Is Ron Knecht rewriting history?

—by Rich Dunn, RNDC 2nd Vice Chair

In a Nevada Appeal op-ed, Controller-elect Ron Knecht laid out the premise for his ultra-conservative world view as follows:

“For 125 years, we’ve seen the rise of the dysfunctional politics of Progressivism. As it
has accelerated in the last five decades, we’ve had slowing economic growth and reductions in individual liberty, prosperity, opportunity and hope.”

I doubt that Mr. Knecht was referring to the short-lived Progressive parties of Theodore Roosevelt (1912), Robert La Follette (1924) or Henry Wallace (1948), so I’ll assume that he was actually referring to progressivism with a lower-case p. So what is that?

Wikipedia observes that “American progressives tend to advocate progressive taxation and oppose what they describe as the growing and negative influence of large corporations. Progressives are typically in agreement on an international scale with left-liberalism in that they support organized labor and trade unions, they usually wish to introduce a living wage, and they often support the creation of a universal health care system.”

All of the above have been around in one form or another for the past 125 years, and for lack of a better word we can agree to refer to them collectively as “progressivism.” And according to Ron Knecht, those progressive ideas have driven the “dysfunctional politics” he sees as responsible for “slowing economic growth and reductions in individual liberty, prosperity, opportunity and hope.”

I have no clue what Ron Knecht thinks of as individual liberty, prosperity, opportunity or hope, so I’ll leave those aside, but economic growth is something that can be objectively measured, so let’s do a fact check on that part of his world view. Knecht seems to believe that economic growth has been slowing for the past 125 years, and that perceived slowing has “accelerated in the last five decades.” So, is that a true statement? Let’s see.

Looking back 125 years, we find that nominal GDP in 1889 was $14 billion, which is $360 billion in 2014 dollars. That is 1/47th the output of today’s economy. And US GDP fifty years ago (1964) was 743.7 billion, which is $5.71 trillion in 2014 dollars. That is only 1/3rd of today’s $17 trillion GDP. I’m not an economist, but to my mind those numbers reflect a pretty robust rate of economic growth.

Perhaps the best test of Ron Knecht’s thesis that progressivism is bad for economic growth is to look at the years immediately following the Crash of 1929. That will let us contrast the effects of Hoover’s pro-cyclical regressivism to Roosevelt’s counter-cyclical progressivism. Here goes: GDP growth in 1930 was -8.5%, in 1931 it was -6.4%, 1932 -12.9%, 1933 (FDR took office in April) -1.3%, 1934 +10.8%, 1935 +8.9%, 1936 +12.9%, 1937 +5.1%, 1938 -3.3%, 1939 +8.0%, 1940 +8.8%, 1941 +17.7.

It should be noted that the recession of 1938 followed FDR pulling back on his counter-cyclical progressive policies at the urging of conservatives in his own party. The hope was that the economy already had enough momentum to grow on its own (bad guess).

Conservative ideologues routinely make the same kind of mistakes here in the 21st century, as witnessed by the tea party’s on-going temper tantrum over counter-cyclical recovery measures like QE, TARP and the ARRA. Unlike real world conservatives like George W. Bush and his treasury secretary Hank Paulson, they don’t understand that the public and private sectors do not compete in a developed economy, they are in fact complementary.

Knecht ties off his progressivism-slows-growth argument with this counter-factual assertion: “Now, after a six-year blowout of it since the Great Recession, we’re mired in a long-term non-recovery it has caused.” Why do I call that counter-factual? Well, think about it…

In response to the Global Financial Crisis, European governments responded with austerity: pro-cyclical fiscal policies that drove the EU as a whole into a prolonged period of near-zero growth and southern Europe into an outright depression, with unemployment rates over 25% in Greece and Spain and joblessness up to 50% among the under-30’s.

Contrast that with the US, which was fortunate enough to have Democrats in control of both houses of congress when the financial crisis hit in September 2008. The progressive counter-cyclical response turned what was clearly an impending economic depression into a recession that was over in just a few months.

Today, after 56 months of continuous job growth, the US unemployment rate is under 6%, the economy is growing at a robust 3.5%, gasoline is under $3 a gallon, the stock market is at an all-time high, and the federal budget deficit has been cut in half, not to mention that ten million more Americans can afford to see a doctor when they get sick.

Not too shabby, and I can tell you this with total certainty: Were that the record of a Republican president, Fox News, Rush Limbaugh, Sean Hannity et al would be crowing about it around the clock. But they are all about politics, not reality, so all you’re going to hear about is “Obama’s failed agenda.” Yeah, right.