Tyler Cowen's Sunday NYT discussion of The New Deal is getting all sorts of play in the econoblogosphere--pro and con.
What's not getting much discussion (except here) is the elephant that Tyler rather inexplicably
fails to even mention: massive government (deficit) spending during
the war. (It's not the war, stupid, it's the spending.)
The consensus opinion out there seems to agree that:
It wasn't until the war that government made really big moves
(necessarily, fiscal), with just-plain-mind-boggling deficit spending.
U.S. government debt went from 50 to 120 percent of GDP.
(Yes, shortages continued/increased during the war, but for reasons
unrelated to fiscal or monetary policy--notably the redirection of resources.)
The fiscal effect of war spending broke the Depression's back
and got the economy moving, setting us up for the sustainable post-war
That boom allowed us to pay down the resultant debt-to-GDP ratio over the next thirty-five years, bringing it to 32%.
Then...1980. The elephant landed with all four feet:
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