One of the central arguments of this campaign has been over the economy, and in particular whether the best path to recovery goes through things like the stimulus or whether it is through the private sector. As is often the case neither answer is entirely true.
In many ways this debate is merely an extension of debates over New Deal and it’s impact on the Great Depression. A number of conservatives take the view that the New Deal did absolutely nothing to bring the nation out of the depression. Not surprisingly they are quickly challenged by more liberal arguments that the New Deal saved the country by ending the economic slump and restoring prosperity.
As is often the case when people take absolute positions both sides of the debate have some merit to their argument but also go a bit too far in adopting the all or nothing sort of argument.
To begin with the conservatives do have a point in doubting the degree to which the New Deal ended or solved the problems of the depression. If you look at economic statistics from the 1930’s you find the unemployment, industrial production, GNP growth, etc remained fairly bad throughout the decade. It really started to recover during the late 1930’s when World War 2 sparked a major increase in demand for production.
The second factor in the recovery of the economy started to take effect in the mid 30’s but did not really come into full bloom until the end of the decade and once again it was not really the result of government action. During the 1920?s the United States went through a major period of overproduction. We built far more of everything that the economy could ever possibly absorb.
At first this made sense because during the period around World War 1 there had not been much in the way of domestic production so there was something of a pent up demand for supplies. But once this demand wore off we started filling the warehouses with stuff that nobody could ever possibly buy.
By the mid to late 30’s this overproduction had worked its way through and demand rose again. It is perhaps in this area that we can look to solutions for our current problem in that the housing slump is very much the result of massive overbuilding of homes and it is likely to take many years for this to resolve itself.
So in one sense the conservatives in the debate have a point in saying that programs like NRA, CCC, WPA, etc did not really cure the depression. Government programs are not going to take the place of private industry unless you are going to totally abandon capitalism.
However the conservatives are wrong in saying that the New Deal did not play some role in bringing the country out of the depression era. For one thing they were vitally important in simply being there to carry us through the time that it would take to recover from the slump. Telling people that things are going to get better in the future is fine, but in the short term they need food to eat, a place to live and clothing to wear.
In that vein the New Deal was quite important in providing people with jobs and with support when they could not find them elsewhere. It also gave rise to many programs that even the most conservative person today would never even consider abandoning. Programs like unemployment insurance, Social Security, worker safety laws and so on. It laid the foundation for future programs like Medicare which are also important to the basic safety net today.
In addition the New Deal provided training for millions of workers so they would be ready for the private sector jobs when they became available later in the decade. Without these programs many workers would have remained unskilled and thus not in a position to take advantage of the later recovery.
Finally the New Deal sparked a massive improvement in the infrastructure of the nation, building the roads, dams, bridges, power plants, etc that would help to spark the growth in later decades. So in this sense the New Deal was vitally important to the recovery. And just as the overproduction during the 1920’s echoes the overbuilding of homes today, we do have a need for infrastructure improvements today as well as for programs to help people through the hard times.
Thus when it comes to this debate I think there is much to be taken from both sides, as long as you are not going to go to far one way or the other.