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08-07-2011, 07:46 PM
Here is the present administration's economic play book revealed, an attempt to resuscitate the dubious keynesian economics of the 1930's.
link ---http://en.wikipedia.org/wiki/New_Deal
Article---
World War II and the end of the Great Depression
The Depression continued with decreasing effect until the U.S. entered World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the GNP (Gross National Product)[67] Civilian unemployment was reduced from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives joined the labor force. The effect continued into 1946, the first postwar year, where federal spending remained high at $62 billion (30% of GNP).[68]
The emphasis was for war supplies as soon as possible, regardless of cost and efficiencies. Industry quickly absorbed the slack in the labor force, and the tables turned such that employers needed to actively and aggressively recruit workers. As the military grew, new labor sources were needed to replace the 12 million men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, but the national debt as percent of GNP hardly changed. However, spending on the New Deal was far smaller than spending on the war effort, which passed 40% of GNP in 1944. The war economy grew so fast after deemphasizing free enterprise and imposing strict controls on prices and wages, as a result of government/business cooperation, with government subsidizing business, directly and indirectly.[69]
A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls provided a reasonably priced diet to everyone. White collar workers did not typically receive overtime thus the gap between white collar and blue collar income narrowed. Large families that had been poor during the 1930s had four or more wage earners, and these families shot to the top one-third income bracket. Overtime provided large paychecks in war industries.[70]
[edit] Critical interpretations of New Deal economic policiesSee also: Critics of the New Deal.
Many historians argue that Roosevelt restored hope and self-respect to tens of millions of desperate people, built labor unions, upgraded the national infrastructure and saved capitalism in his first term when he could have destroyed it and easily nationalized the banks and the railroads.[71] Some critics from the left, however, have denounced Roosevelt for rescuing capitalism when the opportunity was at hand to nationalize banking, railroads and other industries.[72] Still others have complained that he enlarged the powers of the federal government,[73] built up labor unions, slowed long-term economic growth, and weakened the business community. In his 1968 memoir The Brains Trust, Rexford Tugwell (a member of Roosevelt's Brain Trust) wrote that many New Deal laws “were tortured interpretations of a document intended to prevent them.”[74]
[edit] Keynesian and monetarist interpretations
national debt/ GNP climbs from 20% to 40% under Hoover; levels off under FDR; soars during WW2 from Historical States US (1976).The New Deal tried public works, farm subsidies, and other devices to reduce unemployment, but Roosevelt never completely gave up trying to balance the budget. Unemployment remained high throughout the New Deal years though greatly reduced from the much higher rates before the New Deal; business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynesians later argued that by spending vastly more money — using fiscal policy — the government could provide the needed stimulus through the multiplier effect. Critics of Keynesian economic theories said that government spending would "crowd out" private investment and spending and thus not have any effect on the economy, a proposition known as the Treasury view, which Keynesian economics reject.
In recent years more influential among economists has been the monetarist interpretation of Milton Friedman, which did include a full-scale monetary history of what he calls the "Great Contraction". Friedman concentrated on the failures before 1933, particularly those of the Federal Reserve, and in his memoirs said the relief programs were an appropriate response.
Historians generally agree that apart from building up labor unions, the New Deal did not substantially alter the distribution of power within American capitalism. "The New Deal brought about limited change in the nation's power structure."[75]
Keynes visited the White House in 1934 to urge President Roosevelt to increase deficit spending. Roosevelt afterwards complained that, "he left a whole rigmarole of figures — he must be a mathematician rather than a political economist."[76]
END OF EXCERPT
The financial successes of the Reagan era effectively won the debate about "supply side economics" vs keynesian economics. Somebody should have explained that to these profs that doggedly keep on presenting it as viable in the college class room.
link ---http://en.wikipedia.org/wiki/New_Deal
Article---
World War II and the end of the Great Depression
The Depression continued with decreasing effect until the U.S. entered World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the GNP (Gross National Product)[67] Civilian unemployment was reduced from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives joined the labor force. The effect continued into 1946, the first postwar year, where federal spending remained high at $62 billion (30% of GNP).[68]
The emphasis was for war supplies as soon as possible, regardless of cost and efficiencies. Industry quickly absorbed the slack in the labor force, and the tables turned such that employers needed to actively and aggressively recruit workers. As the military grew, new labor sources were needed to replace the 12 million men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, but the national debt as percent of GNP hardly changed. However, spending on the New Deal was far smaller than spending on the war effort, which passed 40% of GNP in 1944. The war economy grew so fast after deemphasizing free enterprise and imposing strict controls on prices and wages, as a result of government/business cooperation, with government subsidizing business, directly and indirectly.[69]
A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls provided a reasonably priced diet to everyone. White collar workers did not typically receive overtime thus the gap between white collar and blue collar income narrowed. Large families that had been poor during the 1930s had four or more wage earners, and these families shot to the top one-third income bracket. Overtime provided large paychecks in war industries.[70]
[edit] Critical interpretations of New Deal economic policiesSee also: Critics of the New Deal.
Many historians argue that Roosevelt restored hope and self-respect to tens of millions of desperate people, built labor unions, upgraded the national infrastructure and saved capitalism in his first term when he could have destroyed it and easily nationalized the banks and the railroads.[71] Some critics from the left, however, have denounced Roosevelt for rescuing capitalism when the opportunity was at hand to nationalize banking, railroads and other industries.[72] Still others have complained that he enlarged the powers of the federal government,[73] built up labor unions, slowed long-term economic growth, and weakened the business community. In his 1968 memoir The Brains Trust, Rexford Tugwell (a member of Roosevelt's Brain Trust) wrote that many New Deal laws “were tortured interpretations of a document intended to prevent them.”[74]
[edit] Keynesian and monetarist interpretations
national debt/ GNP climbs from 20% to 40% under Hoover; levels off under FDR; soars during WW2 from Historical States US (1976).The New Deal tried public works, farm subsidies, and other devices to reduce unemployment, but Roosevelt never completely gave up trying to balance the budget. Unemployment remained high throughout the New Deal years though greatly reduced from the much higher rates before the New Deal; business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynesians later argued that by spending vastly more money — using fiscal policy — the government could provide the needed stimulus through the multiplier effect. Critics of Keynesian economic theories said that government spending would "crowd out" private investment and spending and thus not have any effect on the economy, a proposition known as the Treasury view, which Keynesian economics reject.
In recent years more influential among economists has been the monetarist interpretation of Milton Friedman, which did include a full-scale monetary history of what he calls the "Great Contraction". Friedman concentrated on the failures before 1933, particularly those of the Federal Reserve, and in his memoirs said the relief programs were an appropriate response.
Historians generally agree that apart from building up labor unions, the New Deal did not substantially alter the distribution of power within American capitalism. "The New Deal brought about limited change in the nation's power structure."[75]
Keynes visited the White House in 1934 to urge President Roosevelt to increase deficit spending. Roosevelt afterwards complained that, "he left a whole rigmarole of figures — he must be a mathematician rather than a political economist."[76]
END OF EXCERPT
The financial successes of the Reagan era effectively won the debate about "supply side economics" vs keynesian economics. Somebody should have explained that to these profs that doggedly keep on presenting it as viable in the college class room.
[SIGPIC][/SIGPIC]
Messages In This Thread
US borrowing tops 100% of GDP: Treasury - by Hoot Gibson - 08-07-2011, 07:48 AM
US borrowing tops 100% of GDP: Treasury - by Hoot Gibson - 08-07-2011, 10:21 AM
US borrowing tops 100% of GDP: Treasury - by SKINNYPIG - 08-07-2011, 11:43 AM
US borrowing tops 100% of GDP: Treasury - by TheRealThing - 08-07-2011, 05:08 PM
US borrowing tops 100% of GDP: Treasury - by TheRealThing - 08-07-2011, 05:11 PM
US borrowing tops 100% of GDP: Treasury - by TheRealThing - 08-07-2011, 06:44 PM
US borrowing tops 100% of GDP: Treasury - by TheRealThing - 08-07-2011, 07:15 PM
US borrowing tops 100% of GDP: Treasury - by TheRealThing - 08-07-2011, 07:46 PM
US borrowing tops 100% of GDP: Treasury - by Benchwarmer - 08-07-2011, 08:08 PM
US borrowing tops 100% of GDP: Treasury - by TidesHoss32 - 08-07-2011, 09:19 PM
US borrowing tops 100% of GDP: Treasury - by nky - 08-08-2011, 10:04 AM
US borrowing tops 100% of GDP: Treasury - by real_change - 08-12-2011, 04:56 PM
US borrowing tops 100% of GDP: Treasury - by TheRealThing - 08-12-2011, 05:43 PM
US borrowing tops 100% of GDP: Treasury - by Hoot Gibson - 08-12-2011, 07:43 PM
US borrowing tops 100% of GDP: Treasury - by SKINNYPIG - 08-12-2011, 09:10 PM
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