Jon Chait delves into an interesting hypothetical:
I think that’s correct. It’s also a useful lesson for liberal who compare President Obama with President Roosevelt. The latter’s political success owed an enormous debt to the fact that he took power after the economy had hit bottom and begun to rebound. Indeed, Obama’s situation is more like an election that took place in 1929, leaving him to take the oath of office in early 1930, just as the bottom was falling out.
I think that at the same time pundits are embracing the worthy goal of political fatalism, they’re also getting dangerously close to embracing a kind of economic fatalism as well. Governments don’t control the economy, and Presidents don’t fully control the government, but the Great Depression wasn’t just about a “bottoming-up” followed by a “rebound” policy choices mattered. In particular, soon after taking office FDR took the United States off the gold standard thus initiating a round of expansionary monetary policy. Then in 1937, he initiated fiscal retrenchment and the Fed initiated monetary contraction — the economy fell back into recession. Then in 1939–41 monetary conditions reversed again and the US began a fiscal ramp-up to prepare for war and the economy grew again.
The link between abandoning the gold standard and exiting the Depression is not a coincidence:
I think it’s at least plausible to argue that had Herbert Hoover followed Japan’s lead and swiftly abandoned the golden fetters of monetary orthodoxy, that the economy would have been growing again by 1932 and there’d have been no FDR and no New Deal. I don’t think Obama had a comparable option to dropping the gold standard available to him, and House losses in 2008 were likely unavoidable under any plausible economic scenario, but there are a variety of things he could have done that would have made a difference economically and politically.