The Abe and Joe Talk Radio Show on 02/15/11
When President Franklin D. Roosevelt conceived of and executed the New Deal -- his grand plan to lift the country out of the Great Depression -- his work was guided by demand-side economics. The government would spend money to put people to work building roads, schools, bridges, dams, community centers and a whole array of infrastructure projects, many of which are still in use today. In turn, these gainfully-employed Americans would circulate their wages through the economy, creating demand for goods and services of all kinds. The money needed to hire these workers was raised through a combination of deficit spending and taxation of the wealthy, at rates that would be considered scandalous today.
And it proved to be fantastically succcessful. Even before America mobilized for World War II, the New Deal was breathing life into the moribund economy. The landmarks of the post-war era -- the Marshall Plan, the GI Bill, the public university system, the interstate highway project, the Great Society, the unprecendented growth of the middle class -- were all born of this same tax-the-rich, invest-in-the-worker mindset.
So what went wrong? Here's a hint: the rich didn't like being taxed. Economis Justin Elardo joins Abe and Joe to discuss the end of demand-side economics as a basis for domestic policy.