She Shlaes Me

Once again, the Washington Post hands over space to the go-to girl of the moment, Amity Shlaes, to explain why FDR and the New Deal sucked. Schlaes opens with a sad, sad story:

One evening in the 1930s, a 13-year-old named William Troeller hanged himself from the transom of his bedroom in Greenpoint, Brooklyn.

William's father was laid up in Kings County Hospital awaiting surgery for an injury he'd suffered on the job at Brooklyn Edison. A federal jobs program was paying William's older brother Harold for temporary work. But the amount wasn't nearly enough to make ends meet. Gas and electricity to the family's apartment had been shut off for half a year. Harold told a New York Times reporter that both hunger and modesty had driven William to act. "He was reluctant about asking for food," read the headline in the paper.

The surprising part of this story is not that it happened; most Americans know that after the 1929 stock-market crash, hard times sometimes led to suicide. The surprising part is that William Troeller killed himself not in 1930, when Herbert Hoover was president, but in 1937, in Franklin D. Roosevelt's second term. The New Deal was almost five years old, but the economy was not back. In fact, the country seemed farther from recovery than before. A new sense of futility was overcoming Americans. The British magazine the Economist sneered that the United States "seemed to have forgotten, for the moment, how to grow."

Shlaes is, shall we say, factually challenged.

Here's a chart Brad DeLong posted some months ago:

Notice anything? First: Notice that upward movement from late 1932 to 1937. Looks like growth to me. Second: Notice that downward movement beginning in 1937. That when FDR decided to listen to more conservative voices and cut taxes and spending. Instant recession-in-a-depression. Just like Keynes said! Indeed, Shlaes makes mention of this but fails to draw the obvious conclusion:

After the 1936 election, Roosevelt found himself appalled at the budgetary deficit he had run up and turned frugal. Infrastructure spending slowed. Monetary authorities feared inflation and doubled reserve requirements at banks. The "Depression within the Depression" of the Troellers' time began.

Amity, you great twit, this happened because FDR listened to people like you.

Now, the graph posted above deals with private investment during the new deal. But plotting other indicators would produce a similar graph. Economist Dean Baker:

While the basic argument has the form of a no evidence counter-factual assertion (e.g. the good fairy of the market would have set things right, if only Roosevelt didn't get in the way), the discussion is contradicted by the known facts of the era. Roosevelt's New Deal Agenda lowered the unemployment rate from 25 percent in 1933 to 10 percent in 1937. None of us would be happy with 10 percent unemployment, but it is difficult to complain about policies that reduced the unemployment rate by an average of almost 4 percentage points a year. The annual growth rate over these four years averaged 13.0 percent. It is always possible that the magic of the market would have done better, but there is no reason that we should believe so.

It's worth noting that while Shlaes is the Senior Fellow for Economic History for the Council on Foreign Relations her degree is actually in English. (That's not to say that someone can't acquire expertise outside of their field just that Shlaes has failed to do so.)

Steve Benen points out that this is the umpteenth time the WaPo has turned to the, shall we say again, factually challenged Amity Shlaes to tell us either the current economy is the bestest ever or that FDR sucked.

Just keep repeating to yourselves, dear hearts, "The Washington Post is liberal...The Washington Post is liberal...."

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Comments

[Mike H.]

Although many many on the the left and right say there agreement on success on the new deal, both sides are wrong. There is still debate and I fall on the side of the failures of the new deal. First off you can look at the "great depression of 1920". There was a massive devaluation in the markets, double digit unemployment and bank runs. What was Hardins's response?, Cut the federal budget, cut the tax rate and with in a year the resession was over. There is a case to make for self correction and liquidation of assets. As for the New Deal, It centralized captial distribution and from private sources to the federal government. The federal gov. distributed money in politically (esp to swing states). Additionally, Many of the jobs were non-productive make work jobs and were taken at the private sectors expense. The private sector, always make better use of resources - land labor and capital.
Now to 1938, other things happened at that time that I believe you are leaving out. The wagner act was passed, the social security act was passed, and in addition to the taxes like the undistributed profits tax all of which greatly increased the expense to hire people. To many other things to mention but with the above and policies like NIRA AAA and his plan to pack the supreme court he is not on the top of my list.
One more thing, were is the original source of you investment chart? Federal reserve data or what?