Paul Krugman Schools George Will On The Great Depression

On ABC's This Week, conservative pundit George Will took up the case against Franklin Roosevelt's New Deal, arguing that it sent confusing signals to capitalists (who apparently might otherwise have pursued lucrative deals in the 1930s market place) and turned a depression into the Great Depression.

Thankfully, Nobel laureate Paul Krugman was around to remind Will of some history -- that the economy improved after the New Deal, and that it was FDR's attempt to balance the budget in 1937 (a move favored now by many conservatives) that then cut into that progress.

Watch:

Comments

[MirelanMO]

As far as the New Deal goes, most revisionist repugs make it out to have been comfort food for the masses. I for one have family that began careers in many of those public works projects out of necessity or want and later retired from the many offshoots that they reaped. Both of my grandmothers worked on aircraft assembly during the War, my dad begged for bone scraps from the back door of the butcher shop to make stew due to the rations. They were hard times to which I cannot personally attest, but from everything that has been handed down to me, I've learned that hard times, TRULY hard times, will bring people together from all walks of the park ,all sides of the track and of all faiths and beliefs. Hopefully, this will be an opportunity to bridge our ideologies for the common good and drive out the wedges and the crazies.

We're gonna need it. The coming social security crisis, I don't think anyone can fathom.... That's what we should really be think-tanking!

[goldenshaman]

Raising taxes on the top 1% would be good for the economy because it would move money that is currently in cold storage.

Throughout the Reagan Revolution the velocity of money has declined because more and more income has been going to people who don't need to spend it.

The New Deal didn't end the Depression because it wasn't big enough.

The bonds issued to finance the war were enough to get the whole economy is moving.

Note that it was the issuance of the bonds, not the war itself, that got the economy rolling.

The idea that war is good for the economy has been leading us down false paths for a long time.

Deflation is the big risk, and the Fed can safely print enough money to replace that money that is being destroyed by the collapse of bad debts.

[osturk]

He did not school anybody. Get a clue.

[flossophy]

Agreed, osturk... who's writing these titles?

Seems to be a regular phenomenon here at the HuffPuff..­. Duality Reality.

So Krugman skools Will by responding with textbook generalizations and in the end, agreeing with him...

Title should read: "Krugman Schools Obama on Raising Taxes During Recessions"

[nochange]

krugman has no idea what hes talking about

if you want to learn listent to ron paul

[snarkopolitan]

I love your incisive, detailed analysis of Krugman. What could the Nobel committee have been thinking?

[nochange]

who knows.....­.?? but if you did you wouldnt be arguing with me

[StevieRae]

Although Will was oversimplifying, we're splitting hairs. Facts are that FDR's public works projects put a significant portion of the 25% unemployed back to work in some form.

The historical analogy is what are we going to do with/for the approx. 10-15% unemployed in 2009?

Yes, the war ignited the economy in 1941 and historically the US major economic resurgences have followed a war. Unfortunately, staying in the middle east to continue the existing war isn't helping the employment situation here; check out who the contractors employ to support the war effort, not Americans.

[legalclubs]

As Krugman points out FDR "raised taxes...an­d the economy went into the tank." So thank you for clearing that up, that raising taxes is bad for the economy. I'm glad Krugman is on the Obama team so they won't do anything as stupid as raising taxes in bad economic times.

[research]

NO! FDR lowered SPENDING in 1937!

FDR raised taxes top income to 79% in 35 and the economy went up in 36.

Please read up on the Great Depression with this time line:
http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html

[inthelandoftheblind]

Thanks for the link!

[SeeDaddy]

It was the of size increase that was the problem. The tax rate for the wealthiest went from 25% to 75%, I think. Size matters. Clinton increased by a few percentage points, and the economy boomed.

Think of the economy as a canoe. To keep a straight course, you paddle on the right side a bit, then switch and paddle on the left side. If you paddle on the same side all the time, you go nowhere.

[snarkopolitan]

You forget Part Two: "AND CUT SPENDING". It's not as if we can't replay the clip.

Right through to the current era, this nation has been coasting, sometimes literally, on public works projects undertaken by FDR-- roads, bridges,dams, schools. It was a gigantic legacy from a generation that looked out for subsequent generations, only to be almost undone by a generation of free marketeers looking out only for themselves.

[flossophy]

ahh... those evil free marketeers. Who the heck do they think they are... thinking they can be free in this society.

I have an idea - let's gain political power so we can take more of their dirty money and give it to those who really need it. Then complain that it's the rich guy's fault when the poor don't move up the socioeconomic ladder. That should ensure our power for decades!

Change! Yes We Did It Again!

[moveonliberalsorg]

The national debt at this point works out to be at least $30,000 per person in the United States. Counting retirees and kids, less that 50% of people in the US work, so that means if you work you have about a $60,000 share of the national debt to pay off.

How are you going to pay your $60,000 worth of the national debt?

These economists all focus on the macroeconomic level, but they forget the personal cost and suffering involved to the ordinary person when they screw up.

I would like to hear any economist tell me how they are going to pay my share of the $60,000 national debt.

Printing more money will cause hyperinflation and stagnation, and make the dollar worthless, more worthless than it already is.

We cannot keep passing these debts on to the children of the next generation.

During the '80's there was talk about how all the government borrowing was using up all the credit that should have been available to the private sector, and the same thing is happening now. If you want to end the "credit crunch," stop the government from borrowing all the money and leave some for the private sector--you and me.

[sammyscout]

hey you wanted to go to iraq and afganistan, so now you pay for it

[MrXfromplanetX]

What Paul Krugman says is it was WWII that brought us out of the depression. This case is different because it was a war in part that lead to this depression. This was combined effort between both Republicans and Democrats to totally screw up the economy.

Clinton removed the Glass Steagall Act which allowed mortgage backed securities to be used http://en.wikipedia.org/wiki/Glass-Steagall_Act Clinton signed NAFTA into law allowing a transfer of wealth from the rich to the poor so people couldn't afford house payments. Clinton also lowered tariffs against China so our tariffs aginst them are 3% for the most part, and China's tariffs against the US are 25% (Lou Dobbs War On The Middle Class).

Bush spent $10 Billion per month on a pointless war based on fabricated evidence. They both suck.

[MrXfromplanetX]

Oops. I meant "Clinton signed NAFTA into law allowing a transfer of wealth from the poor to the rich so people couldn't afford house payments.

My bad. People may also want to check out this John Pilger documentary on the dark side of Globalism

http://mrxfromplanetx.com/the-new-rulers-of-the-world

Check out what John Perkins has to say on Globalizm as well. He's the author of "Confessions of an Economic Hit Man."

http://mrxfromplanetx.com/category/john-perkins

[jacqmac]

You really believe EVERYTHING that comes out of Lou Dobbs's mouth, don't you?
And I suppose you also believe that leprosy is on the rise because of the number of immigrants allowed into the country lately too---
Dobbs couldn't wait to start knocking down Obama---the stock market fell the week he was elected and Dobbs was sneering as he said 'Four days after Barack Obama was elected'---
Although even a broken watch gets to be right twice a day--Dobbs is seldom correct on his statistics or his so -called 'facts' about the 'war on the middle class'.

[flossophy]

people...

http://en.wikipedia.org/wiki/John_Perkins

Scroll down to the 'Controversy' section... if his take on the NSA is accurate, don't you think there would be more of these eeevil Economic Hit Men coming out to make big bucks selling books via Democracy Now?

It's all about the Benjamins.­.. even for the staunchest critics of capitalism.

[Indubio]

Honestly..­. Perhaps you are from Planet X because you're written language is only marginally English and it's hard to know what you're trying to say. Krugman said FDR's 1932 policies helped mitigate depression pain but he was convinced in 1937 to balance the budget by raising taxes and cutting spending, which sent the economy into tailspin. WWII ended any concerns about budgets and the depression ended. So what case is different? Today as opposed to the 1930s? Daah... We aren't in a depression today, not even close: Recession, yes. What was a combined effort? The present mess?; 'tis true! Clinton didn't remove Glass-Steagal, Congress did and Clinton signed it into law. Indeed NAFTA was approved during Clinton's presidency but it wasn't responsible for wealth transference, a function of tax policy. NAFTA wrecked the Mexican economy and caused the largest human migration in world history--south to north. As for China-US tariffs... Dobbs is an ignorant, jingoistic blowhard. If Dobbs claimed Chinese tariffs are 25%, our 3% he's wrong; my guess is you misunderstood the perpetually misinformed Dobbs. Chinese-US tariffs are based on import/export class: For actually rates check www.apectariff.com or US Customs. Bush has wasted a lot of money but I'm confused? Who sucks? Bush and Clinton? FDR? Your comment illustrates what happens when a person becomes over reliant on pronouns.

[DuganS1]

NAFTA has nothing to do with the current crisis, neither does increased trade with China. Lou Dobbs hosts an entertainment TV show with the purpose of getting ratings and pushing Dobbs' personal agenda. His show is a very poor source for economic related information - it's always cherry picked and broken down to the most simple level and used as propaganda on his show.

[freerepublicrat]

During the first 6 yrs of the Bush adm the unemployment rate was a 4% millions of jobs were created and millions of minorities became homeonwers the CRA actually did not caused the meltdown in the mortgage industry , but it contribute, republic deregulated the industry ..but the hypocrits Dod/Frankly paid no attention when some republ cried for accountability of Fannie and Fredie, while most bank were forced to keep 10% of their capital in reserve...­they just had 2%!!! Non profict housing counseling Agencies like Acorn encouraged 100% financing with DTI of 50/55 with 10/30 10 yrs interest only..
BUSH IS ONLY PARTLY TO BLAME....
BE HONEST LIBS

[msmaggie]

Think there is plenty of blame to go around, but the actual % of loans gone bad that are Freddie and Fannie is fairly small--most are not. And the minority lending you reference, those laws go back a couple decades.

[andyboy]

so ACORN is like the buddy who tells you to go jump in the lake? Anyone knows 100% financing is impossible to make money on. The amount of mtgs that will be defaulted on is a known quantity in the financial services world. Certain percentages of bad debt can be predicted using credit modelers so let's just accept that the entire system played along from top to bottom.... Free to do so because of the cozy pay to play lobbying and campaign donation game played on the Hill.

It wasn't a perfect storm or something caused by any particular political affiliation. Just plain old greed. You can dress it up any way you want to. A whole bunch of rich fellers got a whole lot richer. And now we all have to pay for it. How convenient it all seems. I don't see where ACORN gets any bailout funds..... did you?

[kmdippenger]

Even Republican Joe Scarborough says you can't blame this economic meltdown on poor people who wanted to buy a home.

[Soulsurfer]

Sorry, your numbers do not compute. Yes, Dems were involved in small ways, but the cornerstones of Republican economic policy has been (since Reagan) deregulation and low (non-existent for many corporations) taxes, period. Republicans completely caved on oversight thanks to Bush/Cheney, Alan Greenspan, Phil Gramm, and a host of big bidnez billionaires, come ta work dat sysdem, baby. Business has been writing the laws for 8 years, and they have no social conscience, much less patriotism. They outsource jobs, exploit tax loopholes, degrade environments, and guess what? They're unapologetically Republican. It's no wonder the economy historically does much better under Democratic Presidents. At least they try to keep the wolves at the fringes of the meadow.

[arcticterrier]

Economy better under Dems???? yeah those Carter years were great weren't they?

And lets see...you cite "big bidnez" working the system. The Congress was under Dem control during most of the time you mention...­you remember from civics class...th­e only branch that can spend money....t­he only one who can tax....the one who writes the tax codes.....­you know that one...the branch held almost exclusively by dems over the time you mention...­.and quite a ways before that.

[closedeyes2008]

WOW!!! Great stuff, Soulsurfer!!

[DuganS1]

Deregulation since the movement started in the 1970s has been a bi-partisan effort. President Carter did far more in the realm of deregulation than Reagan ever did.

[Indubio]

Beyond general criticism of liberals, what's you're specific complaint(s)? Please proofread/spell check. Use of abbreviations is fine but punctuation is important. If you employ acronyms don't presume people know what they mean. Proper use of tense matters.

You're correct... Bush is only partly to blame for the present mess; the ground work was laid in 1980: Bush represents the culmination of disastrous policies. There's nothing wrong with a market based economy but it must be well regulated least greed consume those running them.

Acorn never encouraged lenders to make bad loans: They demanded lenders not use zip codes as a means for qualifying borrowers, which often meant disqualifying borrowers because of race or other factors not specifically relevant to an individual. While Republicans were crying crocodile tears about Fannie Mae and Freddie Mac lack of accountability, they turned a blind eye to corporate malfeasance and out right criminality (not to mention war profiteering). So please don't talk to me about the purity of conservative motives. Conservative leadership views rank and file workers as exploitable resources to be discarded as required by bottom line profits. Unfortunately, too many of those at the bottom of economic stratum can be easily misled into supporting conservative policies that ultimately cut their own economic throats. Not to put too fine of a point on the matter but too many conservatives are racist (and or ignorant or as Mills argued, stupid) and they develop justifications for their behavior rather transparent to anyone with reasonable objectivity.

[freerepublicrat]

1930 85% of the stock crashed, today 35%
1930 21% unemployment , today 6%
Jimy Carter left 12% unemployment with 21 % interest rate and a 13% inflation, along with endless lines at gas stations, 10 millions jobs were lost back them

[andyboy]

I don't think you can connect who was President with large scale economic trends. It's the business community that sets the tone. We had an economy that was a grand illusion. Obama may have unemployment numbers that approach Carter's but it won't be because he himself mis-handled the economy.

Take Nafta. Your in the middle of pretty solid economic times and you can start to see the flat earth level playing field argument, almost. It's pie in the sky in the end. It isn't protectionist to want to have the strongest and most robust and richest country in the world. But that's what this attitude was labeled.

So at the behest of your cronie suit who can't find any other way to wring an extra dollar out of his operation to please his very demanding stockholders and bosses with ever higher profits and ever rosier budget forecasts you allow your jobs to be exported to the far corners of the Earth.

They said it was a good idea. We were all too fat and lazy and docile to say no. End of story.

[Racetracker]

The Carter Administration inherited the "Guns and Butter" bills of the Johnson and Nixon Administrations, inflation had already run unchecked (do you remember the "WIN" [Whip Inflation Now] buttons passed out by Jerry Ford), Nixon had imposed wage and price controls, and the 1974 OPEC oil embargo followed by a second round in 1978 caused serious damage. Sounds like your following lockstep with Limbaugh and Hannity in proclaiming the "Obama Recession.­"

[Soulsurfer]

Plus, Nixon took us off of the "gold standard" in '72.......­.....we were printing money not backed by bullion anymore. We were now trading on our "good name". Coupled with the many tumultuous events you named above, a major downturn was inevitable. Carter's bad luck, plus some ineptness. Never as bad as repuglican economies, though.

[Fernando]

George Will is a pompous arrogant who thinks he knows more than he does. I'm glad Krugman schooled him the same way he did Bill'O some time back.

... And Krugman is more than just "a smart guy", the guy is a friggin' Nobel Laurate!

[sweets]

Yes, and so was Yassar Arafat.

So much for a credible award.

[SeeDaddy]

Arafat didn't get a Nobel for economics!!!!! Or didn't you know that?

[Indubio]

Anyone including Arafat who wins a Nobel prize is credible. What you or I think doesn't matter. What ultimately matters to the Nobel Committee usually doesn't sit well with Americans because they don;t pay much attention to what we think. That's probably a good thing. It doesn't have anything to do with credibility however. I'd say the Nobel Committee has far more credibility than say the American government.

[daveishere]

God forbid that a man should spend his life in the pursuit of international recognition of a people who had their land taken from them arbitrarily by an international community who had no care for their well being ,add to that another sixty years of equally brutal economic and military repression against which he fought. Finally in the twilight of his life he saw a path opening towards peace with Israel and inclusion for Palestine as a legitimate government, yet you would discredit him now. Shame, shame, shame you heartless person! As for George Will, how could anyone take his opinion as being credinle when he refers to the falling gas prices we are seeing now as a surrogate for a tax cut? Don't believe me? read his article in Newsweek from a few weeks ago, I don't remember which issue it was, but he said it. What a fool.

[NancyinGeorgia]

Has anyone considered consulting Lee Ioccoca (sp) on the GM, Chrysler, Ford problems? Seems to me he has been there and brought Chrysler out of near disaster and paid back the loans.

[SoCalGalinNC]

So, here’s a bad joke! You wanna hear something that’ll make you really mad? ABC's Brian Ross did a report on this morning's GMA on how the CEOs of the automakers currently crying poor, continue to maintain extensive and expensive fleets of private company jets to transport company executives. Are we surprised at this double standard?!? This included the head of GM taking a $20,000 flight on one of GM's private jets to the hearings this week before the House Committee on Financial Services. Let them fail -- and give the current CEOs and their lame boards the BOOT while they’re at it! If they haven't learned by now how to run a business out of debt rather than into the ground, then these CEOs should be out looking for jobs like millions of other Americans. You think these CEOs are counting their pennies and worried about their futures? Of course not! We need to call their bluff. It's not our problem. They're nothing but a bad joke and need to be allowed to fail. That's capitalism! Survival of the fittest! Contact the Committee, and your congressional and senatorial representatives now and tell them NO. Enough is enough. Don’t let the joke be on us!

[HoraceOvidson]

The rich are different from you and me: They fly in rarefied air at company expense. Make that taxpayers' expense.

[flossophy]

Socialists are different from you and me: They fly in rarefied air at companies' / producers' expense. Make that taxpayers' expense.

The rich are selling you things you may want... if you don't want it. don't buy it. The rich cannot force you to do something you don't want to do. The socialists however, can.

Redirect your concerns at the appropriate party.

[Indubio]

Ross made his point and it was great for circulation and made CEOs look stupid but his point is inconsequential. The Big Three aren't going bankrupt because of executive compensation and was too focused on making himself shine to note this. The Boards of directors of the Big Three should have stopped excessive executive compensation/perks before asking UAW for sacrifices or taxpayers for money.

However, if the three auto companies eliminated executive salaries and perks, it wouldn't make a dent in either their short or long term fiscal situation. I remain a little unclear why Detroit doesn't hammer home the main problem, which GM outlined several years ago: Heath care and pensions. The costs of these two benefits for retirees is staggering and it increases annually. There can be no viability for Detroit unless this country deals with health care. Detroit's foreign competition doesn't pay for healthcare and many have public pensions; thus, we ask our manufacturers to compete in a market heavily skewed against them. This doesn't excuse many of the stupid decisions Detroit's made: Refusal to develop greener vehicles, unwillingness to stop making large vehicles because that would lower vehicle profitability, etc... but it certainly helps explain why they haven't invested in R&D and new facilities: They spend part of R&D capital improvement funds on health care and pensions. America must address health care on a national level and Obama's plan simply won't suffice.

[LeaderofMen]

Don't let Republicans re-write current history either.

This mess was caused by two important things: Bush's incompetent cabinet placements and Bush allowing greedy Republicans to pull the plug on as many business regulations as they could possibly find.

Republicans and their utter lack of public integrity are the source and center of the current economic meltdown.

Do NOT let them ignore that.

[FrankensteinBlack]

That right there is an example of “PASSIVE PWNAGE!” (Responding with historical accuracy and facts to right wing blowhards is like garlic, er sunshine to vampires.)