It is said that those who do not read history are doomed to repeat it.  But which history should we read?  The one that is penned as the events take place?  Or the one written decades afterwards?

The question is relevant for countless economic policies, particularly regarding the role of the federal government in the economy.  As the generations that came of age in the era of the Great Depression and the New Deal pass from the scene, and the nation is increasingly populated by those who have never heard a Roosevelt radio address and have never known a time when a quarter of the work force was looking for a job, there is a reassessment of sorts occurring as to what really happened during what was unquestionably the worst economic experience in our nation’s history. 

It’s a reassessment that has important ramifications today.

In fact, the inevitable political implications of any discussion of the 1930’s economic events probably means that it’s still too soon to attempt anything resembling a dispassionate analysis of this troubling period of our past.  The New Deal did more than establish the countless government agencies and landmark programs like Social Security that remain alive to this day.  It also ushered in an era of government activism in affairs of the economy that is almost taken for granted today. 

The federal government, as well as many state governments, stands poised today to act at almost every turn of economic events.  The threat of higher default rates in subprime mortgage markets has led to calls for Congress to intervene with moratoriums on delinquencies and evictions.  The scent of impropriety in the events at companies like Enron and Tyco brought us the Sarbanes-Oxley law that dramatically ratcheted up regulatory requirements.  And the rise in insurance rates in hurricane-prone coastal states has gotten some states – and their taxpayers -- into the home insurance business. 

We applaud ourselves for taking the initiative and showing compassion to those riding out the bumps and swallowing the harsh medicine the economy serves up from time to time.  But beyond this warm and fuzzy feeling, do our actions make these situations better or worse?

If a fresh analysis of the 1930’s were to cast any doubt on the storyline that the New Deal’s measures rescued the American economy, it would chip away at the foundation for programs and policies that have strong constituencies today.  But we ignore the issue of what worked, and what didn’t work, to pull the nation out of the Great Depression at our own peril.

And the facts pointed out by author Amity Shlaes in her recent book are difficult things to ignore.  Five years after the New Deal was underway, the nation’s unemployment rate still hovered about 20 percent.  The stock market, as measured by the Dow Jones Industrial Average, took until the 1950’s to reach its pre-depression levels.  Ms. Shlaes argues that the actions of both Herbert Hoover and FDR, not to mention Congress, helped turn a painful, yet necessary, market correction into a catastrophic event that scarred millions of families forever.

It’s more than just a blame game, although the political side of the question may make it seem so.  It goes without saying that we should learn from our mistakes.  And it’s hard to find an era where more of them were made – both in the U.S. and abroad – than this sad chapter in our economic history.

Yet for all of its economic failings, the New Deal was a colossal political success, and tinkering with the economy has remained popular ever since.  And it is clear that our elected leaders have learned that lesson too well.