The Occasional Observer

BTW, you're now seeing a full flowering of opinion among new commentators who are alleging that Obama's brand of socialism is "well suited to the times." After all, since this is Great Depression 2.0, don't we need New Deal 2.0?

I'll bypass the entire argument over whether this situation, bad as it is, in any way resembles the Great Depression. After all, with unemployment at 6%, I'm more interested to see if we'll crack double digits than if we'll get anywhere near the 1930's unemployment rates, which topped out in the mid-20s.

No, I'd rather go after one of our most sacred political fallcies head-on. FDR's groundbreaking new American government, while heartwarming to the masses, was incredibly unhelpful to our country's economy in the short run. Thomas Sowell, economist extraordinaire, summed up the FDR expirement nicely in this review of a book on the New Deal:

The grand myth for decades was that Hoover was unwilling to use the powers of government to come to the aid of the people during the Great Depression but that Roosevelt was more caring and did. In reality, both presidents represented a major break with the past by casting the federal government in the role of rescuer of the economy in its distress.

Scholarly studies of the history of these two administrations have in recent years come to see FDR's New Deal as Herbert Hoover's policies writ large and in bolder strokes.

Those who judge by intentions may say that this was a good thing. But those who judge by results point out that none of the previous depressions — during which the federal government essentially did nothing — lasted anywhere near as long as the depression in which the federal government decided that it had to "do something." [my emphasis]

...With policy after policy and program after program, [there were] high hopes and disastrous consequences. It would be funny, like the Keystone cops running into one another and falling down, except that millions of people were in economic desperation while this farce was being played out in Washington.

Perhaps worse than any specific policy under FDR was the atmosphere of uncertainty generated by incessant new experiments. [N.B.: sound familiar?] Billions of dollars of investment were needed to create millions of jobs for the unemployed. But investors were reluctant to risk their money while the rules of the game were constantly being changed in Washington, amid strident anti-business rhetoric.

Some of the people who most admired and almost worshipped FDR — poor people and blacks, for example — were hurt the most by amateurish tinkering with the economy by Roosevelt's New Deal administration. This book is an education in itself, both in history and in economics. It is also a warning of what can happen when leaders are chosen for their charm, charisma and rhetoric.