On Friday I prefaced my usual Weekly Indicators column with an observation that we were continuing to use virtually the same set of policies that had previously brought us the weakest GDP and jobs expansion in 80 years, and yet hoping that they would give us what we really need to bring down the horribly high rate of long term unemployment - for which we would need an expansion equivalent to the top two or three expansions in that time.
Well, over on the right side of this page you can see the "Seeking Alpha contributor" link, and over the weekend Seeking Alpha decided to pick up this particular column. The comments (a dozen of them) show why economic policymaking in this country is so haplessly warped. FDR's New Deal morphed into a disaster, while W's economy was lauded. I have a memo for those commenters: everybody is entitled to their own opinions, but you don't get to make up your own facts.
Here is a bar graph of the percentage of annual GDP growth for the last 81 years:
The simple fact is, in GDP terms the New Deal recovery was the strongest economic expansion of the last 80 years, ex-World War 2. W's was the weakest.
Here is a graph of annual employment growth since 1939:
Once again, W's economy was the weakest period of employment growth in that entire period. As for the New Deal, while it predates that Fed graph, we know from the US Census Bureau records that it produced the following employment growth (in thousands)
1932 38,630
1933 40,247 (+125,000/mo)
1934 41,284 (+87,000/mo)
1935 44,760 (+290.000/mo)
1936 47.733 (+250,000/mo)
Considering that the working age population was only about 1/4 of its current size, that means in today's terms the New Deal created on average +9 million jobs annually, or +752,000 jobs a month!
Again, the simple fact is, in employment terms the New Deal recovery was the strongest expansion of the last 80 years, ex-World War 2. W's was the weakest.
Now let's look at the unemployment rate. Here is a graph of annual change in the unemployment rate since 1949:
Once again, W's economy was the weakest period for the decline in the unemployment rate in that entire period. As for the New Deal, while it predates that Fed graph, we know from the US Census Bureau records that it produced the following declines in the unemployment rate:
1932 22.89%
1933 20 90%
1934 16.20%
1935 14.39%
1936 9.97%
That's an average decline in the unemployment rate of 3.5% a year. For the third time, the simple fact is, in terms of the decline in the unemployment rate the New Deal recovery was the strongest expansion of the last 80 years, ex-World War 2. W's was the weakest.
[Source for Payroll and Unemployment data in the 1930's: Weir, David R. “A Century of U.S. Unemployment, 1890-1990: Revised Estimates and Evidence for Stabilization.” Research in Economic History 14 (1992): 301-346; chart on pp. 2-82 - 2-83.]
Those who argue that the New Deal was a failure base those arguments on counter-factuals: imaginary worlds where there was a do-over using laissez-faire capitalism, based on the work of UCLA Profs. Ohanian and Cole. Bonddad and I already debunked this argument, the assumptions of which explicitly include that the Great Depression would have spontaneously cured itself starting in April 1933 anyway!
Everyone is entitled to their opinions. And there is nothing inherently wrong with basing those opinions on imaginary counter-factuals. But you don't get to make up your own facts. The facts are, to substantially bring down the number of the long-term unemployed, we need a recovery that produces the kind of numbers in terms of GDP growth, employment growth, and unemployment rate declines that are close to those of the New Deal. But we are trying to accomplish this with fiscal policies that are close to those that brought us the poorest rate of GDP growth, employment growth, and unemployment rate declines since then.
