Sunday, 23 November 2008

RE-EVALUATING THE FDR YEARS

Ken Berwitz

The New York Times is scared.  Its stock has fallen through the floor, its financial health is nearly on life support and electronic media are fast overtaking whatever else is left.

So, suddenly, it isn't ok to just reflexively spout all those slogans that please the paper's leftward stalwarts. 

Here is a piece in today's paper, by Tyler Cowen, that you just don't expect to see in the Times.  Partly this is because it isn't what passes for logic in today's left, and (sad to say this about the Times).  And partly because it makes sense -- which hasn't always been a valued commodity during the years "Pinch" Sulzberger has run the show:

The New Deal Didnt Always Work, Either

By TYLER COWEN

Published: November 21, 2008

MANY people are looking back to the Great Depression and the New Deal for answers to our problems. But while we can learn important lessons from this period, theyre not always the ones taught in school.

David G. Klein

The traditional story is that President Franklin D. Roosevelt rescued capitalism by resorting to extensive government intervention; the truth is that Roosevelt changed course from year to year, trying a mix of policies, some good and some bad. Its worth sorting through this grab bag now, to evaluate whether any of these policies might be helpful.

If I were preparing a New Deal crib sheet, I would start with the following lessons:

MONETARY POLICY IS KEY As Milton Friedman and Anna Jacobson Schwartz argued in a classic book, A Monetary History of the United States, the single biggest cause of the Great Depression was that the Federal Reserve let the money supply fall by one-third, causing deflation. Furthermore, banks were allowed to fail, causing a credit crisis. Roosevelts best policies were those designed to increase the money supply, get the banking system back on its feet and restore trust in financial institutions.

A study of the 1930s by Christina D. Romer, a professor at the University of California, Berkeley (What Ended the Great Depression?, Journal of Economic History, 1992), confirmed that expansionary monetary policy was the key to the partial recovery of the 1930s. The worst years of the New Deal were 1937 and 1938, right after the Fed increased reserve requirements for banks, thereby curbing lending and moving the economy back to dangerous deflationary pressures.

Today, expansionary monetary policy isnt so easy to put into effect, as we are seeing a shrinkage of credit and a contraction of the shadow banking sector, as represented by forms of derivatives trading, hedge funds and other investments. So dont expect the benefits of monetary expansion to kick in right now, or even six months from now.

Still, the Fed needs to stand ready to prevent a downward spiral and to stimulate the economy once its possible.

GET THE SMALL THINGS RIGHT Its not just monetary and fiscal policies that are important. Roosevelt instituted a disastrous legacy of agricultural subsidies and sought to cartelize industry, backed by force of law. Neither policy helped the economy recover.

He also took steps to strengthen unions and to keep real wages high. This helped workers who had jobs, but made it much harder for the unemployed to get back to work. One result was unemployment rates that remained high throughout the New Deal period.

Today, President-elect Barack Obama faces pressures to make unionization easier, but such policies are likely to worsen the recession for many Americans.

DONT RAISE TAXES IN A SLUMP The New Deals legacy of public works programs has given many people the impression that it was a time of expansionary fiscal policy, but that isnt quite right. Government spending went up considerably, but taxes rose, too. Under President Herbert Hoover and continuing with Roosevelt, the federal government increased income taxes, excise taxes, inheritance taxes, corporate income taxes, holding company taxes and excess profits taxes.

When all of these tax increases are taken into account, New Deal fiscal policy didnt do much to promote recovery. Today, a tax cut for the middle class is a good idea and the case for repealing the Bush tax cuts for higher-income earners is weaker than it may have seemed a year or two ago.

WAR ISNT THE WEAPON World War II did help the American economy, but the gains came in the early stages, when America was still just selling war-related goods to Europe and was not yet a combatant. The economic historian Robert Higgs, a senior fellow at the Independent Institute, has shown in his 2006 book, Depression, War, and Cold War, just how much the war brought shortages and rationing of consumer goods.

While overall economic output was rising, and the military draft lowered unemployment, the war years were generally not prosperous ones. As for today, we shouldnt think that fighting a war is the way to restore economic health.

YOU CANT TURN BAD TO GOOD The good New Deal policies, like constructing a basic social safety net, made sense on their own terms and would have been desirable in the boom years of the 1920s as well. The bad policies made things worse. Today, that means we should restrict extraordinary measures to the financial sector as much as possible and resist the temptation to do something for its own sake.

In short, expansionary monetary policy and wartime orders from Europe, not the well-known policies of the New Deal, did the most to make the American economy climb out of the Depression. Our current downturn will end as well someday, and, as in the 30s, the recovery will probably come for reasons that have little to do with most policy initiatives.

When you're the one suffering the consequences, you stop being clever, theoretical and ethereal.  You start getting real.  Maybe this article is the start of The New York Times' crossover.  At the very least, it's a nice change from the months of Obama worship at all costs, isn't it? 

I'll keep watching, to see if this is a trend or a one-day aberration.


BETTY JAMES, R.I.P.

Ken Berwitz

Sad news from the world of important people who media ignore.  Ms. Betty James passed away. 

Here is a short piece on who she is and what she did, from www.allheadlinenews.com:

 Betty James, Co-Founder Of Slinky Dead At 90

November 23, 2008 6:30 a.m. EST

Linda Young - AHN Editor

Hollidaysburg, PA (AHN) - Betty James - the co-founder of the company that made the Slinky - and a single mother who broke the glass ceiling to become a successful executive in the 1950s has died. She was 90.

James co-founded what would become the Slinky empire in 1945 with her husband, the late Richard James.

But when her husband left to join a religious cult and follow it to Bolivia, she took over control and management of the company, James Industries Inc., along with raising the couple's six children alone.

She initially commuted to Philadelphia to run the company and stayed there from Sunday through Thursday during the week, leaving the children with her mother. James eventually moved the factory closer to her home so she could be home at night with her children.

James was inducted into the Toy Industry Hall of Fame in 2001 for the Slinky. She was one of the first women to have a nationally-known business.

Unlike media darlings such as Hillary Clinton, whose paths were eased every step of the way by a powerful, charismatic man, Betty James really was a true ceiling breaker for women.  And countless women who never knew her name (and never will unless they read allheadlinenews.com or this blog) owe much of their ability to compete in business today to her.

May she rest in peace.


WHY THE ISRAEL-HAMAS TRUCE ENDED

Ken Berwitz

Days ago I blogged that hamas calls truces when it needs to re-arm, and ends them when it is strengthened enough so that it feels able to fight effectively and kill lots and lots of Jews.

Here, from www.pajamasmedia.com, is Michael Sharnoff's analysis.  As you will see, we have a lot in common:

Gaza Powder Keg Set to Explode

Posted By Michael Sharnoff On November 23, 2008 @ 12:00 am In . Column2 02, . Positioning, Israel, Middle East, World News | 13 Comments

At least 90 rockets have been launched from the Gaza Strip, including [1] 35 on November 5, since the June 19 tahdiyeh (calm) was announced between Hamas and Israel. According to [2] recent analysis, terror groups in Gaza have undergone a massive buildup in training and arms, and have expanded their tunnel networks for smuggling.

[3] One representative for the Palestinian Popular Resistance Committees told the London newspaper Asharq al-Awsat that terrorists have used the tahdiyeh to train in the abduction of [Israeli] soldiers and martial arts, and he threatened Israel with unpleasant surprises.

Israeli authorities have no illusions about the tahdiyeh. They understand that Hamas is practicing the [4] Islamic concept of sabr (patience), which permits and even recommends Muslims to suspend jihad until they are in a position of strength. As [5] Hamas leader Khaled Mashal told one al-Jazeera journalist, The tahdiyeh is a tactical means. It is a step within the resistance. It is a process of ebb and flow, going up and down. This is how you run a battle.

[6] Hamas is now believed to have stockpiled thousands of rockets and to have trained some 20,000 fighters. It also possesses sophisticated anti-tank devices and roadside bombs to target Israeli vehicles. So, as renewed conflict draws nearer, Israel is analyzing the threat Hamas poses and evaluating three options.

Iron Dome: Israel may soon deploy a defensive missile shield. Last December, Israeli Defense Minister Ehud Barak surmised that a new and sophisticated anti-rocket system, Iron Dome, could stop Qassam rockets and other short-range Palestinian missiles. [7] Barak claimed that the defense shield would cost Israel over $200 million but would not be deployed until late 2009.

Last year, however, Israeli Prime Minister Ehud Olmert lamented that Iron Dome could not successfully defend Sderot from Qassams. [8] Olmert told the Israeli newspaper Haaretz that the system was effective against rockets fired from more than four kilometers away, but not against those fired from closer range. Thus, Iron Dome would protect major cities including Ashkelon and Ashdod, but not Sderot. Sderot is approximately four miles from [9] Beit Hanoun, an area in Gaza where rockets are regularly launched.

Over the summer, the Israeli Air Force announced further setbacks. Officials stated that Iron Dome would not be ready until the first half of 2010. However, [10] it is now unclear if Jerusalem will continue to develop the system if it can only serve as a temporary relief for Israelis living beyond a four-mile radius, and not even defend the 24,000 citizens of Sderot who bear the brunt of rocket attacks.

Extending the tahdiyeh: Israel could also attempt to extend the ceasefire after it officially expires on December 19. As [11] Defense Minister Ehud Barak recently stated, We have an interest in perpetuating the calm. His deputy, [12] Matan Vilnai, also stated on Israeli radio, We hope the truce can again be applied.

However, an extension of the ceasefire, much like the development and deployment of Iron Dome, would only provide temporary security and would not end Israels rocket problem.

Gaza operations: The third option is for Israel to launch a ground offensive in the Gaza Strip. This option would be very unpopular among the Israeli public, as it would be dangerous and almost certainly result in many casualties.

Public sentiment notwithstanding, Israels internal security agency, [13] Shin Bet, argues that a military offensive in Gaza should be undertaken if rocket fire persists. Even Israeli political leaders, who typically agree on virtually nothing, can agree on this point. Likud leader [14] Yuval Steinitz surmised earlier this year, The only way to eliminate rocket attacks is for Israel to launch a military operation. He added that because Gazans elected Hamas, this gives Israel the full right and duty to react. In May, Labor leader [15] Binyamin Ben-Eliezer agreed, stating that Israel has no choice but to destroy all the nests of terror.

In the end, it must be underscored that Hamas raison dtre is to destroy the Jewish state. This is repeatedly called for in the Islamist groups speeches and sermons. It is also articulated in Hamas charter. It is an undeniable fact that Hamas sees its struggle with Israel as a zero-sum conflict. Thus, Israel can employ the first two options to temporarily protect civilians living in the south, but the attacks will almost certainly continue. While it is the least appealing, the third option will ultimately be necessary for Israel to experience a lasting quiet on the Gaza border.

How many times must this happen before Israeli President Ehud Olmert catches on and acts decisively?  Apparently the number is limitless. 

How many times do you think it would happen under someone like, say, Benjamin Netanyahu?  Trust me, the number is a tad more finite.  My best guess is somewhere in the neighborhood of once.

Now the key question:  Which of these two philosophies will keep Israel safer?  With elections coming up months from now, Israelis better think long and hard about the answer.


Buy Our Book Here!


Return to Current Blog
We're Hopelessly Partisan

hopelesslypartisan.com, is a web site which is dedicated to honest, blunt, debate on the issues of our time.


About Us



Privacy Notice: In conjunction with the ads on this site, third parties may be placing and reading cookies on your browser, or using web beacons to collect information.


At “Hopelessly Partisan” we discuss all issues, big and small. In here, nothing is sacred and nothing is out of bounds.

So settle back, preferably after laughing your way through a copy of “The Hopelessly Partisan Guide To American Politics”, and let the battle begin. In this blog, your opinion counts every bit as much as anyone else's, maybe even more.

And to show that my willingness to provide all sides of the issues is sincere, here are links to a variety of web sites, from the left, the middle (more or less) and the right. Read them and either smile in agreement or gnash your teeth in anger!!