Economics, Idiotarianism

Failing To Learn From History… Correctly

Mitch Berg takes a rhetorical baseball bat to a Star-Tribune op-ed calling for a new New Deal. Columnist Bob MacLean thinks that the US badly needs a make-work program to “rebuild infrastructure”—a theory which Berg manages to tear apart with aplomb. The columnist suggests the following:

Let’s use the $150 billion currently proposed for rebates and corporate welfare to instead fund an 18-month infrastructure and government-efficiency initiative. This initiative — call it IGE — would be a contemporary version of the indisputably successful WPA program launched in 1935 by presidential order to cure economic depression.

First of all, the idea that the WPA was “indisputably successful” is wrong—in fact, there’s been a significant amount of economic research supporting the contention that the New Deal in fact made the Great Depression worse by preventing the normal market mechanisms from restoring normal employment. In fact, throughout the Depression and the height of the New Deal, unemployment remained incredibly high. For those who could get jobs, wages were propped artificially but that came at the expense of wider employment—the lowest the unemployment rate ever got during the New Deal period was around 14%, and in fact unemployment peaked again in the late 1930s despite all of Roosevelt’s programs. What truly ended the Great Depression was not the New Deal but the outbreak of World War II.

Even if we ignore the data and take the popular view, MacLean’s argument still doesn’t make much sense. Berg points out the obvious: do we really want unemployed mortgage brokers and software engineers either doing engineering inspections or digging ditches? Either you’re taking skilled labor and making it do unskilled work or taking skilled labor and putting it into a position where all those skills are wasted. It makes absolutely no sense, and it’s why such programs are completely worthless as an economic stimulus. How do you advance an economy by taking skilled labor and turning it into unskilled labor? The short answer is you don’t. Digging ditches does not prepare a worker for competing in the 21st Century.

Then there’s the fact that this is an 18 month program. If the real purpose is to reduce unemployment over the long term, then what’s the point? You’ve taken people with marketable skills and taken them out of the skilled labor pool for 18 months, putting them even further behind. The fatal flaw in this theory is the completely ridiculous assumption that the amount of productive work in digging ditches for 18 months is greater than the amount of productive work that people could get in the free market. That’s not a very intelligent argument, and it belies the kind of economic illiteracy seen frequently from the left.

If the goal was really to reduce unemployment, there’s a case to be made for funding worker retraining programs to increase the pool of skilled workers. If the goal is to increase domestic employment in unskilled or semi-skilled labor, the quickest way to do that is to start enforcing immigration laws—the effects of that alone would be a dramatic increase in the number of open jobs.

Instead, this is an example of trying to return America to the days when Fabian socialism was an active part of American politics—which is why we constantly hear the drumbeat of economic despair from the left. If there’s a crisis, then their radical ideas can have more of a purchase. When things are looking up, there’s less of a need for radical government intervention. Ironically, the party that once said “we have nothing to fear but fear itself” now has an economic position that requires scaring the American people into accepting radical policies.