Real World Event Discussions

Conservatives have no ideas what to do about recessions

POSTED BY: kpo
UPDATED: Monday, March 9, 2026 17:30
VIEWED: 29022
PAGE 19 of 25

GEEZER

Tuesday, January 14, 2014 8:50 PM

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Originally posted by M52NICKERSON:
Don't get ahead of yourself...

Says the person who repeats KPO's question before I have time to answer it.

"When your heart breaks, you choose what to fill the cracks with. Love or hate. But hate won't ever heal. Only love can do that."

KPO

Wednesday, January 15, 2014 3:18 AM

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You expect to see Keynes' cure work, so you interpret the data to support this point, while dismissing alternate explanations.

Unlike you, I expect (and require) that my pet theories and philosophies be backed up by data. If they're not visible in the data, they're not valid theories. As for my 'dismissing alternate explanations': I've pointed to several instances of government spending rising, and GDP rising in response, and government spending being cut, and GDP falling in response. I've provided this as evidence that the two seem to be linked. What 'alternate explanations' for this phenomenon have I dismissed? The only thing I've dismissed are alternate theories which are contradicted by the data.

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Sort'a like me saying I went to the doctor with a headache, he diagnosed it as an excess of bile, then he bled me and the headache went away. If I believed in the "Four Humours" theory of medicine, that'd confirm it.

Again, just like Auraptor giving climate scientists a lecture on the scientific method. Take my word for it that being able to read a graph, is not voodoo. It's maths.

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The average recession 1900-1928 is 18 months, and the average 1929-present is 13.25 or so. Not that big a difference.

That's a very significant difference. And I notice that you include the 1929-33 depression in the 'Keynesian' camp, even though you haven't been able to back that up with data. So remove that 3 year depression and the average post-Keynesian recession is 11 months. Almost a 40% reduction in recession time.

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the reduction in average length could be attributable to things other than Keynes - better communications and resulting business and market efficiencies

All I can show (and have shown) is that Keynesian policies correlate strongly with improved short term economic performance. And all you can say (and are saying) is that it's a lucky coincidence that Keynesian policy seems to have served us so well.

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Government spending went up.

http://www.usgovernmentspending.com/spending_chart_1920_1934USb_15s1li
011mcn_F0f

This is your evidence for Hoover carrying out 'the Keynesian cure from the get go'. Spending increased 3.8% in 1929. Less than it did in 1928. In 1930 spending increased 3.9%. Again, less than the jump from 1927 to 1928. So Hoover's response to financial meltdown and the Great Depression was... a small, un-extraordinary increase in government spending. Again, if you want a testbed for Keynesianism look at 1933 and 1941, and stop wasting everyone's time with your libertarian nonsense about Hoover's massive Keynesianism.

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The Deficit went up.

http://www.usgovernmentdebt.us/spending_chart_1928_1934USp_15s1li011mc
n_G0f_Annual_Federal_Deficit

This graph shows that the US didn't have a significant deficit until 1932 (and actually ran a surplus in 1929 and 1930). A Keynesian response from the get go. Right.

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Rothbard discusses Hoover's push for increases in farm aid, public works, and wage support, which sounds pretty Keynesian to me.

It would appear that those quotes are only there to mislead the economically illiterate. A massive surge in spending is not visible in the data at all. It didn't happen. It's a libertarian fantasy.

It's not personal. It's just war.

KPO

Wednesday, January 15, 2014 3:25 AM

Oh, and some more evidence on the ARRA:

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Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.

http://www.nytimes.com/2010/02/17/business/economy/17leonhardt.html?_r
=0

It's not personal. It's just war.

GEEZER

Wednesday, January 15, 2014 7:48 PM

Quote:
Originally posted by kpo:
[Unlike you, I expect (and require) that my pet theories and philosophies be backed up by data. If they're not visible in the data, they're not valid theories. As for my 'dismissing alternate explanations': I've pointed to several instances of government spending rising, and GDP rising in response, and government spending being cut, and GDP falling in response. I've provided this as evidence that the two seem to be linked. What 'alternate explanations' for this phenomenon have I dismissed? The only thing I've dismissed are alternate theories which are contradicted by the data.

As noted, government spending started to increase in 1927, and the Great depression followed soon after. See. I've proved that increased government spending causes depressions.

Or it could be possible that correspondence does not necessarily imply causality.

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Quote:
The average recession 1900-1928 is 18 months, and the average 1929-present is 13.25 or so. Not that big a difference.

That's a very significant difference. And I notice that you include the 1929-33 depression in the 'Keynesian' camp, even though you haven't been able to back that up with data. So remove that 3 year depression and the average post-Keynesian recession is 11 months. Almost a 40% reduction in recession time.

I'll get to Keynes and the Great Depression below.

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Quote:
the reduction in average length could be attributable to things other than Keynes - better communications and resulting business and market efficiencies

All I can show (and have shown) is that Keynesian policies correlate strongly with improved short term economic performance. And all you can say (and are saying) is that it's a lucky coincidence that Keynesian policy seems to have served us so well.

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Keynes's influence waned in the 1970s, partly as a result of problems that began to afflict the Anglo-American economies from the start of the decade, and partly because of critiques from Milton Friedman and other economists who were pessimistic about the ability of governments to regulate the business cycle with fiscal policy.

http://en.wikipedia.org/wiki/John_Maynard_Keynes

So it hasn't been quite the Keynes-fest you claim, with sort of a 40 year gap.

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Government spending went up.

This is your evidence for Hoover carrying out 'the Keynesian cure from the get go'. Spending increased 3.8% in 1929.

Depression didn't start until Sept. 1929.

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In 1930 spending increased 3.9%.

Yep. President doesn't just snap his fingers and start spending instantly. Legislation must be proposed and passed. This especially applies in the early 20th century when the power of the Executive wasn't anything like it is now, and Congress wasn't in session near as much.

Legislation like the Reconstruction Finance Corporation Act wasn't passed until early 1932.

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So Hoover's response to financial meltdown and the Great Depression was... a small, un-extraordinary increase in government spending. Again, if you want a testbed for Keynesianism look at 1933 and 1941, and stop wasting everyone's time with your libertarian nonsense about Hoover's massive Keynesianism.

Hoover was president until March of 1933, so he and his legislature pretty much set the federal budgets for 1933 and 1934. Where spending went up around 30%.

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The Deficit went up.

This graph shows that the US didn't have a significant deficit until 1932 (and actually ran a surplus in 1929 and 1930). A Keynesian response from the get go. Right.

Once again, Depression didn't start until late 1929, and in a democracy it takes time to get things started. Once the larger budgets were passed, deficit went right up.

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Rothbard discusses Hoover&#

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GEEZER

Wednesday, January 15, 2014 9:22 PM

Quote:
Originally posted by kpo:
It would appear that those quotes are only there to mislead the economically illiterate. A massive surge in spending is not visible in the data at all. It didn't happen. It's a libertarian fantasy.

So I showed the spending increased as quickly as one would expect, given the way government functioned at that time.

I have to ask, then, how these quotes mislead anyone who doesn't want to hear them.

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As Hoover recalls:

the primary question at once arose as to whether the President and the Federal government should undertake to investigate and remedy the evils. . . . No President before had ever believed that there was a governmental responsibility in such cases. No matter what the urging on previous occasions, Presidents steadfastly had maintained that the Federal government was apart from such eruptions . . . therefore, we had to pioneer a new field.

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As his admiring biographers, Myers and Newton, declared, "President Hoover was the first President in our history to offer Federal leadership in mobilizing the economic resources of the people." He was, of course, not the last. As Hoover later proudly proclaimed: It was a "program unparalleled in the history of depressions in any country and any time."

Using the jawbone, he immediately got business to increase investment and high wages.

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Hoover acted quickly and decisively. His most important act was to call a series of White House conferences with the leading financiers and industrialists of the country, to induce them to maintain wage rates and expand their investments. Such artificially induced expansion could only bring losses to business and thereby aggravate the depression. Hoover phrased the general aim of these conferences as "the coordination of business and governmental agencies in concerted action." The first conference was on November 18, with the presidents of the nation's major railroads. Attending for the government were Hoover, Mellon, and Lamont, and also participating was William Butterworth, President of the United States Chamber of Commerce. The railroad presidents promised Hoover that they would expand their construction and maintenance programs, and publicly announced this promise on November 19. Later, the railroad executives met in Chicago to establish a formal organization to carry this program into effect.

He inflated credit.

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President Hoover was proud of his experiment in cheap money, and in his speech to the business conference on December 5, he hailed the nation's good fortune in possessing the splendid Federal Reserve System, which had succeeded in saving shaky banks, had restored confidence, and had made capital more abundant by reducing interest rates. Hoover had done his part to spur the expansion by personally urging the banks to rediscount more extensively at the Federal Reserve Banks. Secretary Mellon issued one of his by now traditionally optimistic pronouncements that there was "plenty of credit available." And William Green issued a series of optimistic statements, commending the Federal Reserve's success in ending the depression. On November 22, Green said:

All the factors which make for a quick and speedy industrial and economic recovery are present and evident. The Federal Reserve System is operating, serving as a barrier against financial demoralization. Within a few months industrial conditions will become normal, confidence and stabilization in industry and finance will be restored.

He increased public works at both the State and Federal level.

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With Hoover's views, we would not expect him to delay in sponsoring public works and unemployment relief as aids in curing depressions. On November 23, Hoover sent a telegram to all the governors, urging cooperative expansion of all state public works programs. The governors, including Franklin D. Roosevelt of New York, heartily pledged their cooperation, and on

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KPO

Wednesday, January 15, 2014 11:47 PM

Quote:
As noted, government spending started to increase in 1927, and the Great depression followed soon after. See. I've proved that increased government spending causes depressions.

Or it could be possible that correspondence does not necessarily imply causality.

If I had pointed to only one example of GDP growth following on the back of Keynesian spending, instead of several, that would be a reasonable retort. As it is it's just an excuse to keep your head in the sand.

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http://en.wikipedia.org/wiki/John_Maynard_Keynes

So it hasn't been quite the Keynes-fest you claim, with sort of a 40 year gap.

'His influence has waned' doesn't mean his ideas have been rejected completely. Basic Keynesian thought, the belief that government spending causes short term growth, is still conventional macroeconomic wisdom.

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Hoover was president until March of 1933, so he and his legislature pretty much set the federal budgets for 1933 and 1934. Where spending went up around 30%.

My contention was that it's clear from the data that US spending did not ramp up in response to the GD 'from the get go', or anything like it. This is the important point. You yourself admit this. What the machinery of 1930s US government was like, and whether Hoover was a Keynesian champion or not, does NOT matter, all that matters is that US GOVERNMENT SPENDING UNDER HOOVER WAS NOT KEYNESIAN.

Yes spending boomed in 1933/34 (after Hoover's presidency). That's what I've been saying all along! And what happened to economic growth in 1934?

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I could keep going, but this gives you the idea.

All I need to see is the graph of government spending, to know whether or not government policy was Keynesian. A relevant graph says >1000 words.

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I have to ask, then, how these quotes mislead anyone who doesn't want to hear them.

The suggestion being it's ok to mislead people if you're telling them what they want to believe? The misleading aspect is that people will think Hoover/the US implemented immediate Keynesian spending in response to the GD, when he/it didn't. Again, the important thing is not whether Hoover was a sinner or a saint, it's the spending numbers. Government spending in 1929-1932 grew less than 4% year on year. That's LESS than the growth in spending in EVERY SINGLE YEAR under Reagan and Bush2.

So can we move on from the idea that US spending in 1929-32, in answer to the Great Depression, was Keynesian?

It's not personal. It's just war.

1KIKI

Thursday, January 16, 2014 8:42 AM

Geezer

Top marginal tax rates rose slightly during the 1923-1924 recession - there indeed was a change of policy.

As for 1926-1927: "This was an unusual and mild recession, thought to be caused largely because Henry Ford closed production in his factories for six months to switch from production of the Model T to the Model A." (WIKI) If that was the entire 'recession' it doesn't say much about economic policy.

So, your first example was wrong, your second not applicable. As usual, you are wrong.

NEXT!

GEEZER

Thursday, January 16, 2014 7:09 PM

Quote:
Originally posted by kpo:
If I had pointed to only one example of GDP growth following on the back of Keynesian spending, instead of several, that would be a reasonable retort. As it is it's just an excuse to keep your head in the sand.

GDP also went up in the Coolidge era (through two recessions) when Federal spending and taxes were reduced.

http://www.usgovernmentspending.com/spending_chart_1920_1940USb_13s1li
011mcn__US_Gross_Domestic_Product_GDP_History

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Quote:
So it hasn't been quite the Keynes-fest you claim, with sort of a 40 year gap.

'His influence has waned' doesn't mean his ideas have been rejected completely. Basic Keynesian thought, the belief that government spending causes short term growth, is still conventional macroeconomic wisdom.

Yep. Just ignore what you don't want to see. The Wiki article gives a long section on "Economics out of favour 1979–2007", but that's probably just more misleading by folks who don't agree with you. Right?

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Hoover was president until March of 1933, so he and his legislature pretty much set the federal budgets for 1933 and 1934. Where spending went up around 30%.

My contention was that it's clear from the data that US spending did not ramp up in response to the GD 'from the get go', or anything like it. This is the important point. You yourself admit this. What the machinery of 1930s US government was like, and whether Hoover was a Keynesian champion or not, does NOT matter, all that matters is that US GOVERNMENT SPENDING UNDER HOOVER WAS NOT KEYNESIAN.

Interesting how Keynes got to be about ONLY GOVERNMENT SPENDING all of a sudden. And Hoover's action, even though the machinery of government slowed things down, DOES matter. It started things in motion, and put agencies in place that Roosevelt used later. I'd note that even with the much larger government bureaucracy and efficiencies of communication, it took 10 months to get the first stimulus legislation passed for the 2007-09 recession, and 16 months for the second one.

Then again, I could note that per your analysis, Hoover did not follow Keynes, but the Great Depression officially ended in March of 1933, while he was still in office. Sort'a shoots down the Great Depression as a exemplar of the Keynesian cure.

ETA: And I have to ask, how much of Keynes is in this?

- Deficit-financed spending to compensate for demand gaps in the private sector.
- Easy monetary policy to raise inflation and support demand.
- Mortgage modifications to reduce foreclosures and support consumption.

"When your heart breaks, you choose what to fill the cracks with. Love or hate. But hate won't ever heal. Only love can do that."

M52NICKERSON

Friday, January 17, 2014 9:13 AM

Quote:
Originally posted by Geezer:

ETA: And I have to ask, how much of Keynes is in this?

- Deficit-financed spending to compensate for demand gaps in the private sector.
- Easy monetary policy to raise inflation and support demand.
- Mortgage modifications to reduce foreclosures and support consumption.

All of it.

In arguing the minute points you have missed the big picture. That is the the heart of Keynesian economics it to boost the economy when it start falter. That is what Hoover did and what FDR continued in different ways.

I do not fear God, I fear the ignorance of man.

M52NICKERSON

Friday, January 17, 2014 9:18 AM

Double Post