FDR’s Policies Prolonged the Depression (And Obama’s policies will too.)

“The Depression dragged on for years, convincing generations of economists and policy-makers that capitalism could not be trusted to recover from depressions. They decided that government intervention was required. Ironically, we show that the recovery would have been very rapid had the government not intervened.”

Government Spending Divides, It Does Not Multiply

Robert J. Barro is an economics professor at Harvard. He found that spending in World War II decreased GDP by 20% (a multiplier of 0.8). Government spending actually killed GDP, even assuming that the spending itself was useful.

Quip: If you think WW2 ended the Great Depression in the U.S., then we can carry out the same enlightened policies without needing a war. Conscript most of the able bodied men and have them build tanks. Then destroy the tanks. Impose rationing for good measure. At the end, everyone is supposed to be rich.

Actually, this isn’t so funny. Keynesian economics recommends to do just that. And Obama, Krugman, and many in congress are Keynesian in their thinking, because they like the recommendation that the government should tax a lot of money and spend it on signs saying “Brought to You by a Caring Government”.

Quip: Some people think that WW2 benefitted Europe because they were relieved of the burden of having old factories. They were bombed out, and so could build new, efficient factories. If you believe that, then they could bomb their own factories, or we could bomb ours, and experience the same boost in wealth.