The Problem with the New Deal

The most frustrating public historical narrative of the last month or so is the right-wing talking machine saying that the New Deal didn't work, that it worsened the economy, or in the words of Republican congressman Steve Austria, that it started the Great Depression!

I've been tempted to talk abou this several times, but as I am not really a New Deal scholar, and as many more qualified individuals around the blogosphere have responded strongly to this (see this great discussion of Eric Rauchway's new book on the New Deal at TPMCafe), I chose not to.

But via Yglesias, Bruce Bartlett nails an important point, even if I don't agree with all the details. The problem with the New Deal wasn't that it was too large and wasteful and led to too much of a deficit. The problem with the New Deal was that it was not nearly large enough to overcome the Depression. Conservatives love to point out that it was World War II that brought us out of the Depression. Yes, but they totally miss the point. World War II was a massive unprecedented government investment and intervention into the American economy. It dwarfed the New Deal in size and scope. That's why it ended it Depression. Instead of understanding this, conservatives just like to make vague connections between war and economic growth, two things they like a lot, and not worry about the details. That other wars haven't led to simiarl economic booms doesn't seem to deter them. But then they are conservatives and are too often blissfully ignorant of reality.

The lesson for current policy makers is that there is a real dangerous of going too small, despite the seemingly huge size of the deficit. I am very leery of drawing too close of connections between the Great Depression and today. 1933 and 2009 are an awful long time apart, the economy and society are incredibly different between the two periods, and there are issues today that no one could have dreamed off 76 years ago. But if we are going to draw lessons from the past for present problems, we might as well actually understand what happened then so that we avoid unnecessary mistakes.