GET THE SMALL THINGS RIGHT It’s not just monetary and fiscal policies that are important. Roosevelt instituted a disastrous legacy of agricultural subsidies and sought to cartelize industry, backed by force of law. Neither policy helped the economy recover.Ben Bernanke probably knows more about the mistakes that the Fed made during the Great Depression than any other expert so we don't have to worry that he will make those monetary mistakes again, but it is really the mistakes that the politicians can make that we have to worry about. The Fed has loosened monetary policy almost as much as can be done and things still look bad. Imagine if we added in tax increases at this time.
He also took steps to strengthen unions and to keep real wages high. This helped workers who had jobs, but made it much harder for the unemployed to get back to work. One result was unemployment rates that remained high throughout the New Deal period.
Today, President-elect Barack Obama faces pressures to make unionization easier, but such policies are likely to worsen the recession for many Americans.
DON’T RAISE TAXES IN A SLUMP The New Deal’s legacy of public works programs has given many people the impression that it was a time of expansionary fiscal policy, but that isn’t quite right. Government spending went up considerably, but taxes rose, too. Under President Herbert Hoover and continuing with Roosevelt, the federal government increased income taxes, excise taxes, inheritance taxes, corporate income taxes, holding company taxes and “excess profits” taxes.
When all of these tax increases are taken into account, New Deal fiscal policy didn’t do much to promote recovery. Today, a tax cut for the middle class is a good idea — and the case for repealing the Bush tax cuts for higher-income earners is weaker than it may have seemed a year or two ago.
We will make our own new mistakes, but there is no reason to repeat the same errors that FDR's administration made. Imagine how Obama could soothe the uncertainties roiling the markets if he announced ahead of time that taxes were off the table and that he was going to "delay" any repeal of the Bush tax cuts on higher-income earners.
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"Imagine if Obama announced ahead of time that taxes were off the table and that he was going to "delay" any repeal of the Bush tax cuts on higher-income earners."
Imagine what a disaster that would be, if Obama allowed the massive and further diversion of resources to those who are already holding the most, and benefiting the most from our infrastructure.
The best way out of the Bush/GOP recession is to stick those most able to pay with big new taxes, and fund all the investment needs that Bush let fail (like childrens healthcare).
Oh, and stop pouring money away in Iraq.
Better prepare the crying towel, Bill, for Obama's boys are floating those very trial balloons. They're floating getting out of Iraq "in 16 months" now and allowing the Bush tax cuts to "expire in 2011" rather than repealing them post haste. And all those billions of promised savings in Iraq will be funnelled to Afghanistan to "get bin Laden." I can hear the HuffPo, Demo UnderWear and Kos RomperRumor heads exploding already.
This isn't the new deal, or a new left-wing illuminati administration. It's the same type that will not lower taxes, but raise them, despite what they claimed.
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