what we call the Great Depression was not a continuous downturn; it was really two back-to-back recessions. According to the National Bureau of Economic Research, the first ran from August 1929 to March 1933 and the second from May 1937 to June 1938.
According to current Commerce Department data, real gross domestic product fell sharply in 1930, 1931 and 1932, and modestly in 1933. But GDP rebounded strongly in 1934, growing 10.9% that year, 8.9% in 1935, 13% in 1936 and 5.1% in 1937. But in 1938, real GDP fell 3.4%.
For many years, economists thought this "secondary recession" was inherent in the nature of the business cycle. Today, however, economists generally believe that the only thing that caused the 1937-38 downturn was disastrously bad government policy.
Although right-wingers like to portray FDR as a giddy big spender whose profligate ways made the depression worse, the truth is that he was by nature quite conservative, fiscally. Indeed, when running against Herbert Hoover in 1932 Roosevelt was unsparing in his criticism of Hoover's spending and deficits. As he put it in an Oct. 19, 1932 speech:
"I regard reduction in federal spending as one of the most important issues of this campaign. In my opinion it is the most direct and effective contribution that government can make to business. In accordance with this fundamental policy it is equally necessary to eliminate from federal budget-making during this emergency all new items except such as relate to direct relief of unemployment."
Roosevelt vowed that every member of his cabinet would be required to support the economic plank of the Democratic Party's 1932 platform, which said, "We advocate an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than 25% in the cost of the federal government."
Mark Thoma pans the freeze:
This is pretty disappointing.
The long-term budget problem is due to primarily one thing, rising health care costs. Everything else is dwarfed by that problem. If we solve the health care cost problem, the rest is easy. If we don't solve it the rest won't matter.
This was an opportunity for Obama to explain the importance of health care reform and how it relates to the long-term debt problem. Why not emphasize this?...
Instead we get cheap political tricks that are likely to backfire. How will this look, for example, if there's a double dip recession, or if unemployment follows the dismal path that the administration itself has forecast?
This seems to be a case of the former Clinton people in the administration (or wannabees) trying to relive their glory days instead of realizing that those days are gone, the world is different now and it calls for different solutions.
I wasn't in favor of having so many Clinton administration people in this administration, and nothing so far has caused me to change that assessment. They're nothing but trouble.
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