Krugman’s recipe for depression
Saturday, November 29th, 2008Author Amity Shlaes has a great piece in today’s Wall Street Journal about how president-elect Obama’s FDR style plan for “economic recovery” will only make things worse. She debunks Paul Krugman’s arguments about the great depression and his ideas about what the U.S. should do in response to the current financial problems.
What kept the picture so dark so long? Deflation for one, but also the notion that government could engineer economic recovery by favoring the public sector at the expense of the private sector. New Dealers raised taxes again and again to fund spending. The New Dealers also insisted on higher wages when businesses could ill afford them. Roosevelt, for example, signed into law first his National Recovery Administration, whose codes forced businesses to pay an above-market minimum wage, and then the Wagner Act, which gave union workers more power.
Let’s hope that we don’t have to undergo the same government-created problems in the future.