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Stimulus No Longer Stimulates a Brave New World

America’s labor market isn’t getting better, and it is hardest on people who haven’t worked in a long time.  The Economist reports:

AMERICA’S great labour market slump continues to cast its pall over the economy, leaving one lonely group in particular shrouded in shadows. Over 6m Americans, more than 40% of all those unemployed, have now been out of work for more than six months. Most of these, 4.5m, haven’t worked for a year or more. This crisis of long-term joblessness is unprecedented in the post-war period.

Lacklustre growth is the main problem. The pace of new hiring crashed during the recession and has scarcely recovered since. Although America’s unemployment rate is down a percentage point from its peak, this is little cause for cheer. Workers are escaping unemployment more slowly than at any time since 1948. The long-term unemployed are struggling most; in the year to June, the newly jobless were three times more likely to find new work in a given month than the long-term unemployed. Many of the latter have given up hope. For the first time in decades, jobless workers are more likely to drop out of the labour force (and cease to be counted as unemployed) than to get a job (see chart). Bit by bit, a large mass of American workers is losing touch with the labour market.

The article suggests that the crisis of unemployment might be solved through more stimulus or the American Jobs Act.  It also suggests that the President’s support of state-based programs like Georgia Work$ could “light the path back to work for many jobless Americans.” Maybe, but the government’s New Deal instincts have worked even less well in 2011 than they did in 1933.  (It was World War Two, not the New Deal, that ended the Depression.)  Even Georgia Work$ participants have been no more successful at finding employment than Georgia’s average unemployed worker.

The federal government’s attempts at stimulus were poorly planned.  “Shovel-ready” used to actually mean “shovel-ready” — today it means that a local government has approved a project and will move forward with it as soon as it can placate the zoning and environmental regulators, which may take anywhere from months to years.  By the time the projects reach the unemployed individuals that they were meant to help, many of the unemployed will have dropped out of the workforce entirely.  (It is also likely that the recession will be over before some of the ‘shovel ready’ projects are actually under way.) Also, a host of additional regulations and requirements make it difficult and expensive for private firms to bid for these contracts — and the mandate to pay workers ‘prevailing’ (that is, union) wages means much more red tape and that fewer jobs are created per billion dollars spent.

Small businesses and start ups are where most jobs are created.  Reducing the regulatory and paperwork burdens on small companies and new start ups would help. Career politicians, journalists and academics often have no idea how a host of seemingly small and benign regulations, each looking on its own like a commendable and even cost effective way to address a real problem, congeal into a mass of job killing, initiative-deadening obstacles that raise start up costs and throttle new enterprise.

Cities have historically been hives of initiative and new enterprise, but in the regulation dense thicket of modern American urban life, few jobs can grow.  The nation’s major cities — where so many of our poorest communities with the highest rates of long term unemployment are found — were often shedding rather than creating jobs even before the recession.  The Empire State Building, then the largest in the world and still an icon of design and serviceability around the world, was built in 13 months at the start of the Depression.  It has taken the coop in which I live longer than that simply to find out from the city whether we can use a certain method to replace broken gutters along the side of my building.  (We are still trying to find out.  So is the company that wants to do the work.)

Like an elderly patient on so many medications that drug interactions cause additional problems, the American economy today is prostrate before the combined effects of a cyclical downturn in the traditional credit cycle and the unintended consequences and interactions of layer after layer of well intended but poorly designed progressive reforms and protections.  Too many doctors have prescribed too many drugs for too long.

The cure does not lie in cutting off all the drugs, but neither does it lie in prescribing still more.  This country is in desperate need of a major regulatory overhaul; every layer of government needs to go through its shelves of statutes and regulations with the goal of pruning back everything that makes it harder for ordinary people to do ordinary things — including starting small businesses.

Every regulation has its friends; the handicapped lobby wants every bathroom in every day care center in America to have handicapped access facilities — a worthy goal, but the sort of thing that helps make day care unaffordable, and in combination with many other regulations (all lovely and well intentioned) prevents unemployed people without a lot of capital or skills from making a living in hard times by taking in their neighbors’ kids.

Special interests, many quite noble and others masking commercial goals with idealistic slogans, have created regulatory thickets over the decades and these thickets are suppressing the initiative and the drive that made America great.  It is time to whip out the pruning shears; otherwise our rates of structural and long term unemployment will gradually and inexorably rise.

US infrastructure could use some work, and if significant infrastructure spending was linked to a credible and real plan to reduce federal spending over the long term, front loading necessary infrastructure work to give people jobs when they are hurting makes sense.

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  • WigWag

    “It was World War Two, not the New Deal, that ended the Depression.” (Walter Russell Mead)

    This line is repeated ad nauseum by erudite people like Professor Mead who should know better. It wasn’t World War Two that ended the depression, it was the aggregate demand created by World War Two that ended the depression. Had the spending programs enacted as part of the New Deal been as large as the amount expended on the Second World War, then the New Deal would have ended the depression. What World War Two proved was that Keynes was right; dramatic, shock and awe-like deficit spending by the federal government in the face of an economy on its back because aggregate demand is insufficient is the remedy to a contracting economy.

    In 2011, with monetary policy options nearly exhausted, the same thing would work today to solve our problems. What’s needed isn’t the puny stimulus package that was implemented near the start of the Obama Administration but a stimulus package as large in today’s terms as World War Two was 70 years ago.

    “…It is also likely that the recession will be over before some of the ‘shovel ready’ projects are actually under way.” (Walter Russell Mead)

    I only pray that Professor Mead is right but there’s substantial reason to think that he isn’t. Japan fell into its liquidity trap more than a decade ago; they’ve been trying to dig themselves out ever since with little success. Japan’s lost decade could easily be recapitulated in the United States and Europe, especially if the austerity program the developed world has fallen in love with continues to dominate economic policy. The unnecessary human suffering around the world associated with double digit unemployment for what may be a decade or more is almost too horrible to fathom. But I have a sneaking suspicion it will be long enough to get those shovel ready projects actually off the ground. I bet there’s even a chance that Professor Mead’s gutters will be mended by then.

    “This country is in desperate need of a major regulatory overhaul; every layer of government needs to go through its shelves of statutes and regulations with the goal of pruning back everything that makes it harder for ordinary people to do ordinary things — including starting small businesses.” (Walter Russell Mead)

    Fair enough, but Professor Mead exaggerates the extent of the problem. According to the SBA, 600,000 small businesses are started in the United States every year. Somehow these businesses manage to jump over the regulatory hurdles that Professor Mead bemoans. And if an inefficient and inflexible regulatory regime is really a major factor in hindering employment, perhaps Professor Mead can explain why, during the Clinton Administration when the regulatory environment was substantially similar to what it is now, unemployment rates were half of what they are today and the small business community in particular was thriving.

    “US infrastructure could use some work, and if significant infrastructure spending was linked to a credible and real plan to reduce federal spending over the long term, front loading necessary infrastructure work to give people jobs when they are hurting makes sense.”

    The problem is that Professor Mead’s half-hearted endorsement of infrastructure spending is likely to make just about as much difference to the U.S. economy as his idea that throwing a few Greek Government officials in jail is likely to revive the European economy.

    Half hearted measures won’t work when the world is facing an economic cataclysm. What’s needed is fiscal stimulation at almost unprecedented levels. Professor Mead’s tepid endorsement of infrastructure spending reminds me alot of what naysayers said about the construction of the Erie Canal, the national park system or the interstate highway system. If Via Meadia had been existence at the time , I wonder what its position would have been on the enormous federal spending on rural electrification that brought electricity to so many of Professor Mead’s fellow South Carolinians. Thank goodness that in the cases of those infrastructure projects, the naysayers and the nattering nabobs of negativism were ignored.

    Sometime bold thinking and action are called for. It seems to me that time has arrived.

  • Mrs. Davis

    Your thesis is reinforced by this article (pdf) which suggests that the reason for the end of the Great Depression was not so much WWII, but the return of investment with the end of uncertainty among investors about their property rights.

    (T)he insufficiency of private investment from 1935 through 1940 reflected a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns. This uncertainty arose, especially though not exclusively, from the character of federal government actions and the nature of the Roosevelt administration during the so-called Second New Deal from 1935 to 1940. Starting in 1940 the makeup of FDR’s administration changed substantially as probusiness men began to replace dedicated New Dealers in many positions, including most of the offices of high authority in the war-command economy.

  • Luke Lea

    @WMD – “It was World War Two, not the New Deal, that ended the Depression.”

    Probably so. Still there is such a thing as hope, too. It took 90 days to put the basic machinery of this program in place. There are priceless interviews in this film of working-class Americans from all walks of life, all races and creeds; don’t miss it.

  • Jim.

    Very, very sensible.

    The best case for stimulus is that its spending leads to renewed consumer confidence and spending. (The post-WWII boom is the success case we’re trying to imitate, here.) The problem is, no one who supports stimulus is prepared to admit just how many years of 10%-of-GDP deficits we would need to run before this approach would lead to a self-sustaining economic growth.

    In this slow recovery, the private sector has de-leveraged even as the public sector has taken on debt. The rate at which this de-leveraging has occurred, however, points to 10-20 years of huge deficits before private-sector debt levels could meet their late 1940s levels.

    Now, if the federal govenrment had gone into this completely debt-free, it would be one thing. But we *already* stand on the cusp of unpayable debt — we’ve blown past the 90%-of-GDP mark and stand near 100% already. Could this nation possibly recover from the 300%-of-GDP debt level that the Stimulus strategy may require? The idea is absurd.

    Nations have recovered from 120%+ debt-to-GDP ratios before. But these nations — the US after WWII and Britain after Napoleon — have been clear victors over exhausted, broken, destroyed opponents. These nations have been the sole possessors of intact industrial power in their times. And on the darker side, these nations have been willing and able to use both military force and shady trading practices (see the Opium Wars, and the history of United Fruit company) to support their economic recoveries.

    Does that describe our situation now? Are those paths open to us now? No, not at all.

    So we have to find a strategy other than stimulus. The clearest one available to us is reducing transaction costs imposed by regulation. This increases the number of profitable transactions available, which increases employment at every level and could well get our economy off the ground again. There are also tantalizing hints of the feasibility of new frontiers (a workshop at JPL last week has brought some ideas with potentially huge economic impacts much closer to the mainstream of advanced concepts).

    But in the meantime, reduction in red tape is our best bet, since Stimulus is clearly unsustainable.

  • Bonfire of the Idiocies

    The regulatory overkill has been going on for years. California is now regulating itself to death and has the 2nd highest unemployment t rate in the country (12% last I checked) and is as high as 30-40% in some areas. Despite a desperate need of tax revenues to pay off overgenerous pension benefits, they still don’t get it. If one of the financially worst-off states in the country doesn’t get it, what chance do we have with the Feds who can just print money to pay off their debts. Apparently, some people DO need a ton of bricks to fall on them.

  • jack

    Mr. Mead repeats that tired old cliche that WW2 ended the great depression, but this is not so. After the war, a R-dominated Congress rejected Truman’s attempt to extend and enlarge many New Deal programs and instead enacted tax and spending cuts that fueled an economic expansion. Same thing happened during the depression of 1920, BTW.

  • JDComments

    It would also make sense that as one stimulus fails to ignite the economy, the next stimulus will be even less effective in convincing employers that they should hire employees for the soon to be reviving economy.

    There is a law of diminishing returns at play here which means that we are beginning to throw good many after bad.

    Keynesian economics has failed [as it seems to have always failed]. Now it is time to try unleashing the markets.

  • Tom Kinney

    We’re just starting to see the fallout from excessive radiation…I mean, regulation.

    Yesterday’s hoot was Dick Durbin trying to deflect away from himself BOA’s new monthly “Durbin tax” on debit card use by encouraging customers to drop BOA for raising a fee he’s responsible for implementing. Great idea, Dick, let’s sink one of our biggest banks in the midst of a recession.

    Today’s yuk is that utilities are being told to do a massive upgrade–something needed, but now, in this economy?–and the utilities will sensibly, if unhappily, pass those costs on to customers.

    In both cases, liberals–always the ones responsible for excess regulations–whine that they too have to pay for those they’ve passed and are responsible for.

    This administration has triggered a regulatory regimen that will haunt us for years to come.

    They just can’t stop fixing the problem to death and won’t be happy until the funeral is over. What they don’t seem to get is that they’re in the coffin with the rest of us.

  • HenryC

    It was the huge savings made during WWII and the aggregate demand the savings allowed the got us out of the depression. It was saved private money in other words, something not available today.

  • NickJ

    To those who think “stimulus” spending hasn’t been large enough, our current deficits are all “stimulus” spending, not just the bills labeled that. The deficits under Obama are unprecedented outside of wartime.

    If deficit spending really worked, Europe and particularly Greece would be booming. Keynesian theory has been tried for the past 80 years and it has always made things worse, not better.

    It is one of those “beautiful theories mugged by a gang of vicious facts.”

  • Will

    I’m pretty skeptical of additional stimulus spending, but the Republican alternative – cut regulations and hope for the best – seems basically non-responsive to the demand-side economic problems we’re facing. I recommend this entry from Bruce Bartlett – a conservative in good standing – on why regulatory uncertainty is not what’s holding the economy back:

    http://economix.blogs.nytimes.com/2011/10/04/regulation-and-unemployment/

    I like Via Meadia’s steady diet of ‘big picture’-type analysis, but these unsupported assertions about regulations holding back economic growth sound like talking points straight from Eric Cantor’s office.

  • BCanuck

    WWII did NOT end the Great Depression.

    The New Deal (stimulus) was an economic failure and scaling it up to WWII proportions didn’t make it any more effective.

    WWII ‘cured’ unemployment by drafting people into the Army, Navy, etc. It worked only in this narrow sense. WWII was a period of rationing and shortages – hardly a period of prosperity.

    Private sector employment did not recover until after the war – after Govt spending was cut by 80%.

    Wars of any kind, anywhere are never good for an economy, WWII was no exception. Spending enormous amounts resources to produce goods and then destroy them is not sound economics and can’t lead to prosperity.

  • TheZeitgeist

    “It wasn’t World War Two that ended the depression, it was the aggregate demand created by World War Two that ended the depression.”

    If it was the ‘aggregate demand’ of WWII that ended the Depression, why did we not fall back in it after the war ended? We stopped uh, ‘stimulating’ and the vast majority of this economic capacity was geared to making things like guns and atom bombs. Indeed, as a percentage of GDP the Feds collapsed after WWII during what a lot of folks consider a Golden Age of prosperity.

    Another thing, if blowing money on wars stimulates an economy, why are the Keynesians complaining about wars in Iraq and Afghanistan as a financial drain?

    Its the same fundamental thing, borrowing money to go shoot people and the economic effort required to do that otherwise not there if you’re not into shooting people somewhere.

    By that reasoning, we should totally pick a fight with a China or Brazil, because big countries mean big wars = big ‘aggregate demand,’ right?

    Good times a’rolling when the bombs start falling, but only if they’re not Bush’s. What a joke.

  • Dave H

    Incredible. Mead points out to liberals that hyperregulation has undermined their own ideals in making Keynesian stimulus impossible, and all they can do is fixate on a tangential point about the Great Depression. Wake up and smell the coffee, people! The logical implication of what Mead is saying is that EVEN IF the New Deal ended the Great Depression, you couldn’t repeat that feat again today because regulation is so much more extensive and oppressive.

    Not only is he right that hyperregulation is killing Keyensianism, it’s also killing the Green movement because start-ups need to adopt union-advocated regulations to get federal money, but the labor regs make their start up comopanies economically unviable, even with federal money.

    But, no, let’s distract ourselves with trivial historical opinions in which one’s conclusion is predetermined by one’s poltical party. It’s so much easier than dealing with today’s real world problems.

  • Bernd

    Stimulus no longer works, because people and businesses look at the level of debt that the US government has already accumulated, the current year’s deficit of $1.5T that will add to the outstanding debt, and assume that stimulus will be paid for with borrowed money that will simply cause the levels of debt to go up – all of which is expected to lead to higher taxes in the future.

    It is in the area of expectations where Obama’s economic policy is so flawed. He has taken a set of steps that have created a very negative set of expectations on the part of businesses and consumers. For example:

    1) Being hostile to carbon based energy, leads us to expect higher energy prices in the future.

    2) Passing ObamaCare leads us to expect higher health care costs, and higher taxes to pay for it all.

    3) We already expect taxes to go up with the expiration of the Bush tax cuts in 2013.

    4) Existing debt and deficits lead us to expect to have to pay higher taxes down the road to pay these loans off.

    Against this backdrop, any more borrowing is viewed so negatively that the negative expectations outweigh any good that the stimulus could possibly do.

    If we had no debt, and the government borrowed and spent the first $1T that would be one thing. But now, more borrowing just feels like digging a deeper hole.

  • nadine

    The comments make it plain that old myths die hard, and that many people have not yet learned the lesson FDR’s Treasury Secretary, Henry Morgethau, Jr., had learned by 1939, “We have tried spending money. We are spending more money than we have ever spent before and it does not work. . . . I say after eight years of this administration we have just as much unemployment as when we started . . . And an enormous debt to boot!”

    If unlimited stimulus and debt were the answer to recession, the USA and Europe and Japan would all be prospering today.

  • BlackSaint

    In between Hoops, Golf, ESPN and Vacations, President Zero is now focusing his laser beam on getting reelected by borrowing another 500 billion from China.

    This will allow him to put the millions of Illegal Aliens that dominate the Construction industry in this Nation back to work alone with over-payed and under-worked Democrat unions members around the Nation.

    This 500 billion will also allow the Illegal Aliens to continue to sending the 40 to 50 billions annually of tax payer,s money home to support Mexico and South American while continuing to enjoy free medical, schooling, food stamps, welfare, etc. here!

    Great plan for the Democrat party, Unions and Illegal Aliens but a very bad plan for unemployed Americans citizens and American!

    Union leaders will charge the Nation Union Scale hire Illegal,s at 10 bucks per hour with benefits like Medical, Housing, Schooling, Food Stamps etc. all paid by the tax payer,s.

    Pocket the vast profits and have lots of unions funds to buy more Democrat politicians with to continue the progress of rewarding the union thugs and Democrat politicians, while pushing the rest of the population that is not Illegal,s or Union members deeper into poverty!

  • Kevin Hill

    The author makes a lot out of a little and little out of a lot.

    This article, along with a prevailing current in republican political rhetoric, vastly over states the supposedly negative effects of regulations, vastly understates the purpose of these regulations (notice he doesn’t cite specific examples except for his ridiculous non-example of the gutter alongside his building that just points to incompetence on his part)

    What the author doesn’t do is acknowledge that there are other much more powerful forces at work in the current employment problem. To him it seems the effects of huge migration of industries to offshore no standards locations and deleveraging of the highly indepted consumer don’t count for much…but they are many times larger effects than what he is complaining about.

  • MERLIN

    “…if significant infrastructure spending was linked to a credible and real plan to reduce federal spending over the long term, front loading necessary infrastructure work to give people jobs when they are hurting makes sense”. Wrong! The economic goal is to create wealth, not jobs. As a by-product of wealth creation in the private sector more labor is employed (or in the misleading vernacular: more jobs are created). The creation of goods and services which sell for more than the cost of production is wealth creation, which is self-sustaining, and leads to long term increases in employment. The public sector, focused on “job creation,” taxes private wealth creators to “give jobs” in various activities which are temporary, producing non-marketable goods and services, and often do not meet the wealth creation criteria. Thus does government destroy wealth creation and self-sustaining employment in the private sector in order to create to create temporary, non-wealth creating employment. This is what Obama has been doing for three years. Do you really think that more of the same “makes sense”?

  • Nightelf

    Stimulus used to be referred to as “pump priming.” In my youth those old iron pumps were all around in rural areas. The seals would get dry, and you’d pull on the handle and nothing would come out. You had to pour some water in the top to wet the seal so the pump could draw again. The idea was definitely NOT, as Obama seems to think, to keep pouring huge amounts of water in the top of the pump in order to refill the well!

  • Rod Hug

    Excessive regulations and taxation driven by excessive government spending have provided sufficient friction in the wheels of economic activity so that now we have high unemployment, consumer malaise, and national bewilderment as to what is next. Simply put, America consumes far more than she produces (witness our $600 billion trade deficit). The Obama administration thought that Keynesian stimulus, forcing accumulation of a giant debt that one day must be repaid, would save the day. It did not; rather it exacertabed it.

    Fundamental to Leftist thought on how to approach the problem is an utter lack of understanding how the market place works. To that end, a small dose of instruction is in order:

    Before there was money, and when society was simple, the free market worked fundamentally like it does today. That is, people made things to trade. A farmer grew corn to trade for finished lumber from a miller. The farmer was skilled at growing crops, and the miller was skilled at cutting and finishing wood. Division of labor and focused utilization of skills allowed each trading partner to obtain every need by simply doing what he did best.

    As the society grew and became more complex, and as the quantity and variety of things began to be produced, money was introduced so as to facilitate trade. Instead of trading corn and lumber, money which substituted for the product was traded.

    Somewhere along the way it was discovered that larger and more complex products (tractors, for example) could be produced by groups of people working as a team. It was learned that large groups could produce things that small groups could not. Business was born, and corporations too were found necessary to supply the needs of large populations. It was found that large groups of workers performed most efficiently when organized on some hierarchy of management with each member of the group paid according to the market value of his contribution.

    It was discovered that investment money in sizeable amounts was needed to fund research and development of the largest and most complex production processes needed to satisfy a growing population. To obtain the necessary investment capital, corporations became property; that is, businesses, especially large ones, were divided into pieces similar to the way large tracts of land were divided into lots, and then sold as stock to the population they served. The motivation to continue producing things was the money received by selling those things. Every stock holder got a dividend proportional to his or her ownership percentage. Dividends and other forms of return on investment gave business purpose.

    It was discovered way back when the farmer grew corn for lumber that trade transactions must be voluntary, and each trade partner must benefit from the transaction. This meant that the farmer was best served if he had more than one lumber producer to trade with, and the lumber producer was best served if he found more than one farmer to trade with. Competition in the free market resulted in happy trading partners, high efficiency, quality products, and low prices.

    So, war on business undermines production of all the things we need to maintain comfortable lives. It is a war on our living standard and ultimately on our welfare. There can come a point where taxation takes so much of the trade money (profit) that the business fails or finds less reason to continue operation. Excessive government interference by the leveling of regulations that gum up the works also can bring a business to its knees. Government regulators may get little feedback that the works are gumming up, other than growing unemployment. Government tax and regulatory policy almost always chooses winners and losers, given that government, driven by political considerations, often has social goals that compete with economic goals, and is often intellectually and strategically unequipped to address the entire business community in a responsive and balanced way. Such targeted interference inevitably disrupts the free and competitive environment necessary to obtain the best quality, the lowest prices, and to avoid shortages.

    The beauties of the free market are manifold. Since all trade partners benefit, harmony exists. Everybody gets what he or she wants by simply working. Civil harmony even facilitates political harmony and representative government. Nobody feels cheated and nobody is being used or having the product of his labor arbitrarily taken. That is, the citizens are free men and women in the full sense such that everyone has opportunity to succeed in a proportion to his willingness to work, to his natural talents, and to his readiness to take risks. Thus the free market promotes qualities found beneficial such as tolerance, good will, and generosity. The free market invites participation by every citizen in his most productive and creative potential. All citizens take part, without thinking about it, in the national collective decision making given that every one of the millions of decisions competes with all other decisions so that that the maximum number of beneficial winners rise to the top.

    As the system of trade – which took on the name Capitalism, partly because money or “capital” became essential to grease transactions – matured it became complex and fostered a population that prospered. Of course some prospered more than others, which is a natural outcome of freedom and differences in motivation, energy and natural ability. In an attempt to insure nobody got much ahead or the crowd, many people called for an arbitrary redistribution of wealth enforced by a central government. The idea behind this was expressed often by words like “equality”, “fairness”, and so on. It was an egalitarian philosophy that imagined that “greed” had co-opted capitalism and failed to understand that greed would be prevented so long as free, unhindered competition was allowed to operate.

    For the system to work efficiently, the early farmers and millers had to be unhindered in their work. For example, suppose that farmer Lee, who lets say had a farm in China, was free to grow his corn. The central authority left him alone and did not require he send part of his income to the national treasury. But farmer Fred, and American, was required by the central authority to use farm equipment equipped with multiple anti-pollution devices and other things, so that his operating costs were higher than were farmer Lee’s. Furthermore, the central authority required farmer John to send part of his income to the treasury. The result of this imbalance was that farmer John had to sell his corn at a higher price than did farmer Lee.

    The capitalist system, in this case, was interfered with such that it became less efficient. All participants suffered given that the price of corn was not allowed to be set by a free and unhindered market. Other undesirable features of interference by the authoritarian might cause farmer John to move his farm to a country where less interference happened, so that the system of free trade lost essential manufacturers necessary to insure a minimum level of productivity. Artificial interference by the authoritarian brought fertile ground for the feared greed, given that some producers now had an advantage and were not so curtailed by competition. The authoritarian said that inefficiency, reduced productivity, and the emergence of greed were unfortunate byproducts of a need to encourage industries not responsive to the profit motive (but felt to be important to the authoritarian) such as, for example, green technology.

  • Tim Stevens II

    “The federal government’s attempts at stimulus were poorly planned.”

    And is that surprising?

    To those who spent the money, it was not an issue if the spending would actually help the economy, it was to be seen as “doing something.”

    Of course, it is now generally accepted that the various flavors of stimulus were failures in that many of the so-called “created or saved” jobs ended up costing more than the salary they provided.

    Government is composed of people. The same people as the general population of the USA: good, bad, ugly, slick, smart, stupid, lazy, exceptional and worthless. Is it any surprise that a government composed of such people and who are also insulated from poor decisions would result in the various policy, monetary and financial failures we currently enjoy?

    The market (to the libs, this means people free to trade without interference, coercion and government threats) make better decisions than government authorities.

  • Curmudgeon Killjoy

    Professor Mead repeats one of the most pernicious myths of Keynesianism. “It was World War Two, not the New Deal, that ended the Depression.” The truth is World War II ended the New Deal, and end of the New Deal ended the Great Depression.

  • TSIndiana

    As an entrepreneur for 25 years, corrupt judges and attorneys are my stopper. They are taking sides with thieves. One cannot reinvest profits when they are stolen by the very persons with duty to protect.

    Failure of the DOJ to contain fraud in courts of law by “officers” is a sign of what’s comming. Failure of legitimacy.

    Any member of the BAR has a conflict in acting as a “check” on abuse in the judicial branch. Leaving corruption UN-checked simply promotes more of it.

    Every legislator who is a lawyer (and POTUS Obama) have a “hands off” commitment to the BAR that clearly takes precedent over their oath of office.

    Google “nihilism in court” and “The Dynamics of Institutional Corruption in Court”.

  • TSIndiana

    Why bother making comments that are not printed? Censure much?

  • John Burke

    All sorts of regulations are growth inhibiting but some are not so bad. Traditional zoning requirements — bulk and height, setbacks, type of construction, building quality, fire safety standards, etc. — work pretty smoothly, although opponents of any big or small project can use zoning and planning processes to affect it. Handicapped accesibility raises costs but typically does not hold up projects.

    The big culprit is so-called environmental impact statements. These demand that proposed projects address a host of real and hypothetical issues in excruciating detail and allow any opponent, including public agencies but also private parties, a virtually endless array of objections that require more study, higher costs, and delay upon delay — first in administrative processes, then in quasi-juducial reviews by planning agencies, then the courts.

  • No Lawyers

    There would be a wealth of employment and businesses being started if government got out of the way and ONLY intruded if something actually harmful to the environment or people was being done. Witness the idiotic safety “things” on what used to be a simple lawnmower. Am I the only person who can keep clear of rapidly moving machinery? Unnecessary intrusion and increase of cost.

  • Craig Purcell

    We clearly need to release the pent up entrepreneurial energy present in the system. Making jobs by hiring state, county, municipal federal workers by taking millionaires tax dollars is not Job growth — make legislation that promotes risk and entrepreneurial investment in new ventures which in turn makes revenue for more jobs. It is the only way it will work.

  • http://mickeyhobart.wordpress.com Mickey Hobart

    Eh. I think the death of FDR, the end of WWII and the sharp fall in government spending that thankfully resulted ended the Great Depression.

  • Tom Dehoff

    For those who don’t think that WW 2 ended the depression, its obvious that you don’t have a clue. We destroyed our competition in all of Europe and Asia. Its the only example of Kenseyen economy policy working. But I don’t think Obama or the Demorcrats have the stomach to fight WW 3. So its time to balance the budget with real spending cuts and elimination of requlations that are destroying our economy.

  • Kris

    I got a depression and the cure is more soma! We gotta have more soma, baby!

  • PeterJ

    During WWII unemployment decreased and households and businesses deleveraged, substantially reducing debt accumulated during the depression. A recession immediately followed the end of the war while the economy transitioned to a more consumer driven one. So, the New Deal did not end the Depression or the double dip of the Depression that started in 1937.

    The basis for economic recovery [from the Depression] was driven by a private sector that had the ability to drive growth with limited government controls, energy self sufficiency, financial flexibility and indvidual initiative. Keynes had nada to do with it.

  • wareagle

    the WWII/Depression debate is pointless; after the war, the US was the only industrialized nation still standing. Talk about cornering the world market and, for a time, we did. Then the former enemies whom we helped rebuilt caught up and, in many cases, surpassed us.

    The US system got bloated, unfocused, and lost its competitive edge. Profit is treated as some dirty word with a higher ed system that once was the envy world degenerating into a hothouse for ideas that have proven themselves to be failures. If massive govt solved things, wouldn’t the EU be enjoying a universal boom right now?

    The first stimulus did not work. Another – and one with a calculated job creation cost of 200K per – won’t, either, particularly if you look at the fine print and all the tax increases buried within it. And, like it or not, the effects of Obamacare are already being felt.

    After three years, even Dems are realizing that calling POTUS an empty suit is an insult to tailors. Or maybe there is another reason Senate Dems want nothing to do with this “jobs” bill. The man is not just over his head; he is practically at crush depth: losing majorities in both houses in two years; watching unemployment increase under him with no relief in sight; loaning money to Petrobras but refusing to allow energy exploration domestically; and, so forth.

  • Mwalimu Daudi

    Had the spending programs enacted as part of the New Deal been as large as the amount expended on the Second World War, then the New Deal would have ended the depression.

    This line is repeated ad nauseum by erudite people like WigWag who prefer to ignore history. Always they argue that the “stimulus” was not large enough. A billion, a trillion – never enough. They have no evidence to back up their claims (and plenty to the contrary), but they repeat it endlessly in the hopes that it will somehow become true.

    The only people helped by “stimulus” are greedy bureaucrats (whose sinecures seem to live on forever), the crony capitalist parasites who rake in the taxpayer dough for wacko projects like “green energy”, and the ivory tower academics who think up this lunacy in the first place.

  • http://steamcatapult.com/ Dave Pinsen

    During World War II we had a trade surplus, and government spending on armaments created jobs in American factories. Today, we have a large trade deficit, and government stimulus spending via transfer payments (refundable tax credits, extended unemployment benefits, etc.) creates jobs in Chinese factories, via Walmart.

  • TorontoCharles

    It wasn’t quite world war II that ended the depression, and saying it was the increase in aggregate demand is not quite true either.

    The most likely effect was the 4-5 years of global austerity and thrift that built up pent up demand so that the end of austerity marked the unleashing of this pent up demand. The spendings alone in WW2 did not create prosperity.

    However, the debtor nations after WW2 did not quite do as well as the main creditor US did.

    The real lesson here could be that what went through needs to reach bottom quickly, and intervention in the form of government stimulus has an unintended consequence of driving up debt. Snce the level of mortgage debt itself was what fueled the severity of the recession after a real estate bust, the crisis in confidence was really precisely about debt.

    Seen in that light, the global crisis in confidence cannot be fought by increasing debt, at least not by any role
    Played by the government.

    Taxes raised to pay down debt could arguably increase long term confidence but the short term could be horrific as the dive in the economy culd be unpalatable to all.

    The worst thing to do is to see tax increases in order to craft new stimulus. Global governments have a terrible record when it comes to spending money efficiently.

    What about a combination of some increases, and some temporary decreases? A lot of the tinkering with regulations the last two years has only created more confusion. Any temporary tax decreases in hirings will not help the strategic planners in the business world.

    What about incentives for new hires to make it cheaper to hire new people without adjusting the costs of older employees? If it is big enough to matter, it will be big enough to incentivize the employer to lay off older employees and hire new ones with no net gain in jobs.

    The quandary in all this is that almost everyone who isn’t a socialist understand that the private sector and the free market is the only force strong enough to sort out this mess, yet it is shackled by taxes and regulations.

  • Thomas Paine

    WigWag’s Magical Mystery Tour — The mystery is WHERE IN HELL DID YOU LEARN ECONOMICS?

    The Depression ended AFTER WWII when measured in CONSUMER WELFARE or CONSUMER SPENDING.

    You’re CONFUSED, Wag. Nominal GDP figures don’t tell us everything about depressions or recessions or growth in WELL-BEING.

    I suppose if I paid you $1 Trillion to be pen pals, and you paid me $1 Trillion, we’d SOLVE THE GROWTH PROBLEM OVERNIGHT, right?

    How about government building a flotilla of ships, then SINKING THEM? Better off now?

    Where you ERR on Aggregate Demand is that is was NOT satisfied by WWII. THERE WAS NO AGGREGATE DEMAND BY CITIZENS TO BUILD AND USE BOMBS, TANKS AND BULLETS.

    Aggregate Demand by SOCIETY, not Government, was finally satisfied IN THE POST-WWII BOOM that saw MASSIVE CUTS IN GOVERNMENT SPENDING AND EMPLOYMENT. Pseudo-economists of the time, like yourself, were oh so concerned about these cuts — not unlike “Cut Nothing” Demorats today.

    Well, like magic (certainly a mystery to Libtards) the private sector “put” all those soldiers back to work in no time, making things the PEOPLE WANTED, not what the GOVERNMENT WANTED — WHICH HAS NEVER WORKED.

    EVER.

    Why can’t people like you figure that out? Sticking your finger in a lightbulb socket will NOT make you a Unicorn. It’s just a myth.

    So please stop trying to OUTSMART 300 MILLION PEOPLE — it’s not working so well for Comrade Obama, it’s never worked, it won’t work, and thank God Bernanke can’t manufacture enough Money Illusion quickly enough (pushing on a string wrt velocity?) to fool the voting public that they’re better off under President Dipshit.

    The One and Done, coming soon, Nov. 2012.

  • DG Forbes

    ‘Career politicians, journalists and academics often have no idea how a host of seemingly small and benign regulations, each looking on its own like a commendable and even cost effective way to address a real problem, congeal into a mass of job killing, initiative-deadening obstacles that raise start up costs and throttle new enterprise.’

    This statement is true in respect of the consequences of our constantly expanding legislation and regulation and we all know it. If we know it, the said career politicians et al surely also know it. So why is a solution not sought? One reason would be the undue influence of vested interests and at the end of the day, every one of us, however unimportant, has a vested interest to defend somewhere. Another would be that the governmental rulemakers who churn out this mass of regulation, which we will accept is generally well meant, operate in a micro environment. No one, president or prime minister, is capable of being smart enough to take a macro view of the effects of the legislative machine in al its complexity and diversity. Hayek demonstrated this in the Roads to Serfdom. How we break free from this paralysing restraint, I don’t know. But continuing to grow the government as the Left everywhere wants to do is certain only to make things worse.

  • Dennis D

    In past decades stimulus programs worked because we still made products in America. Now we borrow money from China and circulate it into the economy for people to purchase Chinese made goods. The dollars go back to China.

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