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→Stagnation of the economy: Negative supply side: expand
==Stagnation of the economy: Negative supply side==
==Stagnation of the economy: Negative supply side==
Supply side economics<ref>The term was invented in the 1970s.</ref> can have a goal of expanding the supply of labor and capital, as typified the [[Ronald Reagan]] administration in the 1980s. But it can also be the reverse or "negative supply side," trying to reduce the unemployed, for example, by moving millions of people out of the labor force, as by relief agencies (CCC, WPA etc), retirement (Social Security, Old Age pensions) or (staring in 1940) the military draft.
Supply side economics<ref>The term was invented in the 1970s.</ref> can have a goal of expanding the supply of labor and capital, as typified the [[Ronald Reagan]] administration in the 1980s. But it can also be the reverse or "negative supply side," trying to reduce the unemployed, for example, by moving millions of people out of the labor force, as by relief agencies (CCC, WPA etc), retirement (Social Security, Old Age pensions) or (staring in 1940) the military draft.
===Practice===
Senator Hugo Black's 30-hour bill, a favorite panacea of the [[American Federation of Labor]] (AFL), did not pass, but its substitute, the [[National Industrial Recovery Act]] (NIRA), sought recovery through minimum wages and the reduction of hours. The NRA did reduce the total number of hours worked in the nation, and thus reduced the total GNP and average real income. The Civilian Conservation Corps (CCC) kept several hundred thousand young men at a time off the labor market. Child labor codes in the NRA effectively removed youths under sixteen from the labor market, and home work was drastically curtailed. Public opinion strongly supported federal and state efforts, echoed by many local governments, school boards, utilities, and other large employers, to prevent wives from working if the husband (the "breadwinner") had a job. Alien Mexican families were given one-way rail tickets back home. The Social Security program did not have much effect on older people until the 1950s, but meanwhile railroad retirement and old age assistance for the poor who stopped looking for jobs reduced the supply of labor. As late as 1937, Roosevelt's aides were drafting laws to shorten the work week to thirty-five hours, require premium pay for overtime, and fix the minimum hourly wage at 80 cents (far above the prevailing 63-cent rate). They failed, and the much watered down Fair Labor Standards Act of 1938 established a 25-cent-per-hour minimum wage which covered 43 percent of the nation's wage earners. The final, and successful supply-side remedy was the draft, and after 1940 the increase in military personnel paralleled the reduction of unemployment.
The problem with the supply-side remedies was that they cut output as much as input, made the nation poorer, slowed long-term growth, distorted personal choices, and increased unemployment.
===Theory===
The New Dealers promoted negative supply side because they believed in the theory of economic maturity developed by Alvin Hansen to the effect that the American economy by the late 1920s was fully grown and would not be growing any more. Recovery meant return to the levels of the 1920s, but it seemed unlikely there would be much future growth. There seemed to be no new industries--the most important new industry in the 1930s was radio, but it employed few people. Therefore pro-growth solutions, New Dealers argued, were a mistake, especially because they gave a lot of leeway to big business.<ref> George Terborgh, ''The Bogey of Economic Maturity'' (1945) is a systematic refutation. [http://www.questia.com/googleScholar.qst;jsessionid=LZXTJhxhfZFGMG8K0TbQMs2GvQX0NBvy2Gk2Tp7PLb59fkLll6Qs!-508003271!-1404068679?docId=8860128 online edition]</ref>
The New Dealers promoted negative supply side because they believed in the theory of economic maturity developed by Alvin Hansen to the effect that the American economy by the late 1920s was fully grown and would not be growing any more. Recovery meant return to the levels of the 1920s, but it seemed unlikely there would be much future growth. There seemed to be no new industries--the most important new industry in the 1930s was radio, but it employed few people. Therefore pro-growth solutions, New Dealers argued, were a mistake, especially because they gave a lot of leeway to big business.<ref> George Terborgh, ''The Bogey of Economic Maturity'' (1945) is a systematic refutation. [http://www.questia.com/googleScholar.qst;jsessionid=LZXTJhxhfZFGMG8K0TbQMs2GvQX0NBvy2Gk2Tp7PLb59fkLll6Qs!-508003271!-1404068679?docId=8860128 online edition]</ref>
The most prominent spokesman for "economic maturity" was Harvard economist Alvin Hansen (1887-1975)<ref> Alvin H. Hansen, "Economic Progress and Declining Population Growth," ''American Economic Review,'' Vol. 29, No. 1 (Mar., 1939), pp. 1-15 [http://www.jstor.org/stable/1806983 in JSTOR]</ref> who called it "secular stagnation." In the late 1930s Hansen argued that "secular stagnation" had set in, so that the American economy would never grow rapidly again, because all the growth ingredients had played out, including technological innovation and population growth. The only solution, he argued, was constant deficit spending by the federal government. Critics, such as George Terborgh, attacked Hansen as a pessimist and defeatist for advancing his secular stagnation thesis. Hansen replied that secular stagnation was just another name for Keynes's underemployment equilibrium. However, the sustained economic growth beginning in 1940 undercut Hansen's predictions and his stagnation model was forgotten.<ref> W. Robert Brazelton, "Alvin Harvey Hansen: Economic Growth and a More Perfect Society: The Economist's Role in Defining the Stagnation Thesis and in Popularizing Keynesianism," ''American Journal of Economics and Sociology,'' Vol. 48, No. 4 (Oct., 1989), pp. 427-440 [http://www.jstor.org/stable/3487557 in JSTOR]</ref>
The most prominent spokesman for "economic maturity" was Harvard economist Alvin Hansen (1887-1975)<ref> Alvin H. Hansen, "Economic Progress and Declining Population Growth," ''American Economic Review,'' Vol. 29, No. 1 (Mar., 1939), pp. 1-15 [http://www.jstor.org/stable/1806983 in JSTOR]</ref> who called it "secular stagnation." In the late 1930s Hansen argued that "secular stagnation" had set in, so that the American economy would never grow rapidly again, because all the growth ingredients had played out, including technological innovation and population growth. The only solution, he argued, was constant deficit spending by the federal government. Critics, such as George Terborgh, attacked Hansen as a pessimist and defeatist for advancing his secular stagnation thesis. Hansen replied that secular stagnation was just another name for Keynes's underemployment equilibrium. However, the sustained economic growth beginning in 1940 undercut Hansen's predictions and his stagnation model was forgotten.<ref> W. Robert Brazelton, "Alvin Harvey Hansen: Economic Growth and a More Perfect Society: The Economist's Role in Defining the Stagnation Thesis and in Popularizing Keynesianism," ''American Journal of Economics and Sociology,'' Vol. 48, No. 4 (Oct., 1989), pp. 427-440 [http://www.jstor.org/stable/3487557 in JSTOR]</ref>
====Conservative opposition====
Conservative economists at the time opposed this idea, most notably Raymond Moley (a widely read columnist), consultants George Terborgh<ref> Benjamin Higgins, "The Doctrine of Economic Maturity," ''American Economic Review,'' Vol. 36, No. 1 (Mar., 1946), pp. 133-141 [http://www.jstor.org/stable/1802261 in JSTOR]</ref> and Wilfrid I. King<ref> Willford I. King, "Are We Suffering From Economic Maturity?," ''Journal of Political Economy,'' Vol. 47, No. 5 (Oct., 1939), pp. 609-622 [http://www.jstor.org/stable/1824177 in JSTOR]</ref>, and professors Gottfried Haberler, Frank Knight, Oskar Morgenstern, Henry Simons, Joseph Schumpeter, and William Fellner.<ref>William Fellner, " The Technological Argument of the Stagnation Thesis," ''Quarterly Journal of Economics,'' Vol. 55, No. 4 (Aug., 1941), pp. 638-651 [http://www.jstor.org/stable/1884121 in JSTOR]</ref>
Conservative economists at the time opposed this idea, most notably Raymond Moley (a widely read columnist), consultants George Terborgh<ref> Benjamin Higgins, "The Doctrine of Economic Maturity," ''American Economic Review,'' Vol. 36, No. 1 (Mar., 1946), pp. 133-141 [http://www.jstor.org/stable/1802261 in JSTOR]</ref> and Wilfrid I. King<ref> Willford I. King, "Are We Suffering From Economic Maturity?," ''Journal of Political Economy,'' Vol. 47, No. 5 (Oct., 1939), pp. 609-622 [http://www.jstor.org/stable/1824177 in JSTOR]</ref>, and professors Gottfried Haberler, Frank Knight, Oskar Morgenstern, Henry Simons, Joseph Schumpeter, and William Fellner.<ref>William Fellner, " The Technological Argument of the Stagnation Thesis," ''Quarterly Journal of Economics,'' Vol. 55, No. 4 (Aug., 1941), pp. 638-651 [http://www.jstor.org/stable/1884121 in JSTOR]</ref>