A Conservative Who Understands Economics

(via Yglesias) Bruce Bartlett (Treas. Secy under Bush 41, and House Banking Cmte guy and Ron Paul and Jack Kemp staffer) writes in Forbes that the problem with FDR's deficit spending was that it wasn't big enough! Here's a conservative - and an economist - who understands that the conservative politicians are talking gobbelygook on Capital Hill.

Nevertheless, Republicans claim that today's fiscal stimulus is doomed to fail because the deficits of the 1930s didn't end the Great Depression. "We know for sure the big spending programs of the New Deal did not work," Senate Republican Leader Mitch McConnell asserted on Feb. 6.

The implication seems to be that the economy would have recovered faster from the Great Depression if the budget had been balanced. But as my calculations demonstrate, the true failure of the New Deal was that deficits were much too small, not too large.

Ironically, Republicans implicitly acknowledge the truth of this when they argue that "the only thing that brought us out of the depression was World War II," as Sen. John Ensign explained on Feb. 7.

Yet Republicans conveniently overlook the fact that it was massively larger budget deficits--which averaged close to 20% of GDP from 1941 to 1945--that were the principal contribution of the war to economic recovery.