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View Diary: PROOF: GOP Deficit Hawks Lie - IMF, CRS & CBPP FINALLY Agree. See Charts (39 comments)

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  •  Can Obama return to New Deal policies? (5+ / 0-)

    Yes.
      Will he? No.

      As for austerity, they know it hasn't worked for a very long time.
      The problem is that the fact of it not working doesn't matter!

      Competence and fixing things is not a priority in politics, especially when the politics involves protecting the status quo.

    ¡Cállate o despertarás la izquierda! - protest sign in Spain

    by gjohnsit on Tue Jan 08, 2013 at 02:17:04 PM PST

    •  The New Deal was NOT responsible for the postwar b (3+ / 0-)
      Recommended by:
      gjohnsit, War on Error, J M F

      This is a common misperception (I think deliberately cultivated by the Right).

      The 1930's New Deal did not affect inequality and unemployment and growth was still very bad and the end of the 1930's.

      What created the postwar era was the 1940's New Deal, what I call the Real New Deal that was put into place by executive fiat during WW II.  The key feature was truy massive stimulus paid for partly by super-high taxes (91% top rate), borrowing, and direct monetization of the national debt by the Federal Reserve (i.e. printing money to fund the government).  The stimulus meant very low unemployment (1-2%) which created labor shortages and the potential for rapidly rising wages, which is inflationary.  Inflation was kept at bay by wage and price controls.  

      A key feature of the wage controls was that businesses could raise wages at the low end without having to get permission, whereas to raise wages at the high end they had to get permission from the Washington office who almost always said no.  In the middle they went went to the local office who was more likley to say yes if they had a good case.  

      The net effect of this adminstrative policy was to rapidly raise wages on the bottom end of the scale while the top level remained unchanged.  That is, it explicitly flattened the income structure, which stuck for decades after the policies were ended.  

      This is part of the reasons why CEO's only made ~40 times what their workers earned in the 1970's compared to ~300X today (super-high taxes helped).  Both the pre-existing flat income structure emerging from WW II and continued super-high taxes supported a business culture in which executives asking their boards for excessive compensation (i.e. a bigger increase than the the rank and file businessmen from which the executives came got) was unseemly.  CEOs made a lot more than 40X before WW II too when the business culture was more supportive.

      All of this was done by FDR using his power as commander in chief, it was not done Leglislatively.

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