Freezing in Allston, Mass.

Grandwazoo/Planet Money Flickr group

 

Today on Planet Money:

With the incoming Obama administration planning a $700 billion economic stimulus, the question now is whether a wave of government spending will revive the economy.

For answers, we turn to the example of President Franklin Delano Roosevelt. If you're like me, you first encountered FDR in history class as the hero of the Great Depression. Lately, though, some people have renewed debate over whether FDR and the New Deal saved America or made matters worse.

We'll start with historian Eric Rauchway, who considers a world in which FDR had done nothing.

Bonus: Rauchway's got a blog and a new book, The Great Depression and the New Deal: A Very Short Introduction.

Download the podcast; or subscribe. Intro music: Paramore's "I Caught Myself." Find us: Twitter/ Facebook/ Flickr.

Click for bigger image.

Ben Hatke

 

Ben Hatke, an illustrator, sent this over today. He first posted it back in October, with the idea that fashion might become a silver lining. Me, I'm holding out for a Great Recession t-shirt.

Roberts writes:

"[A]n increase in spending coupled with lower tax collections is an INCREASE in taxes. AN INCREASE in taxes. NOT A TAX CUT. If I spend more money and collect less, the government is promising to collect more taxes in the future. It is not a tax cut. Not a tax cut. Not a tax cut. And when you don't cut rates but rather give people a lump sum of $500, there are no incentive effects other than to increase the probability that the US Treasury will be unable to honor its obligations in the future."

Typically, new home sales bottom out during a recession and then start growing at least three months before the worst is over. Unemployment, on the other hand, can peak as late as a year after the recession ends. That makes sense, because companies start hiring once they feel confident that business will keep growing.

So far, so good, right? Calculated Risk says this is not your typical recession. Right now, we've still got falling home sales and rising unemployment. What we'll have next, they write, could be anyone's guess.

Twitter pal @olevia sends this bit about the ways in which recessions tend to make us healthier.

Meanwhile, Claire in Northern California reports that her husband's talking about a possible pay cut. She says the same thing we always say at my house -- break out the rice and beans.

Look what came in the mail last weekend! Thought you might want to add this to your list of indicators. If you had a job, a job where you needed to wear a suit, these deflationary times have got you covered!

(See the ad after the jump.)

A suit for these times.

Pam Olson

 

Among the asterisks: The offer's good for up to $7,500 of what you owe.

(Thanks, Shannon and Aimee.)

Americans enter the New Year in a strange new role: financial lunatics. We've been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet's college graduates seemed to want nothing more out of life than a job on Wall Street.

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don't know what they are doing with money, who does?

Slim pickings.

Ron Deutsch/Planet Money Facebook group

 

Today on Planet Money:

Planet Money listeners have sometimes hopped all over us for using too many free-market economists. Now, David Kestenbaum sets one free-market thinker against an ideological opposite. These two forces have had only one proper fight -- the Great Depression. Both claimed victory.

Now, in one corner, it's Russell Roberts, an economist at George Mason University, who believes the economy works best when government stays out of it. He likes the Austrian School of economic thought.

In the other corner, it's Steven Fazzari, an economist at Washington University in St. Louis. He believes the government plays a key role in the economy, especially when it comes to recovering from recessions. He describes himself as a Keynesian.

Which of these mighty warriors is right? Your future could depend on it.

Download the podcast; or subscribe. Intro music: Survivor's "Eye of the Tiger." Find us: Twitter/ Facebook/ Flickr.

The Great Depression begat Keynesianism, the crisis of the 1970s/1980s gave broader support to Friedmanism. So, will this crisis give birth to some new theory? Or are we just going to keep refining the big ideas we already have.

I had a great talk with Daron Acemoglu, a big-shot young economist about this. He says that yes, certainly, there will likely be radical new ideas.

So, he says, we'll have to develop a more complex view, one that allows for a firm to be made up of lots of individual actors with their own--sometimes catastrophically contrary--incentives and goals.

He also says the pure models of Keynes or Friedman or the Austrian School have proven insufficient to explain the current mess.

Acemoglu says we have no idea what that new theory will be or if there will be many. But we can know, for sure, that dramatic changes are on the way.

Self-described producer, director and editor Anthony Ferraro finds the silver lining inside a layoff. (Thanks to listener Ron Deutsch for the link.)

Pick any "economic indicator" -- the price of milk, GDP, unemployment, the stock market, the store that closed on the corner, whatever -- and give us your forecast where it will stand one year from now.

We'll follow up as 2010 dawns and build a podcast or radio story around it.

Stick 'em in the comments section below.

Meanwhile, @sunfire2109 sends word of strapped homeowners abandoning horses.

Lifeguards on duty at the Madoff home.

AP Photo/Town of Palm Beach Police Department

 

It appears someone is trying to teach Bernie Madoff a lesson.

The Palm Beach Post is reporting that thieves who took a $10,000 statue from Madoff's home have dropped off the item along with a note at the Palm Beach Country Club where Madoff was a member.

The note attached to the statue of two lifeguards reads:

Bernie the Swindler, Lesson: Return Stolen Property to rightful owners. Signed by - The Educators.

The Palm Beach Post notes that in the Edukators, a 2004 German film, activists protest capitalism by breaking into the rich people's homes, moving around the furniture and leaving notes that warn, "The days of plenty are over."

In the more locally minded Wheeling, W.V., Intelligencer, the industry's request sounds more starkly protectionist. What they want is "American-made only," one United Steelworkers union official said. John Saunders told the paper that the fate of Wheeling businesses is at stake.

"We can't put a stimulus package in that will create opportunity for imports," he said. "If we could get this language, it could be the biggest shot in the arm we've had in years for Wheeling Nisshin and Wheeling Corrugating."