Great Depression 2.0, Meet New Deal 2.0

The reason that John McCain and the rest of the GOP is failing this year is not because of media bias, or dirty tricks by the Obama campaign, but because conservatives have run out of ideas. McCain has never been an idea person, hoping that people would elect him on his august resume.

But you can only go without new ideas for so long, which is why the GOP is getting its head handed to them come November.

But I tend to think this is a Republican loss and not a Democratic win, meaning just because the GOP isn’t doing so well, that doesn’t mean that Democrats have new ideas ala Bill Clinton in 1992.

The Democrats have pretty much abandoned the “New Democrat” strategy, which placed a more centrist face on the party. It was that willingness to co-opt conservative ideas that gave Clinton two terms in the White House. But the base thought such moves were nothing more then “Republican-lite” and have worked to cast the Democrats in a more traditional liberal mold. Because of that, and because of the utter failure of the GOP under George W. Bush, we have a Democratic Party running on policies that are 70 years old.

Politico is reporting that Democratic lawmaker see a need to bring back some of the programs that had their start in the Great Depression. Call it New Deal: The Next Generation.

With visions of a massive liberal majority in the next Congress and the power to remake economic policy for the next generation, Democrats are dusting off their New Deal history books and openly discussing the idea of re-engineering Depression-era agencies for the 21st century.

Several lawmakers want to bring back the Home Ownership Loan Corp., and others have discussed resurrecting the defunct Reconstruction Finance Corp., a federal program that made direct loans to businesses. Others see a lame-duck stimulus bill less as a short-term cash infusion for the economy and more as a long-term, government-driven jobs creator — a kind of modern Works Progress Administration that invests in infrastructure, bridges and roads.

The recent mess on Wall Street has led some to think that desperate times call for desperate measures and so we get this supposed New Deal sequel.

I think it can be wise to look at what worked in the past, and since the New Deal has been such an important part of history for the Dems, that makes sense. But it seems like they are trying to recreate some golden past instead of trying to work for the future. My personal feelings on government intervention aside, maybe some New Deal-style programs would make sense, but the fact is, we don’t have the economy we had in 1933. Also, it’s still murky as to whether or not a depression is an outcome. A lot of experts think we are headed more towards 70s-style recession than 30s-style depression. So, if that’s what we are headed for, does it make sense to have such a big response?

I’m not saying the government should have no role. In such a crisis as this, government needs to have a role to keep us from entering a 21-century depression. But I wonder if this dream to establish a Second New Deal is overkill. The Dems need to come up with ideas that fit the current times.

The GOP have no ideas and that’s bad. But having the Dems dust off old ideas isn’t any better and voters can only take that tack for so long.


  • DLS

    Irresponsible! This is not the second Great Depression and of course there is no need for a Second New Deal (a derivative — pun intended — of a dream long held, since the 1970s, by the Left who felt that “progress” was stalled after the 1960s).

    Both the hype about the current economy and the subprime-mortgage-debt problem and housing-bubble end, and the incredible ambitions of advocates for government interventionism are ridiculous.

    So is the childish response to Bernanke’s statement today in New York — _naturally_ there isn’t going to be any kind of instant recovery of the economy, idiots!

  • DLS

    “A lot of experts think we are headed more towards 70s-style recession than 30s-style depression.”

    I’d say instead it would be more like a 1990s-style deflationary depression or spiral.

    Bernanke is a student of the Great Depression and it seems to me the central banks and governments are acting forcefully to try to forestall deflation, even if details of, say, what the federal government in the US is doing don’t seem like the right things to be doing in principle, or politically, or even economically (there is no unanimity on economic policy any more than there is on politics here). I was very disappointed to hear about the reaction in the stock market to Bernanke’s statement (provided in the earlier posting I made), because the reaction was childish and was idiotic. It reminded me of the call-options buyers and day-trader types my buddy and I in Atlanta worked with — they thought Greenspan was Einstein, until he made a remark critical of the economy or of investors; then the market would drop, then they would be shouting about what a dunce and a mischief-maker Greenspan was.

    There is only so much that governments can do — we cannot be made to borrow more money if we don’t want to do this — and whatever is done will take time, and it will be experimental.

  • DLS

    “we don’t have the economy we had in 1933″

    I’d like to interject that in addition to refraining from remarking on other things to give others a chance to do it first — an example being recommending trying propane-powered vehicles as one of the alternatives to gasoline if we wanted to reduce air pollution in our metro areas, something available right now that is proven to work, and work better than compressed natural gas (methane) — I have long thought that in addition to seeking clean, safe, reliable water supplies in the underdeveloped world, why not also concentrate on something the federal government did here in the States in the 1930s and was successful at — rural area (underdeveloped nation) electrification (and modernization of existing, pathetic systems in those nations).

    OK, floor yielded.

  • GreenDreams

    Obviously, we need to cut welfare to the bone. Corporate welfare that is.

    We handed them the keys to the kingdom, all the power and revered them as the “engine of the economy”. That policy lies in tatters, whether or not the economy continues to tank. It did not increase jobs, did not increase our competitiveness globally, did not advance “brand America” or improve our trade balance, or “raise all boats” like that “rising tide” of irresponsible borrowing and “investment” was supposed to. None of these things happened, and the right, I guess, is too blinded by self delusion to see that what we have done IS government intervention. It was just intervention on behalf of the rich, the corporations, the lobbyists; in short, the short-sighted and criminally selfish who had no other desire than to grab as much wealth and power as possible with flagrant disregard for the consequences to the middle class and future generations.

    We need over 1.5 trillion in infrastructure investment. We have let our house crumble. How will that happen? I assume the GOP idea is (a) ignore it some more and let our kids deal with the crumbling mess, or (b) borrow from China to rebuild and let our kids pay for it. Shockingly irresponsible.

    Yes, if we need to invest in infrastructure, and if we need to bring down the unemployment rate, why NOT look at WPA style programs for roads, bridges and schools and TVA style programs to modernize our (barely) high tech infrastructure? We could actually have something approaching the same tech infrastructure as say, Korea and India.

  • Polimom

    Just so long as they don’t decide to dust off FDR’s Second Bill of Rights.

  • DLS

    Of course they will, Polimom! And to this day I fear misconstruction of the Ninth Amendment as the magic genie that will support demands to meet those fake “rights.”

  • JSpencer

    I disagree the GOP has no ideas. For some time now they’ve had lots of ideas, they’ve just been BAD ideas, you know, ideas like unnecessary war, trickle down economics, choosing to ignore science, pandering to the ignorant, shilling for the rich, pretending environmental problems don’t exist, etc.

    If the democrats are serious about working for and representing the middle class, then more power to them. It’s about time somebody did.

  • DLS

    You’re equivocating, Green Dreams. Hands-off policy is anti-interventionist, even if repealing certain laws (by Dems as well as by the GOP) itself is a hands-on effort by definition. You are on firmer ground if you said that this was still a choice and even an effort favoring some interests over others — the interests changing when Reagan Entered the Picture [begin ominous music], the favored scapegoat event (featuring the favorite scapegoat and straw man) of the likes of Thom Hartmann.

  • DLS

    “why NOT look at WPA style programs for roads, bridges and schools and TVA style programs to modernize our (barely) high tech infrastructure?”

    It seems to be popular with some. Aside from finding the money to pay for all these things, I asked elsewhere, what will be the conditions for participation in these kinds of programs and what will that mean for costs? Namely, would we have pro-union “prevailing wage” rules, affirmative-action set-asides, hire-American rules, and so on?

    I fear these would be the primary objectives in place of the kind of artwork we can see in the mural(s) in the Cincinnati train station, at some state houses, or in the bridges by Conde McCullough in Oregon that I like so much (yep, gummint stuff).

  • Polimom

    I think the Democrats need to be very very careful with this.

    Rather than put up a whole new post, I wrote my own reaction here.

  • SparkyJP

    Marriner S. Eccles, was the Chairman of the Federal Reserve from 1934 1948

    In his 1951 memoir Beckoning Frontiers, Eccles detailed what he believed caused the Great Depression.
    Our current situation is eerily similar.

    Eccles wrote:

    “As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nations economic machinery.

    Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.