My colleague, James Fallows, has led a just and righteous battle against the myth of the boiling frog. I am distressed, therefore, to see him repeat another hoary old canard that dogs our policy debates:
Those days of the 1970s are now nearly 40 years in the past. And this morning's jobs report makes me wonder whether, as a political system, we ever learn anything. Even this basic thing: That when tens of millions of people cannot find work because of an overall "failure of demand" -- not enough paychecks going to not enough people who can not make enough payments to create jobs for enough other people -- the main problem facing the nation is not "runaway government spending." Any more than it was when Herbert Hoover tightened up on spending as markets crashed, in the wave of folly that Keynes and Ahamed in their different ways chronicled. A lot has changed since the 1930s, and the 1970s. But not this basic principle.
I'm not quite sure what passages in Keynes and Ahmed he is referring to, but the evidence is not ambiguous: Hoover did not tighten up on spending. According to the historical tables of the Office of Management and Budget, spending in 1929 was $3.1 billion, up from $2.9 billion the year before. In 1930 it was $3.3 billion. In 1931, Hoover raised spending to $3.6 billion. And in 1932, he opened the taps to $4.7 billion, where it basically stayed into 1933 (most of which was a Hoover budget). As a percentage of GDP, spending rose from 3.4% in 1930 to 8% in 1933--an increase larger than the increase under FDR, though of course thankfully under FDR, the denominator (GDP) had stopped shrinking.