The author of the article linked in the opening post correctly notes that the Republican congressional caucus is dysfunctional and in disarray. However, he forgot to note that the same is true of Pelosi's Democratic caucus. After all, that's why it got landslided out of office in 2010. It certainly wasn't because people forgot the malfeasance of the Republican Party during the early-to-middle part of the '00s.
The current debate over the fiscal cliff is a national embarrassment. It's simply ridiculous. Very few of these people (in either party) are remotely serious about confronting real problems in any meaningful way. All their actions are geared toward scoring political points. No one in a leadership position gives a damn about putting the nation's fisc on a sustainable course. And no one will, at least not until the onset of a crisis that can no longer be papered over or swept under the carpet. The U.S. is a nation adrift with no responsible leadership.
Republicans need to acknowledge that tax revenue is going to need to be increased. Democrats need to drop the pretense that raising taxes only on the top two percent would do all that much to reduce the size of the deficit, and also need to admit that entitlement reform is absolutely essential.
But I think what we'll probably see is a gimmicky "deal" allowing Obama to declare some sort of victory, and House Republicans to claim to their base voters that they've capitulated in the politically least disadvantageous way. Then there will be a countdown to the next "fiscal cliff" or debt ceiling standoff. Wash, rinse, repeat!
Actually, there is a fair amount of evidence that suggests that FDR's policies, far from ending the Great Depression, prolonged it far beyond its normal lifetime, and made it much, much worse.
There is no doubt at all that World War II is what ended it.
Originally Posted by Sidewinder
A drastic monetary contraction, along with bad economic policies pushed through by both Hoover and FDR, prolonged and worsened the Great Depression.
When a large number of banks failed during the early years of the Depression, the money supply fell by about one-third. If that had not been allowed to happen, the Depression would have only been a more or less ordinary recession. (Of course, the Smoot-Hawley Tariff Act triggered a trade war and compounded our problems in the early 1930s.)
Hoover is sometimes mistakenly portrayed as a laissez-faire "conservative" who did nothing while the economy burned. But the opposite was the case. Federal spending increased by over 40% during his four years in office, and he crammed through big tax increases on businesses and high incomes. One thing that's quite ironic is that during the 1932 campaign, Roosevelt lambasted Hoover for what he characterized as the latter's reckless spending.
At least with respect to the fact that sustained economic growth had resumed, the Great Depression's "second act" (the 1937-38 downturn, caused by the Federal Reserve's monetary tightening by way of a doubling of bank reserve requirements) was over by midyear 1938. World War II did not "end" the Great Depression, at least not in the sense that most of us were taught. A common misconception is that during the 1930s we simply failed to spend enough money to create sufficient aggregate demand to lift us out of the Depression, and only the massive
spending connected with the war effort was able to do the trick. That's just absolute nonsense. For contrast, look at the response to the severe deflationary downturn of 1920-21:
http://articles.washingtonpost.com/2...-state-senator
What we needed after the 1929 collapse was to cut taxes, cut regulations and cut spending. Calvin Coolidge did just that in 1920 after a similar economic downturn and the economy boomed for ten years.
Originally Posted by joe bloe
The burdens of taxation, government spending, and regulation were actually very light in 1929. There have been times when lightening them has been an appropriate prescription, but it should be obvious that it's not always and everywhere the proper course. In fact, a
lack of effective regulation was one of the problems at the time. That's why Glass-Steagall was passed in 1933. As I noted above, the proper response to the crisis would have involved a monetary policy response to the deflationary money supply collapse.
And Coolidge "did just that" in 1920? Wow. Surely a few people sitting around in Boston must be trying to figure out how a Massachusetts governor can wield that much control over federal government policy! (Wilson was president in 1920. Coolidge assumed office after Harding's death in 1923.)
Anyone interested in learning more about factors that caused and prolonged the Depression are encouraged to google up some of the stuff written by professors Cole and Ohanian. They have produced a lot of good work on the issue.
...Hyperinflation is unavoidable...
Originally Posted by joe bloe
No it isn't.
Episodes of hyperinflation have all been associated with the collapse of an economy's foundation, genarally following events such as wartime devastation or other catastrophes causing massive capital flight. For instance, Germany after World War I and Hungary after World War II were burdened with impossible-to-meet reparations impositions, and didn't have much left in the way of productive capacity. Comparisons of our situation to cases like those are even more inapt than comparisons of our fiscal condition to that of Greece, which doesn't have a productive economy and connot borrow in its own currency.
That's not to say that we don't face plenty of problems; we obviously do. It's just that hyperinflation is not likely to be one of them. I think there's a fair chance that at some point down the road, we could have more inflation than we'd like. But the dollar will not collapse into virtual worthlessness.
A likely outcome, in my view, is that we'll muddle through a long period of slow growth as policy makers grapple with how to digest an entrenched, much higher level of government spending. The period of deleveraging is far from over, and may last for a number of years. And that's disinflationary.
2013 is likely to feature a number of vicious political battles.
Happy New Year!
