DeLong beats Kudlow...again

I've not kept track, but I figure the score is something like DeLong 42, Kudlow 0. You'd think at some point somebody would just tell Kudlow to shut the fuck up and go home, because he's hurting his side. For our benefit let's hope he keeps plugging away. Anyway...

May 27, 2006
Will Somebody Please Stop the Insanity!!!!

Over at National Review, Larry Kudlow writes:

Larry Kudlow on Enron, Morals, and Adam Smith on National Review Online: Capitalism in this country has been under assault ever since FDR's New Deal 1930s, a time when a number of alphabet agencies attempted to control America's industrial and farming sectors. The experiment soon proved a dismal failure, with unemployment running 20 to 25 percent up until WWII...

Ummm... The implication that Roosevelt's New Deal pushed the unemployment rate up is, of course, false. The U.S. unemployment rate in the Great Depression peaked at 24.9% in 1933--before any of Roosevelt's policies had time to have any impact--and was below 20% by the end of 1935. By Pearl Harbor day the unemployment rate was 9%--still very disappointingly high, but a far cry from Kudlow's "The [New Deal] experiment... dismal failure... unemployment running 20 to 25 percent up until World War II."

He goes on:

Still, the American welfare state would grow. In the 1960s and 1970s, the murderer's row of economic morons -- LBJ, Nixon, Ford, and Carter -- in allegiance with their liberal Keynesian advisors, concocted a socialist policy mix that ultimately led to wealth-destroying big-government stagflation. Providentially, Ronald Reagan changed all that in the 1980s. The Gipper slashed tax rates, deregulated industries, and rescued the dollar, unleashing the forces of entrepreneurial capitalism...

Real deregulators will tell you that the Reagan administration helped, but that the heavy lifting on deregulation was done under the Carter administration by Alfred Kahn and company. Real international economists will point out that the strong dollar of the early 1980s was driven by Paul Volcker's high interest rate policies, which Kudlow and company strongly condemned. Slashing tax rates and creating big budget deficits, that Reagan did do--with results that weren't that great, for whatever supply-side benefits were generated by lower tax rates were more than offset by the crowding-out drag imposed on investment by the Reagan deficits. Real median hourly wages rose at 2.5% per year on average under the "murderer's row of economic morons" (booming under LBJ and Nixon, and then stagnating under Ford and Carter). They then grew at 0.5% per year under Reagan, 0.2% per year under Bush I, 1.2% per year under Clinton, and now 0.2% per year again under Bush II.

As a result, for the first time since the post-Civil War period (but for the brief Coolidge-Melon period in the 1920s), the American economic system became the envy of the world...

The Reagan years (and the years since) have been great for the overclass. But it was during the period 1942-1973 that the American economy performed best for the rest of us, and was genuinely the envy of the world.

As I've said before, the country is full with lots of excellent, thoughtful right-wing economists who would love to write for National Review. But something goes very wrong--and not just on the right. We do live in a very strange world, in which Gregg Easterbrook is Slate's "Mr. Science."

Posted by Brad DeLong on May 27, 2006 at 02:26 PM in Better Press Corps, Economic History, Economics | Permalink