Economic Illiteracy, McClintock Style
Tom McClintock must be proud of his statement to the House Budget Committee hearing on the 2012 budget. He features a Youtube video and a transcript of it prominently on his website.
In that statement he repeats the conservative canard that FDR’s New Deal policies, as measured by the unemployment rate in 1939, were unsuccessful:
Herbert Hoover responded to the recession of 1929 by increasing federal spending by a staggering 60 percent in just four years. He began by imposing the Smoot-Hawley Tariff Act – a steep tax on some 20,000 imported products – and ended by boosting the Federal Income Tax from 23 to 65 percent. Franklin Roosevelt amplified and expanded these policies and in 1939, the unemployment rate was just as high as when he started. We had lost an entire decade.
I’ve been referring to this untruth, which Tom McClintock has been repeating for years, as “economic illiteracy.”
But that’s too kind. Rather, it seems to be a case of “conservative economic obstinacy.”
The truth is that New Deal policies grew the economy over the course of that decade until 1938, when FDR gave in to conservative pressure to “balance the budget.” When he then eased back on deficit spending, the economy slipped back into a recession (a “double-dip”) in 1938/1939.
The data in the table below support this interpretation. Notice especially the change in GDP growth between 1931 (when the economy was shrinking at a rate of 8.5%) and 1936 (when it grew by an extraordinary 14.1%).
McClintock, like most conservatives, is fond of comparing the unemployment rate at the beginning of the decade with the rate in 1939, after the economy slipped back into another recession thanks to FDR’s implementation of conservative policies (spending cuts) precisely akin to those now being promoted by McClintock and his fellow GOP ideologues.
The result of the current deficit hawkishness — also infecting Obama and the Democratic leadership — will be the same as in 1938-1939: a double-dip recession.
1930 3.4% -9.4% 8.7% 1931 4.3% -8.5% 15.9% 1932 7.0% -13.4% 23.6% 1933 8.1% -2.1% 24.9% 1934 10.8% +7.7% 21.7% 1935 9.3% +8.1% 20.1% 1936 10.6% +14.1% 16.9% 1937 8.7% +5.0% 14.3% 1938 7.8% -4.5% 19.0% 1939 10.4% +7.9% 17.2%
Federal Spending (as a percentage of the Gross Domestic Product)
GNP Growth: Percent change in the Gross National Product