Wednesday, September 28, 2011

FDR's best economic policy...

...was going off the gold standard. Many of his other economic policies were counterproductive.

In more normal times, great economies make great presidents, not the other way around. But in our time, Obama, thinking monetary policy ran out of steam in 2008, has not even tried recess appointments to the two vacancies on the seven-member Federal Reserve Board of Governors. If Obama is punished for the economy, he mostly deserves it. Obama managed some fiscal stimulus, but so did Hoover:

Hoover's budget strategy over his term of office was not to balance the budget. The budget ran a small deficit of -.06% of GDP in 1931, followed by a much larger deficits of 4.0% of GDP in 1932 and 4.5% of GDP in fiscal year 1933... During the Great Depression, Franklin Roosevelt faced unemployment rates of 25% and continued the Hoover policy of budget deficits, running deficits no larger than 5.9% of GDP and more usually in the range of 3-4% of GDP through the 1930s. During the Great Recession, the U.S. economy experienced unemployment of nearly 10%, and has responded with fiscal stimulus on the order of 10% of GDP.
Fiscal stimulus fails if money stays tight.


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