Huh. You don't say! Might there be any similarities between that situation and today?Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years."Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
But the debate hasn’t focused on the academic literature on the subject – including an important, surprising new paper from the National Bureau of Economic Research (NBER), perhaps the most respected economic research institution in the world. (The NBER is the organization tasked with determining when recessions officially begin and end.) The study’s finding: “Most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.”In the aftermath of the financial crisis, the federal government has dramatically expanded the length of the unemployment insurance program from the typical 26 weeks, the period states more or less have the funds to offer, to as long as 99 weeks. That program has helped millions of people get by, but the NBER study suggests it’s also kept the labor market much much weaker than it would have been otherwise — in fact, they calculate, unemployment is 3.6 percentage points higher than it would be if benefits hadn’t been extended.
You should go read the whole thing.