Did the New Deal Fail?
By Arnold Kling
Cato’s Jim Powell makes the case against the New Deal. Among the material Powell cites:
Richard K. Vedder and Lowell E. Gallaway, in their 1997 study Out of Work, estimated that by 1940 unemployment was eight points higher than it would have been in the absence of higher payroll costs imposed by New Deal policies.
Brad DeLong wrote a negative review of the Vedder-Gallaway book. It would be rash to accept their estimates uncritically.
On the other hand, I have never seen an economist lay out a case that the New Deal succeeded. There is no disputing Powell’s point that “the 1937 peak for per capita output was lower than the previous peak in 1929. And the 1937 peak was followed by a crash.”
The crash of 1937 bankrupted my grandfather’s business. Nonetheless, our family became Democrats because of Franklin Roosevelt.
For Discussion. It seems to me that people who lived through the Depression tend to attribute all of the economic problems from 1933-1940 to Herbert Hoover, while giving Roosevelt credit for “doing something.” If that is their thinking, is it justified?