Pile High the Stimulus

Alan Brinkley is one of the more prominent New Deal historians. And he’s joined the debate over the stimulus to counter some of the nonsense being put about by pseudo-historians like Amity Shlaes who are trying to ride the economic crisis to prominence with some dubious history and dead-weight policy ideas. Like Krugman, Brinkley feels that caution is the greatest roadblock to success at a time like this:

The New Deal was least successful when it was least aggressive–when it let concerns about fiscal prudence override the urgent need to pump enormous sums of money into a moribund economy. There is much for the Obama administration to learn from the many achievements of the New Deal. But there may be even more to learn from its failures.

What were those failures? Primarily, the continual retreat from aggressive government spending and an over eager attempt to re-introduce budgetary discipline before private spending could be fully ignited. Brinkley points to the end of the 1930s and the beginning of the war years as the moment that Americans finally took the medicine required:

The idea of spending as an antidote to recession–an idea that had never found much favor in the past even among the most progressive figures in the New Deal–began slowly to achieve legitimacy. American economists were now eagerly reading Keynes and imagining more robust uses of fiscal and monetary powers to stimulate growth. It is possible, though by no means certain, that even without a war the influence of Keynesian ideas might have led New Dealers to embark on a spending program large enough to push the economy to somewhere close to full employment. But, in the end, the Great Depression–an unprecedented crisis that had stubbornly resisted the efforts of two presidential administrations over twelve years to restore prosperity–came to a close only because of the massive spending required by the greatest and most terrible war in human history.

Economic orthodoxy–which gave high priority to balanced budgets and fiscal restraint–remained a powerful force in the 1930s, even as its limitations became increasingly obvious. Similar arguments can still be heard today: While most liberals–and most financiers and economists–agree on the necessity of government doing something dramatic to jump-start the economy, there remain powerful voices, particularly on the right, that oppose such efforts on ideological grounds. Hence Republicans’ initial opposition to the stimulus package in September and their more recent threat to block, through filibuster, federal aid to the auto industry.

No Deal
Learning from FDR’s Mistakes
The New Republic; December 31, 2008

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