Debunking the New Deal Argument (Part 2)

On Monday we began dealing with the New Deal Argument that liberals love to present: "The New Deal got us out of the Great Depression." Today, we're going to handle the second part of this argument, known as Military Keynesianism.

There is a second aspect of the New Deal Argument, which admits that it was indeed World War II was the reason that the United States got out of the Great Depression but claims that the government spending of World War II was the specific impetus for recovery, thus claiming the World War II spending by the government and subsequent recovery was an example of successful Keynesian Economics.

Now first of all, Keynesian Economics in it's pure form speaks to government spending in terms of investment. The World War II spending by the United States government was not  investment it was consumption. Two, and this is far more important, the branch of Keynesian Economics known as Military Keynesianism essentially preaches that this military spending CREATES demand, rather than the other way around.

For those of your from Palm Beach County, this akin to saying "We produce a lot of military supplies so we therefore will HAVE a demand because of that increased supply."

In reality, what occurred in World War II was an organic demand not a created demand. (It turns out, no matter how much effort government makes to create a demand, if people don't organically want or need a new product they will not fly. See: Chevy Volt.)

Secondly, the argument of Keynsianism is that government can "invest" in various industries and therefore stimulate the economy. (Somehow government spending stimulates the economy, but letting people keep their own money doesn't. If your head hurts, well, so does mine.) Investment, however, involves a level of control. If I "invest" in a company I am somewhat of a partner. To some degree I have a say over what that company does. This is what President Obama has tried to do (to massive complete lack of success) with "Green Energy" leading to huge embarrassing failures with taxpayer dollars like Solyndra (and other, less buzz-worthily named but otherwise equally unsuccessful companies).

Compare this to what the United States government did during World War II. During World War II, the United States government didn't "invest" in military supplies. No. They BOUGHT military supplies. They were not INVESTORS, they were CONSUMERS.

The government acting as a consumer for a Constitutionally valid and appropriate reason is both not a front to freedom and also is not the premise behind Keynesian Economics. Government consumption and government investment are not synonymous. Otherwise, purchasing the Presidential limo would be considered "investing" in Cadillac and replacing Air Force One would be "investing" in Boeing. Also when I bought a can of soda earlier, I "invested" in Pepsi.

Yet again, this example of Keynesianism "working" is based on a faulty premise. Then again, what would liberal "successes" be if they couldn't move the goal posts?

Debunking the New Deal Argument (Part 1)

Liberals seem to have two big arguments to back up their messes of policies: the Clinton Argument, which we debunked here on Biblical Conservatism nearly two years ago, and the New Deal.

The claim from liberals is that the New Deal is what got us out of the Great Depression. Somehow, they claim, all the government spending in the New Deal created a recovery.

History tells a different story.  To what degree the unemployment dropped due to the New Deal it was a prop up, caused my government make-work agencies like the Public Works Administration.

Now, given the choice, I'll pick the government hiring people to build bridges over the handouts of the Welfare State. However, once you take away these government make-work programs you'll find unemployment at it's lowest of 17.9%.

You'll notice that unemployment began it's genuine and permanent recovery in 1939. Gee, what happened then? Oh, right, the United States started selling war supplies to France and Great Britain. Then you look at the difference betwen 1941 and 1942.

In fact, many economists surmise that the New Deal's massive taxes may have slowed the recovery, thanks to such policies as a LOWEST top marginal income tax rate as 63% (the highest was a whopping 94%).  Who knew that taking tons of money from those who produce might stop them from producing. Shocker.

Thursday, we're going to talk about a second aspect of the New Deal Argument that other Keynesian argue. In short, they argue that sure, it was World War II that got us out of the Great Depression, but the spending during the war was Military Keynesianism therefore it was a success of Keynesian Economics.