New Deal Deniers

(WPA poster, image courtesy of the Library of Congress Prints and Photographs Division.) 

In 2009, at the height of the Great Recession, U.S. Senate Republican Mitch McConnell said "we know for sure that the big spending programs of the New Deal did not work." 

Mark Calabria, policy wonk at the conservative Cato Institute, said "Most of the policies we did in the New Deal did not work."

And Amity Shlaes, self-styled historian and economist (she's neither of course), and author of The Forgotten Man: A New History of the Great Depression, said "Growth has to happen in the private sector, and it has to go in areas, you know, where productivity gains are going to happen, where we get the greatest advantage, where capital finds the best returns and not just because a certain politician says we need a certain road or bridge."

All these statements are part of a political ideology & agenda for small (if any) government, low (if any) taxes on the wealthy, and few (if any) regulations on big business. If we look at the data, however, it is clear that the New Deal ushered in gains in GDP, gains in the Dow Jones Industrial Average, and lower unemployment rates, as compared to the years immediately after the stock market crash. As an example, look at GDP data at the U.S. Bureau of Economic Analysis here. Open the spreadsheet "Percent change from previous period," and compare the years 1930-1932 (the years immediately after the stock market crash) vs. 1933-1945 (the FDR/New Deal years). 

  

Christine Romer, professor of economics at the University of California, Berkeley, and former chair of the Council of Economic Advisers, wrote in the New York Times in 2011: "Look more closely at history and you’ll see that the truth is much more complicated — and less gloomy. While the war helped the recovery from the Depression, the economy was improving long before military spending increased...From 1933 to 1937, real gross domestic product grew at an annual rate of almost 10 percent, and unemployment fell from 25 percent to 14. To put that in perspective, G.D.P. growth has averaged just 2.5 percent in the current recovery, and unemployment has barely budged."

And beyond the raw numbers, we have to look at other things. For example, Amity Shlaes said growth has to happen in the private sector and belittles the value of a "certain road or bridge." But both before, during, and after World War II, private business expanded on New Deal roads, across New Deal bridges, and out of New Deal airports. Private business employed (and still employs today) people educated in New Deal-built schools. Private business enjoyed (and still enjoys today) the tourism dollars spent around parks created or improved by the New Deal.  

New Deal deniers are pursuing a political ideology, they are not telling us the facts or giving us a comprehensive interpretation of the New Deal. The New Deal was certainly not perfect, but it did work extraordinarily well in a number of ways--infrastructure modernization, national defense improvements, billions of trees planted, huge GDP gains, restored hope, etc. How can we possibly consider these things failures?