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Who’s Benighted?

Here’s a letter to the Washington Post:

Steven Pearlstein alleges that a laughable mysticism drives those of us who “reject as thoroughly discredited all of Keynesian economics, including the efficacy of fiscal stimulus, preferring the budget-balancing economic policies that turned the 1929 stock market crash into the Great Depression” (“The magical world of voodoo ‘economists’,” Sept. 11).

Before guffawing at us oafs, Mr. Pearlstein should check his facts.

After running a budget surplus in 1930, Uncle Sam ran a budget deficit in 1931 of $462 million and a budget deficit in 1932 of $2.74 billion.  Moreover, 1932’s budget deficit was four percent of GDP – a deficit-to-GDP ratio the size of which was not matched after 1946 until 1976, and which was exceeded by only three of FDR’s non-war-year budgets.  For 1930-1932 as a whole, the U.S. government ran a net budget deficit of $2.46 billion.*  Herbert Hoover’s deficit spending was so alarming that, during the 1932 presidential campaign, FDR emphasized his own commitment to reverse what then seemed to be unprecedented fiscal recklessness.

Of course, FDR broke that campaign pledge.  He ran a budget deficit during every year of the greatly depressed 1930s – a fact that should cause Mr. Pearlstein to shed some of the arrogance with which he dismisses skeptics of Keynesian economics.

Donald J. Boudreaux

* See Tables 1.1 and 1.2 here.