I am reminded of the businessman who returned unexpectedly from a business trip in the middle of the day and on entered the marital bedroom he found his wife naked in bed. He opened the closet door to find a strange man in the closet with an erection. His wife said, "who are you going to believe, me or your own eyes?"
When it comes to judging what got America out of the Great Depression I'm afraid I have to accept the evidence of my own eyes. The arming of America ignited a recovery from the Great Depression that lasted through Lyndon Johnson, marred by only a few very small recessions. It ushered in the American Century of American hegemony in military might and economic supremacy.
If there is evidence that the spending to arm America later cost America dearly, I am unaware of it and I wish you would point it out. The lesson I draw from the prolonged period of prosperity which followed on the massive spending for World War II and which raised our deficit as a percentage GDP to dizzying heights, was that it was easily paid for in the postwar boom which drove up GDP. (That is not to say that even Eisenhower was able to deliver consistent balance budgets. Parenthetically, 2 Kool 2 Be 4-Gotten has observed that the postwar recovery was fueled by demand from or destroyed Europe. That may be partially true, but one would wonder what it was the Europeans used to purchase all these American goods? Was it partly the Marshall plan? And if so, was this not another government intervention that succeeded?).
Even if you could demonstrate that the economy would have done better without that war spending can you somehow demonstrate that after nine years of depression we would have spontaneously come out of it? I do not think there is any dispute about the economic utility of arming the country against fascism and communism. It was necessary and it succeeded. It also got us out of the depression. It led to a boom that has lasted with a couple of setbacks for the course of my entire life.
Now let's sort out the oranges from the apples.
The subject matter of this thread is the utility of Bush's rescue package. Somehow we have spun off into comparing it with the futile efforts of Hoover and FDR to spend their way out of the Great Depression . But we should be comparing Bush's rescue package with the emergency spending to arm America. The latter, as noted, succeeded wonderfully, it was a program that saved America and got us out of the Depression as a bonus. To criticize Bush's package by comparing it the New Deal or to Hoover's gaffes is to mix apples and oranges. Obama's nostrums to grow the economy should be compared to the New Deal, a comparison which Obama himself has made. Bush should be compared to the emergency spending for World War II. Bush's goal, whether you accept the need or not, and whether you accept the efficacy or not, was to save the financial structure. The New Deal failed in its aim (New York Times columnists like Nicholas Kristof to the contrary notwithstanding) and so will Obama.
It seems that Bush succeeded in his emergency spending. Although I do not really know because no one knows what the hell went on at the Fed.
I can only repeat that if I were confronted with the facts as George Bush was and if I were compelled to make a decision in hours as George Bush was, I think I would have done the same and I think most Americans agree. It should not be necessary for me to distinguish between what George Bush did in what Obama did.
One of the problems with economics is that you can get away from the politics. As djsherin has so perceptibly said, the changing relative values of economics, especially of supply and demand, make it almost impossible to be predictive, an observation I made with my reference to Newton. Which brings me back to what we don't know. My original post was a cry for humility. One need only consider what one does not know about what the Fed has done to ratchet up his humility several notches.
Further, I think we have to agree that massive federal spending can move the economy. We think it causes dislocations, we agree that our ideology tells that is so but economics is such an inexact science that it is difficult to measure with precision. Moreover, history is not clear in its lessons. There is room for doubt and there is certainly room for contrary opinion and when there is room for contrary opinion, there is room for two political parties. At this point economics becomes contaminated by politics and a demagogue who will pander to the short-term interests of the voters and who is slavishly supported by the media can do immense damage.
