No, We Don't Need a New New Deal
Listen to the Audio Mises Wire version of this article.
As we await fall semester grades, the end of my oldest daughter’s high school career is now in sight. For all intents and purposes, the spring semester will have a muted effect.
Still, I was happy to hear recently that the economics teacher she’ll have apparently “hates” talking about the New Deal. It’s no more an economic concept than is “trickle down,” both being more governmental in nature.
It’s also one of the most undeservedly deified chapters in American history. Yet, Jacqueline L. Angel and Juan Fernando M. Torres-Gil, two professors of “social policy” remain enthralled by it.
This would be done with a “substantial financial investment that would mitigate the effects of a possible double-dip recession.” That self-fulfilling prophecy doesn’t have to happen any more than did the impetus for the original New Deal.
What President Hoover faced early in his only term was a routine, cyclical downturn. Painful though they are, recessions are the natural result of credit expansion, often facilitated by central banks.
When left alone, an economy in a time of recession is much more likely to snap back strongly, quickly. See the recession of 1920–21.
Hoover should have known that given that he was commerce secretary at the time. Alas, as president he succumbed to the typical politician’s urge to “do something!” After steep hikes in tariffs, spending, and taxes, he had pounded the economy into submission. Voilà: the Great Depression.
He had teed it up for FDR to be the savior. Except government isn’t a savior for anything but more government and well-connected cronies.
The New Deal served those folks well by instituting price controls, facilitating industry collusion, greasing the skids for union strikes, etc. Price signals were distorted, uncertainty reigned, investment tanked, and people continued to suffer.
One of the biggest defects in the American DNA that mutated from the New Deal is the conviction that state can cure what ails us. Sometimes FDR disciples mean this literally, as when Angel and Torres-Gil assert that “all Americans” should be “assur(ed) access to basic health care coverage.”
Following in the tradition of FDR’s New Deal was LBJ’s Great Society, which, in addition to wresting poverty from its free fall by declaring war on it, created health insurance for senior and lower-income citizens: Medicare and Medicaid, respectively.
By this time, insurance as we know it, conjured up to provide hospitals with a steady cash flow, had matured. Baked into it, though, were the seeds of the inflationary problems we see today: the third-party payer.
Introducing into this mix a sloppy entity like the government, unmoored by any spending discipline and whose consumers already lack price signals, added fuel to the fire. There’s no reason to believe that giving Uncle Sam a firmer grip on the reins will tamp down those flames.
It’s difficult to know if folks like the authors simply have a blind spot, are being disingenuous, or worse. Given long careers in academia, one would be inclined to give them the benefit of the doubt, but they don’t make it easy. How else to explain the alleged need to “design a new social contract” to ensure “a minimum income in old age?”
Isn’t that what Social Security is for?
Since its first payout in 1940, there has been an almost twenty-year swing in the difference between life expectancy and the first year of eligibility (then 63 and 65 years, respectively, and now 79 and 62). Attaching more claims to it, like helping puppies find their mother, hasn’t helped.
Are they attempting to sweep under the rug the precarious position their forebears have put it in, and move on to the next monorail? That the state, run by purported experts not subjected to competitive market pressures, would furthermore be able to “help small business” as Angel and Torres-Gil claim, is confounding.
Unlike central planners “assuring…useful jobs even if federally-provided” (an oxymoron if ever there was one), small businesses were part of a record-setting job-creating machine the last few years. While the mere presence of the coronavirus might indeed have slowed that down, shutdowns have compounded the problem in a Hoover-like fashion.
The only help these heroic risk takers need from state and local officials is for them to back off.
Folks who spend their lives in an ivory tower seem mentally inoculated from how things work in the real world. They’re too busy moving the rest of us around on their modeling chessboards, waiting to be called up to the big leagues to show smooth-talking, bright-smiling politicians how to make all this government largesse work.
This farm system failed miserably in the 1930s, and it’s unlikely to work any better a century on.