We will all come out this recession with a better knowledge of U.S. economic history and policy. The following are a medley of interesting articles pertaining to the Great Depression, massive fiscal stimulus, and well, is there really anything else?
Tyler Cowen has a great piece in the NY Times today, Recession Can Change a Way of Life :
AS job losses mount and bailout costs run into the trillions, the social costs of the economic downturn become clearer. The primary question, to be sure, is what can be done to shorten or alleviate these bad times. But there is also a broader set of questions about how this downturn is changing our lives, in ways beyond strict economics.
All recessions have cultural and social effects, but in major downturns the changes can be profound. The Great Depression, for example, may be regarded as a social and cultural era as well as an economic one. And the current crisis is also likely to enact changes in various areas, from our entertainment habits to our health.
First, consider entertainment. Many studies have shown that when a job is harder to find or less lucrative, people spend more time on self-improvement and relatively inexpensive amusements. During the Depression of the 1930s, that meant listening to the radio and playing parlor and board games, sometimes in lieu of a glamorous night on the town. These stay-at-home tendencies persisted through at least the 1950s.
In today’s recession, we can also expect to turn to less expensive activities — and maybe to keep those habits for years. They may take the form of greater interest in free content on the Internet and the simple pleasures of a daily walk, instead of expensive vacations and N.B.A. box seats.
In any recession, the poor suffer the most pain. But in cultural influence, it may well be the rich who lose the most in the current crisis. This downturn is bringing a larger-than-usual decline in consumption by the wealthy. (Read the rest here)
Amity Schlaes argues that Obama's stimulus plan is doomed to failure, as illustrated by FDR's New Deal in the 1930's:
The date matters, because our new president has made it clear that his model is Roosevelt. Barack Obama has spoken of creating 3 million jobs with his stimulus plan. As a new president in 1933, Roosevelt spoke of creating "one million jobs by October 1" through his spending packages. At about $850 billion, Obama's stimulus represents about 5.9 percent of gross domestic product. The spending programs of Roosevelt's National Recovery Administration amounted to almost precisely the same share. Then as now, the country was in what we might call an "illions" moment, when a nation contemplates federal spending of a magnitude previously unimaginable. The only difference is that today, we're discussing trillions instead of billions.
It's reasonable that a new executive in a downturn would want to evoke Roosevelt the leader. Like no other president, Roosevelt inspired those in despair. He kindled hope with his fireside chats on a then-young medium, radio. The new president gives radio talks, but they are also made available on this era's young medium, the Internet.
But Roosevelt the economist is unworthy of emulation. His first goal was to reduce unemployment. Of his own great stimulus package, the National Industrial Recovery Act, he said: "The law I have just signed was passed to put people back to work." Here, FDR failed abysmally. In the 1920s, unemployment had averaged below 5 percent. Blundering when they knew better, Herbert Hoover, his Treasury, the Federal Reserve and Congress drove that rate up to 25 percent. Roosevelt pulled unemployment down, but nowhere near enough to claim sustained recovery. From 1933 to 1940, FDR's first two terms, it averaged in the high teens.
Even if you add in all the work relief jobs, as some economists do, Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice -- as a nightmare. (Read the rest here)
Scientific American publishes the results of the state of U.S. infrastructure (it would be nice to see a cross-sectional analysis for other developed economies):
The nation's roads, bridges, levees, schools, water supply and other infrastructure are in such bad shape that it would take $2.2 trillion over five years to bring them up to speed. But even that huge chunk of change would only raise their grade from a "D" average to a "B," according to the latest "Report Card for America's Infrastructure" released today by the American Society of Civil Engineers (ASCE). (Read more here)
Dan Morgan puts the size of the stimulus bill - currently $819 billion - into historical Congressional context:
To truly appreciate the historic scope of the $819 billion stimulus package moving through Congress, it helps to have covered the Hill when passage of the whole domestic budget could be stalled by something as picayune as a fight over $30 million for Alaska's pollock fishermen.
From the mid-1980s to the early 2000s, when Congress and the White House had a tight leash on the domestic budget, I wrote hundreds of stories for The Post about spending programs and the congressional appropriations committees. It wasn't always the most exciting of jobs. A long line of lobbyists would snake down the corridor outside the committee room in the Rayburn House Office Building, hoping for a crumb for their clients: an agriculture research grant here, a bridge project there. Inside, lawmakers sat at long tables and battled over relative nickels and dimes. At one memorable session in 1995, then-House Appropriations Committee Chairman Bob Livingston, a Louisiana Republican, showed that he was serious about cutting spending by brandishing an alligator skinning knife called a "Cajun scalpel." In case that wasn't adequate, he warned, he had also come equipped with a machete and a Bowie knife, nicknamed an "Arkansas toothpick."
So I had to pinch myself last week when I looked at the breathtaking numbers in the House-passed stimulus measure and contemplated the vast ambition behind them: $11 billion to upgrade the nation's electricity grid; $2.8 billion to extend broadband Internet service to every nook and cranny of rural America; $2.4 billion to develop power plants that don't spew carbon into the atmosphere -- a step that could help America use its vast supply of cheap coal far into the carbonless future. Along with that were billions of dollars to repair dams, improve water quality and fix the U.S. Department of Agriculture's Stone Age computer system, famous for crashing during the crucial harvest period. (Read the rest here)
And Greg Mankiw reminds us of the dangers of protectionism to support industries in an economic downturns:
I hope President Obama and his economists strongly oppose these first shots in a new trade war of protectionism. So far, the article says, "the administration has not addressed the issue publicly."(Read the rest here)
Have a nice Sunday! Rebecca Wilder