Economists on both the left and right broadly agree that the need for stimulative government spending is necessary to prevent a further collapse of the global economic system — just as the New Deal and the deficit spending of World War II restored the health of the global economy in the last century.
Before we go into a new New Deal, can we just acknowledge that the first New Deal didn’t work?
As Nobel-laureate Paul Krugman wrote recently in the New York Times, “There’s a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse. So it’s important to know that most of what you hear along those lines is based on deliberate misrepresentation of the facts. The New Deal brought real relief to most Americans.”
Krugman observed that the true short-comings of the New Deal policies resulted from the fact that they were not bold enough over the short-term:
[T]he truth is that the New Deal wasn’t as successful in the short run as it was in the long run. And the reason for F.D.R.’s limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious. [...]
In short, Mr. Obama’s chances of leading a new New Deal depend largely on whether his short-run economic plans are sufficiently bold. Progressives can only hope that he has the necessary audacity.
Brad DeLong offers this chart to emphasize the value of the New Deal:
Paul Rosenberg has more.