Debating the Stimulus

Here is an interesting debate between the liberal Dean Baker and the libertarian Megan McArdle:



The segment of this debate (minutes 62-69) where McArdle makes the typical libertarian wing-nut claim that FDR's stimulus didn't work is sad because it shows how an ideologue can deny facts and redefine things like "employment" to achieve their ideological goals. McArdle claims that the FDR stimulus didn't work. Here is the US Great Depression era GDP from Wikipedia's article on the depression. Seems to me that FDR did a pretty good job (FDR's part starts in March 1933 and he did a pretty good job for somebody working pre-Keynes, but he stumbled in 1937-38 when right-wingers like McArdle worried him into prematurely "balancing" the budget"):

Another part of the "debate" that bothers me occurs at the end where McArdle "worries" that the stimulus will cause "too much" debt. This is exactly the kind of thinking that caused FDR to waiver in 1937-38 and which brought the dip in GDP you see in the above graph. McArdle couches her worry in fancy words of "soverign debt", but this is nutty. The current US debt was moderate. It exploded during WWII. But guess what? After WWII you had 25 years of extraordinary solid growth. That puts the lie to McArdles worry about "debt".

The debt isn't a problem if you have a sound government run by reasonable, pragmatic people. The danger to a republic is from ideologues like McArdle who invent "facts" and redefine categories (employment) to push their argument to the detriment of society.

The problem is that for 30 years you have had ideologues selling lies and distortions like "trickle down" economics, or that "tax cuts" are the fix for everything. Guess what? That wonderful growth from after WWII until the late 1960s occurred in an era where the top marginal tax rate was 92%. But the rich didn't "down tools" and go on strike and refuse to work. The worked and paid their taxes. But what they did do was fund a lot of right wing "movement" activity to elect Republicans to write laws that gave them this extraordinary 30 year era of tax breaks and "trickle down" economics culminating in two spectacular stock market bubbles, huge government deficits, and a collapsing economy. So what do you like? FDR's pragmatism with 30 years of solid growth (post WWII to the late 1960s) or the crash-and-burn economics of the ideological right (1980-2008)?

The truth is that the ideological left pushed too hard with Johnson's "Great Society". The enemy isn't right or left. It is ideologues. What you want is a centrist government with pragmatists in charge! But you don't want a straddle-the-line centrist government that gets bogged down. You want a centrist government which will bob and weave left of right depending on circumstances and which approach best fits the fact and the needs of the moment.