Isaac Bartram]

I've seen Krugman assert on his blog on several occasions that the New Deal wasn't anything close to Keynesian...

Well I suppose one could say that the New Deal (and subsequent years) aren't really Keynesian since under Keynesianism your supposed to have increased spending in and decreased taxes in hard times and decreased spending in and increased taxes in good times.

A year that did not see increased spending in the US has not been seen since the thirties. Balanced budgets (let alone budget surpluses) have been so rare that noone can actually remember when there was one. And most of them were due to some accounting sleight of hand.

No, we're a crisis economy and there's always someone who needs a bailout and has enough clout to get one.

[tarran]

So within the eyar, we will have a drug czar, a war czar, a auto czar and a climate change czar.

This would be funny if we weren't living through it.

[The Wine Commonsewer]

Great cover spoof.

[Isaac Bartram]

and a climate change czar.

The day it was announced someone on NPR referred to her as the climate change czarina.

I nearly puked.

[The Wine Commonsewer]

Well I suppose one could say that the New Deal (and subsequent years) aren't really Keynesian since under Keynesianism your supposed to have increased spending in and decreased taxes in hard times and decreased spending in and increased taxes in good times.

Good point Isaac. I get weary of intelligent people arguing about minutiae. It doesn't matter a fig whether FDR's plan is labeled Keynesian or Dionysian, it was bad economic policy and set the stage for much of our economic ills over the last sixty years.

[The Wine Commonsewer]

Mikey, good job. The Benny Goodman clarinet on the soundtrack was a perfect touch.

[joe]

I'm sure there will be plenty of top-down planning there. Planning of the projects, sure, but not planning of the economy.

I'm also sure it will be as helpful as the old new deal was. Several years of recovery, before ill-advised fiscal hawkishness derails it?

[joe]

RC Dean,

What do you think the car czar is going to do? Not to mention all the mandates that already apply

The "Car Czar" is an idea from Congress's automobile bailout bill, which is not the subject of the thread, or the comment you replied to.

it was bad economic policy and set the stage for much of our economic ills over the last sixty years. You mean the only sixty years in American history without a depression? The period when we became the preeminent economic power in the world? When America became a middle class nation?

[Randolph Carter]

"You mean the only sixty years in American history without a depression? The period when we became the preeminent economic power in the world?"

Yeah, we didn't have a depression until we did... This is an extremely weak argument.

[JW]

You mean the only sixty years in American history without a depression?

Do you carry a rabbit's foot for good luck? I hear they're good for warding off things like pianos and safes from falling on your head.

[Syd Henderson]

"You mean the only sixty years in American history without a depression? The period when we became the preeminent economic power in the world?"

We did that toward the end of the 19th Century.

[R C Dean]

You mean the only sixty years in American history without a depression?

Well, there was the sixty years before the Great Depression, which, although it sported a number of financial panics, did not, by most accounts, have an actual depression (the last one ending around 1871).

So, it might actually be accurate to say that, since the US economy industrialized, we've gone at around 60 years (also known as "living memory") between depressions, and are probably just now getting due for one.

Its not so much that the Great and Good FDR rescued the US of A from Evil Capitalist Depression-Mongers for all time. Its that these things runs on long cycles in post-agrarian economies.

[Pro Libertate]

Actually, I own an anti-depression rock that my grandfather gave me. So long as I rub it once a year, we're impervious to depressions. Unfortunately, I seem to have lost it.