The Rewriting of the Recovery Has Begun

One of the many contradictions of Republicans’ inconsistent love of capitalism and support for a mixed economy is their fawning adulation for public education. Readers of this publication will scarcely be surprised that this author supports private education solutions over government-run institutions, though as with all widespread and deeply rooted government programs on which so many Americans depend I appreciate the need for stability and for any transition away from the public model to be incremental and cautious—so long as progress is marching in the right direction. That said, most Republicans disagree and must abide the contradiction of claiming to fight for the limitation of government powers while granting it unlimited license to determine the conceptual development of their children, the ideas to which they are exposed, and, in no small part, their sense of the world in which they live. Chalk it up to a lack of appreciation for the role of ideas and the preeminence of culture above politics.

Nonetheless, whatever the cause of conservatives’ general endorsement of government-run education (as against, say, government-run healthcare), there is a tragic sense of irony when they are then frustrated by left-leaning educators’ polemic crafting of curriculums or outrageously biased assignments and lectures. It would be too glib in these cases and on so important a matter to say ‘I told you so!’, but…well…consider some of us unsurprised that the state-funded institutions charged with determining what ideas and skills should be taught to all people in all walks of life might have a few people who hold an amorous view of the state. Ironically—and, perhaps, with some ability to explain Republicans’ love of certain “big government” programs—many of the ideas most detrimental to our society and to capitalism are the very ones that go uncontested by these ideologically tangled conservatives.

Take, for instance, US History classes. One of the great blessings in this author’s time in school was to have an excellent US History teacher who not only presented a thorough and balanced curriculum but engaged us in the debates of the eras we studied so as to help us see American history as a history of ideas and the conflicts over them—many of which lie unresolved today. Unfortunately, however, not all students’ experiences are so well guided, and most students come away with a dozen or so key bullet points: Jefferson wrote the Declaration, Washington won the Revolution, Lincoln freed the slaves, etc. Intricacies often fall tragically by the wayside while certain misconceptions prevail: Jackson’s alleged prejudice against American Indians, the characterization of the “Robber Barons” as malicious tyrants, and the motivations behind many economic reforms and policies, among others.

Then there is, of course, the hallmark of all wrong ideas in US History curriculums, reigning safely above all others in its inaccuracy for over half a century: the notion that the Great Depression was brought on by greedy businessmen and speculators and that FDR ended it with the New Deal. Along with its support for Keynesian monetary policy, the pervasive system of price controls, regulations, fascistic police tactics, arbitrary determination of tax rates, judicial bullying, and rampant abuses of individual rights carried out by the Roosevelt administration are said to be the perhaps excessive but ultimately practical formula to get a failed economy back on track. Somehow, a nearly thirteen year—and, arguably, if you believe Lee O. Hanion’s analysis, which I do, over twenty year—economic downturn is considered to have been remedied by FDR based solely on the fact that the economy eventually recovered.

A point for non-economists: there is no theory in economics that holds that an economic downturn will not eventually recover on its own so long as nothing else obstructs it; the argument for interventionism is that statist interventions can make it recover more quickly and more fully than a protracted, natural recovery. Graded on that rubric, the success of New-Deal-supporters in convincing the public that a downturn lasting (at least) thirteen years and destroying untold productive capacity is to be viewed as a success may be the greatest work of propaganda in the history of the United States.

(I will not go into a full argument against the New Deal here. I defer to Jim Powell’s excellent book FDR’s Folly for a look at New Deal fiscal policy and regulations as well as The Great Depression: an International Diaster of Perverse Economic Policies by Thomas E. Hall and J. David Ferguson for a look at its monetary aspects.)

Fade to the present. As ever, propaganda has its purposes. Like FDR before him, President Obama has presided over the lion’s share of this downturn. George W. Bush likewise did his part playing Hoover, the alleged pro-business Republican who set the tone early for massive economic intervention. After seven years of sluggish recovery and unemployment, the economy again rests on unsustainable deficit spending and artificially low interest rates as jobs numbers paper over a dismal labor force participation rate—the worst since the 1970’s. With a Congress that has been stalemated since 2011 and Speaker John Boehner having caved to the president’s budget demands at every turn, Democrats are having a difficult time convincing Americans that the country is recovered and pinning the blame for any lingering sluggishness on Republicans.

More determined than it is conscientious, however, the left does try desperately. Its early narrative—that the recession was created by an outbreak of greedy businessmen let loose by (nonexistent) deregulation—was well fought against by those who presented a contrary narrative of bad policy by Congress, GSE’s, and the Federal Reserve. With time, however, the debate over accountability has been gradually eclipsed by Americans’ weariness with the partisan blame game. Following a string of successive failures in his first term, by his second the president seemed less interested in developing new programs to achieve real recovery than he did in pandering to narrow voting demographics.

Faced with repeated and large-scale failures of government policies—most prominently ObamaCare—the debate over America’s stilted recovery appears to be shaking the left’s confidence somewhat, setting them on the defensive and sending them deeper to fundamental questions about the role of the state in the economy. Interestingly, they seem to be taking this approach not at the national level, where major policies like ObamaCare and a brutally high corporate tax rate still play major roles and where few buy the recovery hype, but at the state level. There is, perhaps, a nascent tendency among leftist writers now to try to interpret differential state recovery trajectories as determined by state policies. There is merit to the intuition: states are recovering differently based in part on state policies. The results, however, point discerning analysts in the direction of more limited government approaches and not, as the left would prefer, towards more interventionism.

Most recently, Carl Gibson, a co-founder of US Uncut went to great lengths in the pages of the Huffington Post to show how confident one can sound in economics with the least possible perspective on the facts. Gibson has tried to treat Minnesota’s rebound from recession as indicative of the success of Governor Mark Dayton’s rather moderate tax-and-spend policies. To hear Gibson tell it, “It’s official—trickle-down economics is bunk. Minnesota has proven it once and for all.” Frankly, the amount of naïveté in that one sentence should boggle anyone as to where to start. First, as Thomas Sowell and many others have so aptly detailed, there is no school of thought called “trickle-down” economics and no economist worth his salt justifies free market policies on the basis that their benefits will lead wealth to “trickle down” the economy.

This is a red herring put forward by leftist economic analysts and commentators to make their arguments that much easier to sell. Free market economists of various schools defend their views on the basis that fewer taxes, subsidies, and regulations allow for a functioning price system, help markets to clear more efficiently, create incentives and not disincentives to succeed, and ultimately promote the growth of productivity and efficiency that will benefit all members of society through innovation, the lowering of the real cost of living, and the increase of real wealth. And to claim that one case study—even if you believe the author’s analysis—proves anything “once and for all” should set any scrutinizing reader on his heels. This is economics. Proving something once is an afternoon; proving it “for all” is how whole careers are spent.

As to Gibson’s ensuing interpretation, I would address it myself if Corey Iacono and Matt Palumbo hadn’t done so well at it already in their “Minnesota Mythbusting” piece published by the Foundation for Economic Education. I won’t detract from their number of reads by breaking it down here, but as they put it, “just because you jump in front of a parade doesn’t mean you’re leading it,” and Minnesota’s recovery was well underway by the time Dayton took office. To say that he caused a phenomenon that predates his governorship is purely illogical, and to suggest that he has played a major role in that recovery Gibson would have to prove that the recovery would have otherwise reversed or leveled-off were it not for Dayton’s policies—a tall order that he has not even begun to approach.

Similar to Gibson’s swing-and-miss approach to economics was a piece published in January in The Atlantic, titled “What’s Wrong with Georgia?” As with Gibson’s analysis of Minnesota, the article suffers from some very serious misconceptions that I have detailed elsewhere in these pages, and one gets the distinct sense that the author already had her conclusion in mind before pursuing the question. Economic analyses from publications like The Atlantic, as with the Huffington Post, often get ahead of themselves in making assertive claims about economic phenomena without asking the tougher questions or even presenting balanced views of admittedly controversial economic issues. More of this should be expected as the uneven recovery continues and the contests for credit and blame wage on.

These are just two examples of the struggle to conceptualize this recession and the recovery that follows. As voters weary of the blame game at a national level, more attention may—and should—be turned to stories of success and failure at the state level. As we do this, however, we must not approach them with heavy-handed and careless analyses that seek simply to purvey a certain message without proper attention to the evidence. When they do, journalists lose title to their work being considered journalism, economists depart from the realm of economics, and the interested reader is pulled from reality into a non-objective maelstrom of groundless opinions. I do not claim to be without strong opinions in addressing this subject, but I ensure at every stage that my opinions begin with the evidence and I acknowledge when I am departing from a social science into moral philosophy. Any focused writer or analyst should do the same.

To rescue the interpretation of the last eight years of economic history is a crucial fight on which much depends. The rewriting of the Great Depression and the New Deal solidified the popular and professional consensus on state involvement in the economy for three decades, and it has yet to be fully stamped out. Keynesianism, straight-up or in modified forms, remains dominant in college economics departments and drives the policy views of the Democratic Party and much of the Republican Party today. It is responsible for the prolonged hardship of the Depression, the economic malaise of the 1970s, and now the Great Recession. In the interest of not allowing the twenty-first century to mirror the grayer, more painful aspects of the twentieth, let us take care to challenge those who seek to prescribe as remedy the same poison we’ve endured thus far.

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