Interesting post by Yglesias on Keynsianism

[Recursion]

http://thinkprogress.org/yglesias/2011/08/01/283990/when-did-keynesian-economics-live/

Elise Foley, citing Sen. Dick Durbin, says a big deal on spending cuts would be the end of Keynesian economics:

...(Snipped quote from Foley on HuffPo)...

I don't disagree with any of that, but it is worth asking when this time was that discretionary fiscal stimulus as a tool of macroeconomic stabilization was alive and well. Famously, the United States didn't actually implement a massive program of deficit spending to stabilize the economy in the 1930s. Looking back at the Roosevelt administration what we have is not a Keynesian policy, but a Keynesian interpretation of the trajectory of policy. Monetary expansion leads to big growth in 1933-36, then fiscal and monetary contraction creates a new recession in 1937, and then eventually massive deficit spending to fight World War II had the effect of eliminating unemployment and excess capacity. That’s a Keynesian story. There’s a Keynesian analysis. But obviously the policy was "fight the war" not "deficit spending reduces unemployment."

Then we had a long period when it was all about the Fed setting interest rates and automatic stabilizers. Then we had the current recession, we had the stimulus bill that economists who believed in stimulus said was too small, and now we have austerity-mania. There hasn’t been, as best I know, any time in which discretionary fiscal stimulus was, in practice and by intention, used on the scale that the theory suggests.

I think our mythologizing of FDR is not quite as historically broken as the GOP's mythologizing of Reagan (and we have more of an excuse since it was 80 years ago), but it gets close sometimes. The WPA/CCC/etc. never got unemployment below 15%, and even that was with a biased sampling method that basically ignored women, African Americans, and many Latinos who wanted work but couldn't find any (the collusion of FDR with the white supremacist wing of the Democratic party to pass the New Deal is itself an interesting story).

I agree with Y. that the monetary side of the early New Deal was bigger than the fiscal side, and that tends to be ignored. But anyways, I guess my real problem is that coming at this problem with preconceived notions of what the only solution can be is a bad thing -- even FDR jettisoned his campaign promises (he ran against the progressive incumbent Hoover saying that Hoover was interfering too much with the business cycle) when the economic and political realities hit the fan.

[SteppingRazor]

1. FDR also raised taxes to finance a lot of this stuff.

We talk now about maybe, possibly ending the Bush tax cuts, so that the top marginal rate will go from 35 to about 39. In 1932, the top marginal rate went from 25 percent to 62 percent. Can you imagine talking about that kind of tax raise today?

[Recursion]

3. He also had a Congressional majority three times the size Obama had in 2009

You run the play you can call, you know? Unless you're the Redskins, and then you put out your special teams on 2nd & inches.

But seriously, I think that's the point: no, nobody can realistically imagine putting the top marginal rate up to 62. Or even 42. We're in a much more conservative era than we were, and we need to be serious about what we can actually get done.

For all the excoriation of Obama for talking about Reagan with admiration, people are missing their real similarities. Reagan changed the direction of this country's politics. He took a lot of heat for not dismantling the New Deal or even most of the Great Society, but he changed the conversation so much that a decade later a Democratic President undid a lot of the Great Society (which, in fairness, never seemed to work remotely as well as the New Deal for the most part). We're not going to build it back up in a day, or even a term, barring Congressional majorities don't seem reachable right now, but the political momentum is changing.

[TomClash]

2. That's funny

It seems to me neither Foley nor Iglesias ever read Keynes, if that's their analysis.