I am blessed to have an absolutely amazing 92-year-old grandfather. He is sharp as a tack, and has a deeper understanding of politics and the law than any pundit I know. That, and he is the *only* person to read every word of every law review article I write. That is a lot. For a sample of his wisdom, check out this GrandpaVlog for a taste.
I just spent the last hour chatting with him about a range of topics, from the Tea Party, to Citizens United, to the war in Iraq, and eventually we wound up talking about the economy.
He said he had a surefire way to fix the economy. Intrigued, I took the bait, and inquired what his solution was.
He replied, I would do what Franklin Roosevelt did. He started telling a story about some road in the mountains in upstate New York that was in horrible shape. Grandpa said Roosevelt hired a number of workers to repair the road. It didn’t matter how long the project took, what mattered was that these people were employed. Grandpa said the President should do much the same now, and put people to work.
So I challenged Grandpa viz The Forgotten Man, and sought to confront his assumptions. I began by asking what would you say if I told you that the New Deal prolonged, and not shortened the Depression. He was incredulous. I asked, who pays those construction workers? He answered, the government. I asked, where does the government get the money from? He paused, and simply said that the government has the money. I suggested that the government can only get money from taxes, or by printing the money. If they get it from taxes, they are taking it from people who had enough to pay taxes, and giving it to those who do not have jobs, such as the construction workers. Alternatively, they can print money, which leads to inflation, which raises the prices of goods (price controls notwithstanding), and prevents people from buying things.
He thought about this for a moment, and replied that I may be right about the economics, but I did not live through the Great Depression, and cannot understand how dire things were. He intimated that Roosevelt was very popular, and that at the time, people were so happy to have jobs. Frankly, he did not care where the jobs came from, and he was happy that the road to the mountains (perhaps more useful than digging a hole and filling it up again) was constructed. He just wanted to see people working. It was more important to do something, anything really, than just stand by. He wasn’t really worried about the long-term consequences of such policies.
He has never any economics books (my grandfather only completed a few semester of college), but he intuitively appreciates the appeal of Keynesian economics. Fascinating. I wonder how he would fare with the Road to Serfdom?
It is hard to argue about cost curves and monetary policy with someone who lived through it. My great grandfather was unable to withdraw his life savings from the bank because it was closed. That can be quite traumatizing.
Always keep in perspective what people experienced when thinking about the past.