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Home Publications Blogs Beat the Press Robert Samuelson Trots Out the Second Great Depression Bogeyman Again

Robert Samuelson Trots Out the Second Great Depression Bogeyman Again

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Sunday, 02 January 2011 22:15

The economy is doing well compared with the Great Depression, but not by any other measure. This is why Robert Samuelson and other spokespeople for the rich and powerful are so anxious to raise the prospect of the Great Depression. It implies that we should somehow be thankful for 9.8 percent unemployment, as he said in his column today. As informed observers know, this is a joke.

In a worst case scenario where the banking system did literally collapse, the Fed could have brought it back to life through its unlimited ability to print money. The first Great Depression was not the result of bad decisions at its onset. Rather it was the result of a decade of inadequate policy response. If the government had spent large amounts of money to boost the economy, as it finally did to fight World War II, the depression would have ended much sooner.

Samuelson uses the second half of his column to repeat Fox News talking points about how firms are not hiring because of concerns over the cost of the health care reform bill. If the Post required its columnists to have some evidence for its assertions Samuelson would have been forced to show that the firms most affected by the coverage requirement in the bill are more reluctant to hire than other firms. This would presumably mean that firms with just under or just over 50 employees are hiring fewer workers than other firms. This would be the case because almost all larger firms already provide health insurance for their workers and smaller firms will not be affected by the coverage requirements in the bill. Of course the data does not show any weaker hiring performance in firms of near 50 than in firms of larger or smaller size.

If firms are seeing enough demand for labor that they would be hiring in the absence of the big bad health care bill then we should expect to see them meet this demand in other ways. For example, they could hire more temporary employees. If the Post required Samuelson to support his assertions with evidence he would discover that temporary employment is still down more than 15 percent from its pre-recession level.

Firms that are reluctant to hire could also increase the number of hours per worker to meet their demand for labor. However the data won't support this story either, since average hours per worker are still down by more than 1 percent from their pre-recession level.

In other words, there is no evidence whatsoever to support Robert Samuelson's Fox talking point that firms are reluctant to hire because they are worried about the cost of President Obama's health care bill and other regulations. This is just a Fox talking point. The fact that such unsupported assertions can appear in the Washington Post is one reason that it is known as "Fox on 15th Street."

Comments (9)Add Comment
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written by Fed Up, January 02, 2011 11:43
"If the government had spent large amounts of money to boost the economy, as it finally did to fight World War II, the depression would have ended much sooner."

At first glance, I would say you don't understand the difference between price inflating with debt and price inflating with currency.

At first glance, I would also say you don't see the difference between a supply constrained economy and a demand constrained economy and how that relates to WWII.
...
written by Calgacus, January 03, 2011 12:48
Fed Up - huh? What are you saying, who are you arguing with? Dean's statement is unexceptional and unexceptionable.
There is no essential difference between "price inflating with debt and price inflating with currency", because currency is a form of debt. There's practically no difference between printing money & printing bonds in low interest rate depression conditions. And what Dean is considering is monetary "inflation", not price inflation, which would only be an unlikely but small and slightly beneficial side effect.

Both now and before WWII, the US and world economies were clearly demand constrained. The US economy could only attain the state of being supply constrained in WWII because of the government demand increase.
A jewel in the head of the toad!
written by JHM, January 03, 2011 7:22


This is just a Fox talking point. The fact that such unsupported assertions can appear in the Washington Post is one reason that it is known as "Fox on 15th Street."

***

Well, maybe 98.44% Fox on Fifteenth Street: today's unsigned hiattorial [ http://j.mp/enrAaj ] would probably not make the cut _Chez Rupert_:

"Tax cuts for the wealthiest are fully protected. But tax help for those at the other end of the income spectrum? Forget it."

Maybe there is hope for us all?

Happy days.

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written by skeptonomist, January 03, 2011 8:29
Was the threat of socialization by the Hoover administration what restricted private investment during the years 1929-1933?

By the way, recovery was very rapid after mid-1933; GDP growth averaged 10% in 1934-1937. What made the Depression so bad was the horrible fall 1929-1933.
The Free Market Cured the Great Depression - Not Government
written by izzatzo, January 03, 2011 8:33
If the government had spent large amounts of money to boost the economy, as it finally did to fight World War II, the depression would have ended much sooner.


Any economist knows it was not WWII spending that pulled the economy out of the Great Depression. It was the release of pent up consumption demand after the war, created by excess savings and rationing during the war.

The free market saved the economy, not the government, exactly the way the private sector has managed to bounce back today, despite the massive socialist government interference that was the root cause of the housing bubble, the financial crisis and the deep jobless recession that followed.

There is no 'unemployment' other than the normal frictional kind associated with changes in jobs. All the other kinds are mere manifestations of artificially 'pulled forward' or 'held back' demand caused by manipulation of the money supply - whether as currency or debt, an unbalanced budget and fear of regulatory uncertainty and inflation.

Stupid liberals.
...
written by liberal, January 03, 2011 8:51
skeptonomist wrote,
By the way, recovery was very rapid after mid-1933; GDP growth averaged 10% in 1934-1937.


Yes, but I thought there was some kind of belt-tightening in 1937 or something on the part of the federal gov't that stopped the recovery.
...
written by fuller schmidt, January 03, 2011 10:35
I'll bet your +2 votes are from people who agree with you, izzatzo, making, I think, a (-) vote the only correct response in a double reverse situation.
...
written by izzatzo, January 03, 2011 11:46
True. Narcisstic posters love negative ratings because they end up hidden behind a special low-ratings window that indicates their relative scarcity and higher value, since the price to get in is one click.

It really hurts to see plus ratings driving it in the other direction because they agree, offsetting the negative ratings ... because they agree as well in double reverse.

Of course what's going on is that posts on economics are so interesting, they draw thousands of ratings in both directions and all that shows on the comment board is the small differences for such close calls among large opposing groups who agree with each other.
WWII stimulous?
written by Future Economist, January 03, 2011 4:08
I always love it when stimulus/government spending advocates use WWII as their example of government spending saving the market from itself.

Here is the Big Government recipe to save the economy:

Step one, use a war time economy, where every able bodied person has a choice of making themselves relevant to the war effort or being forced to be relevant to it (the draft). Next, force production away from consumer goods to wartime goods, and then ration all remaining consumer goods, so the majority of the populous has a choice of saving their money, or burning it if they would like since there is little to purchase with it.

After 5 years of this forced (but financially compensated) labor, with no products to spend their earnings on, we then unleash the capacity of the newly "freed" market to create new products, and the ability of the product deprived consumers to purchase them, and low and behold we are out of a depression/recession.

Those that think the government is the answer to recessions/depressions always seem to turn to the post-WWII era as an example of how well it works, but they never point out that it took 5 years of forced labor and product deprivation.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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