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New Deal Shouldn’t Be Our Template for Recovery

Can huge government spending programs rescue our economy? Amity Shlaes doesn’t think so:

The New Deal is Mr. Obama’s context for the giant infrastructure plan his new team is developing. If he proposes FDR-style recovery programs, then it is useful to establish whether those original programs actually brought recovery. The answer is, they didn’t. New Deal spending provided jobs but did not get the country back to where it was before.

(The Krugman Recipe for Depression , November 29, 2008 Wall Street Journal.)

The present danger is that influential economists like Paul Krugman of the New York Times argue that during the New Deal, government spending wasn’t high enough, and that’s why the Great Depression lasted so long.

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