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

[GeorgeKaplan]

That was a nice moment. Thanks Paul.

[canucklivinginUSA]

To all of you who claim that Krugman is wrong, suck on this. Brad Delong is using cutesy chart just for you
http://delong.typepad.com/

[tkondaks]

What "lesson"?
Here we have liberal Paul Krugman ADMITTING that the economy tanked when FDR "raised taxes and cut spending". Jeez Louise, this is an INCREDIBLE victory to get a liberal to admit that raising taxes is bad for the economy!

[luke150]

He doesn't have to "ADMIT" it , it is not a secret. You can raise taxes only when you are out of recession, not in the middle of it. Krugman has never disputed this. You point out "taxes", but conviniently omit the other part, the spending. If the conservatives are so smart, why they oppose spending during recession? When would a conservative "ADMIT" that spending in a recession (and higher deficits) is actually good for the economy? This is what Krugman says, when investment and consumptions are gone, the only way to revive an economy is to increase goervment spending, preferably for building infrastructure. This creates jobs, imporves consumptions and eventually businesses can afford to invest. Then, when the economy is booming, you try to balance the budget. Something Bush and friends forgot to do.
I love it when non-economists try to explain economic theory and practice. George Will is obviously not on the same level as Krugman in that area.

[vedder110]

Let's not forget Krugman committed a classic "broken window fallacy" when he claimed that the damage from the September 11th attacks would actually help stimulate the economy. Here's a description of the fallacy:

The parable describes a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town

The fallacy of the onlookers' argument is that they considered only the benefits of purchasing a new window, but they ignored the cost to the shopkeeper. As the shopkeeper was forced to spend his money on a new window, he could not spend it on something else. For example, the shopkeeper might have preferred to spend the money on bread and shoes for himself, but now cannot so enrich the baker and cobbler because he must fix his window.

Thus, the child did not bring any net benefit to the town. Instead, he made the town poorer by at least the value of one window, if not more. His actions benefited the glazier, but at the expense not only of the shopkeeper, but the baker and cobbler as well.

[canucklivinginUSA]

Aggregate Demand people, aggregate demand

C+I+G+NX. If C and I do not spend, what do you have left? Say it with me, G-O-V-E-R-N-M-E-N-T

[kevingiampa]

Do you enjoy living history, but find places like Colonial Williamsburg too artificial, just not REAL enough?

Well, have I got a deal for you. Just vote Republican, and you can make those dry pages of history books come to life.

Too young to be apart of that Baby Boom your parents still talk about? Well, you can relive the Vietnam War Era after the Grand Old Party invades Iraq.

Only read about the Great Depression? Vote Republican, and you can discover first hand what made it so GREAT.

That's right, just a few seconds of thought and a quick November vote, and you can make it all happen--again.

The national Republican Party: We refuse to learn from history, so America can enjoy reliving it.

[Twinkie]

hehe

[IAB]

I think I agree with that Republican State Treasurer in NH who lost to some 20 year old TWIRP:

"Young voters were brainwashed by Obama"...

In the same manner, your screed smacks of a similar dose of Kool Aid.

[Vladdycat]

You probably believe the Republican party has done a great job over the past eight years. Monica Goodling was brainwashed by the religious right and Bush.

[kevingiampa]

You're boring.

In the same manner as drying paint.

Please let me know when you decide whether or not you agree with the Republican State Treasurer of New Hampshire on whatever that was all about, blah, blah, whatever.

Go smack your screed.

[jian1312]

I can't agree more there! Not just 'some', apparently A LOT of people would, have voted against their own economic interests, because they don't want blacks to benefit from certain policies, without realizing (with conservatives happily helping to misinform them) they themselves would benefit too. Think of universal health care.

I not long ago asked a co-worker who's Caucasian American (I'm an immigrant) how come the US chose, decades ago, to NOT have universal health care or some version of it, like most of the industrialized countries did? He said, quite simply, because they didn't want black people to share that health care system! They feared that they'd be forced to share the same hospitals with blacks. Yep, that simple.

I guess it won't be very helpful to lament and complain how STUPID some people, or lots of people can be. What needs to be done is to find ways to educate and convince them where their economic interests are, and what policies are actually in their better interests. For example, Obama's tax policy will actually reduce Joe Plumber's tax burden, IF only Joe was smart enough to realize that. I believe Obama will educate the public on these fronts. Hopefully, by the end of his 1st term, we won't be hearing any more of the stupid claim that the US is a 'center-right' nation. If the public get better educated, they'll know 'center-right' means you're on your own, if you get struck by bad luck.

[vedder110]

Panting all people who don't believe in universal helathcare as racists bigots is such an obviously hateful claim I'm not even sure why I need to point it. Unfortunately I feel this hate comes from the same place that paints opposition to the Iraq war as terrorists who hate America, so I want to nip it in the bud.

[rjcrawford33]

Boy, even George Will bows before a Nobel Laureate in ecoomics! Actually, I was surprised Will made such a crude, ideologically biased argument as the history of the Depression is clear and well known.

[tkondaks]

I don't know how you come to that conclusion.
Krugman goes against the liberal grain by admitting that it was raising taxes that was partially responsible for the economy tanking.

That he joked that it took a make-work program in the guise of WWII to get the economy going again is also surprising coming from a liberal.

[rowzeer]

He said raising taxes and try to balance the budget. It was a combined effort. Raising taxes on its own wasn't the problem.

[Grannyover70]

Hmm! I did not realize that George Will was around during the Great Depression which gave him all his expertise on the subject of the effectiveness of the New Deal Programs.

Well, I was there and tell you what. It angers me that the Republicans have taken up this new mantra. The Republicans at the time fought Roosevelt tooth and toenail the whole time, keeping him tied up in Courts the whole time. I listened to them rant and rave just as they are now doing.

The times were awful and tough. People were starving. There were no welfare programs. You never want things to get that bad again.

Will's statement that the "people with money were confused" is total marlarky. There were a few wealthy people, but they made no effort to help, not even to feed the hungry as I remember it. They holed up in their mansions and hoarded their money.

Those programs of the New Deal put people to work doing many things, including bringing electricity to the South via building the TVA, Hoover Dam, Parks, Roads, and a whole host of other works projects.

Go to the Website about.comm" and look up info on the New Deal and you can find a list of all the programs is you are interested. Read about Eleanor's work also. She was a great woman.

[TMAN]

Hey Grannyover, I'm 100% in agreement with you I too lived through it. Revisionist history is all they know, these Republicans, and thats why they govern so poorly. Educate the public in strict historical non revisionist history and we won't keep making the same mistakes. Will is shockingly mis-informed to be such a "respected" pundit. Conservative or not!

[bubbuh]

Geurge Will dreams he is a sportswriter during the twenties and thirties where he follows the fortunes of the Washington Senators and, of course, the Yankees. This is the source of his political and financial acumen.

BTW, Scalia dreams he's a canny New England ship owner during the 1820's and '30's. Cheney, of course, is his chief slave trader. This explains where they get their expertise.

Call it the dark side of new age metaphysics.

[Brettster]

Grannyover70, thanks for sharing. It's always great to hear from people who were really there and remember it first-hand. You are a service to the Internet community!

[vedder110]

One of the reasons people were starving is that Roosevelt encouraged farmers to kill livestock and burn crops to keep prices high in order to protect farmers and prevent deflation.

[peter777]

Republicans have a very selective memory when it comes to analysis of facts, as well as the policies and practices of past Republican leaders. They don't remember much that occurred earlier than the Reagan administration. Let's see- President Teddy Roosevelt wanted universal health care and President Eisenhower was the father of the Interstate system. Today's Republican thinkers (I am being kind) and leaders need to rename the Party accurately- American Scrooge Party. They are collectively the most selfish bunch in the U.S. Only things motivate them- power and greed.

[NGuarente]

Today, Abraham Lincoln would not be a Republican.

[alieninvader]

And neither would Eisenhower or Teddy Roosevelt, I would bet. Eisenhower's biggest fear was the military industrial complex, which is the entire Republican economic plan.

[vedder110]

Abraham Lincoln would very much be a Republican: he was in favor of protectionist trade legislation, expansive federal power, suspension of habeas corpus, and big business favoritism. In fact that was and is pretty much the platform of the Republican party from Lincoln until today except for the anti-New Deal coalition from 1930s-1980s which has been the exception of Republican policy makers, not the rule. The anti-New Deal and fiscal conservatives like Robert Taft, Barry Goldwater, Ronald Reagan (kind of) and Ron Paul are not at all representative of the majority of Republicans.

[Rothgar]

Actually Prof. Krugman appears to have accepted a false assertion from G. Will about the Depression: that WWII solved the Depression!
THIS ASSERION IS NOT CORRECT!!
From data in Appendix A to Dr. Milton Friedmann's book (A Monetary History of the United States of America) it is undenable that on a currency basis the US Economy had returned to parity with 1929 levels (57.158 Billion) by October 1938 at 57.255 Billion. Not counting the deflation of this period we find a plausible threshold for asserting the financial end of the Great Depression.
To place these events in their correct historical context this parity hit a YEAR before the invasion of France; 2 Years and 5 months before Lend Lease (3/11/41). When the Phony War ended the US economy was 12% (8.399 Billion) larger than in 1929, by the start of Lend Lease was 26.58% larger, and 32.78% large by December 1941.
Accordingly it appears that the US Economy had reached recovery over 3 years before the attack on Pearl Harbor which occurred about a week after the Congress approved a significant growth in War budgets.
The truly amazing thing about the WWII ended the Depression argument is that is relies on public war spending as the engine for solving the depression but denies the effect of the public works spending. The only I can find is that noone was quite ready to limit our spending during WWII. Not even the GOP!

[canucklivinginUSA]

Wait a minute, Milton Friedmann their free market god even contradict them? Oh this keeps getting better and better

[rowzeer]

Even General Smedley Butler warned of corporations pushing WWII for profit. Not for the public good but for their own personal gain.

[pgobrien]

This is the current conservative revisionist history about the depression -- that the Left made it worse than it would have been. I thought what Krugman said -- when there's nobody buying what the factory is making, who wants to invest in a new factory? -- was gorgeous! How about we DON'T give all the breaks to the guys with all the money and hope they invest in businesses that will create jobs -- how about we give breaks to the rest of us and our DEMAND for goods and services we can finally pay for will cause investors to create jobs. Let the money trickle UP for a change.
Yikes. Some of these "free market" characters just have no brains. Thank you, Mr. Krugman. Shut up and learn, Mr. Will.

[jim77077]

Good point pgobrien!!!

[mari2JJ]

My father died during the depression. My mom with 5 young kids had to support our family after 1937 when he died. Only the fact that we had moved from South Dakota to the Northwest saved us from ruin. We all (mom and 5 kids) worked ass migrants in the fruit orchards and harvesting vegetables and that is how we survived. We gleaned after the picking in many of the farms and we had plenty to eat after that. the depression was not some glorious era but was horrible on our family requiring my mom to work all day in the fields or packing fruits and vegetables and then to come home and bake bread etc. To idealize this era does not account for the degrading poverty we suffered. But alas, my mom, besides all her work, kept a steady hand on us, encouraged us to study, helped us with homework in the wee hours of the morning and explained to us that a better day was coming. We all grew up loving Mr. Roosevelt and knew that without his leadership, we might have starved. Only hateful Republicans who had no idea of the suffering of the poor can demagogue about Roosevelt. Let them blab on and on. Those of us who lived through those years know the facts. That era was tough on our country but it also made heroes of the common folks who survived. God bless America as he has in the past!!!!

[TMAN]

I'm appreciative of your post, thank you. Those who don't know their history are doomed to repeat it. I find it ironic the same cast of characters are in place for this repeat performance for the republicans, saying the same lines. Bluff and bluster.

How completely and utterly stupid and without any saving grace these poor old white men are.

[GeoLee]

And interestingly the Republicans were investing their money in German companies who were making profits due to slave labor and then funnelling their profits through Swiss banks so as to not get caught...Even Endicott Bush had money invested "over there" while his son was flying planes in defense of this country in the Pacific theatre. Aaron's and Loftus have done a lot of research of who profited off the Holocaust survivors "work" for German companies. Reads like the Congressional Who's Who.

[klipm]

I think what Krugman is alluding to is the fact we didn't enter wwII for quite a while, and in the meantime, Europe bought a LOT, LOT, LOT of amo, guns, planes, ships, ect... from us Americans; all why we manufactorily straddled that wars fence. It broke Europe and pulled us out of our recession. Kind of the opposite of this war of error; which, is breaking us and making the Chinese. To me, the error is one part hubris mixed with several parts teapot-dome-scandal that also happens to be smeared across several national borders- How many fronts are we fighting/predator-droning on now ( Iran , Syria , Pakistan , Turkey and more; seems like quite a few to me ). Like anything worth complaining about - its a complicated nasty situation; and also, because we are embedded in this problem. As for Will, You can't get much more conservative than to believe that investment and market forces eventually pulled us out of the Great Depression.

[mitaka]

I think your throwing Turkey into the mix of war US is fighting is ill-informed. Turkey is a NATO member, like Spain and Germany, and US operates one of its largest airbases in the region out of Incirlik, Turkey. If there is any tension between Turkey and US, then it is as much of a tension as Spain or Germany has with US.

[vedder110]

So you are claiming that membership in NATO makes a country equally friendly with the US? Turkey wants to suppress Kurd independence activities in northern Iraq so it doesn't spill over to the Kurds in Turkey that they are currently suppressing. In fact Kurdish suicide bombing is a major issue in Turkey, and Turkish aggression into Iraq is a major foreign policy issue with the United States

[gnorrfa]

klipm - germany, japan and italy were busy with their own enormous war industries. the u.s. didn't supply arms to anyone prior to sep. 1939 when the war began. roosevelt traded used destroyers for rights to an airbase in gander, nfld. in 1940. the u.s. had no armaments industry of note before war broke out.

[baklava]

Turkey has been a staunch US ally and a member of NATO since the Korean War. Turkey also has paid dearly for being an American ally all throughout the Cold War. All the issues with the Kurds and free speech has its roots in the US backed military coup during Cold War, which was designed to crush any opposition to US policies in the region. hundreds of thousands of people have been imprisoned, killed, tortured or had their life altered in a negative way, forever. After the first Gulf War the US ally Turkey bore the brunt of the refugee wave and lost 2 million dollars everyday for more than ten years thus plunging the country in to the great depression of its own. What did Turkey gain from its alliance with the US? I can't name a damn thing. So, sacrificing it's own to be the only ally of US and Israel in the region for half a century is just not enough for you I guess. You Americans sure are an ungrateful bunch, and you are no friend to anyone.

[BonoVox]

It was like that scene in "Annie Hall" where the idiot in the movie is pontificating about Marshall McLuhan, and then Woody Allen pulls Marshall McLuhan out from behind a wall to tell the guy he's a fool.
http://www.youtube.com/watch?v=OpIYz8tfGjY

[kingv100]

Republican economic strategy- A metaphor:

Person struggles to open a jar of pickles by banging it on a fence post. A passerby takes pickle jar, opens it (the lid twists off!) , hands the jar back to original person. Person who couldn't open pickle jar claims "I loosened it for you".

[alieninvader]

And then the passerby hands the jar back. The person drops it and says to the passerby "You broke the pickle jar."

[TrueIndy08]

Krugman needs a spot in the Obama Economic Cabinet.... he is a genius

[doug108]

Hahahahahahahaha.....Oh, George.