By doing this, the government created huge amounts of new demand for housing, i.e. effective demand from people who could now get bank loans for the first time. This put millions of people back to work, building the housing as well as the roads, gas mains, sewers, water lines and electrical lines that served all this new housing.
This was massive government intervention that was in no way in competition with the private sector, but was, in concert with the private sector, thereby bringing the economy alive and giving it a tremendous boost, since there were then so many newly employed people with money in their pockets, ready to spend.
The Uber-rich Response: "Take Back Our Power Over Congress and the White House"
Reagan's election and everything that happened after it, was the culmination of the bitterness that had been mounting in the business/conservative community. They were unhappy that they had to pay the lion's share of the taxes for the implementation of those very progressive policies, which in fact built up the economy so much and so well that it even benefited them! The rich liked the buildup, but, ingrates that they are, and were, they did not like paying the extra taxes for that buildup, especially so as the middle class grew stronger and more powerful politically. This loss of power experienced by the uber-rich, over Congress and the White House, made them very, very nervous. Huge numbers of middle-class ollege students with almost no tuition to pay were making unprecedented and worrisome demands. This could not be tolerated.
As a result of that nervousness and their mean-spirited and narrow-minded resentment about higher taxes, they went to work in a very disciplined and unified way, in a massive and very effective propaganda campaign, the purpose of which was to portray the government as "evil," as "inefficient," as not the solution," but rather as itself "the problem." And so it was that they selected Ronald Reagan, one of the greatest pitch men of all time, to be the Republican candidate for president. And of course they backed his political campaign with huge financial contributions. So, once elected, there was no surprise about what developed as his main message, which he drilled home at every opportunity, to a mostly very gullible (and by now historically ignorant) population: "Government is not the solution; it is the problem."
Can liberal and progressive forces now overcome that message?
It's a message that has become so deeply ingrained in the minds of those on the right (as well as in the minds of many who are in the middle of the political spectrum). Can it ever be overcome permanently? Not likely says a somewhat pessimistic Richard Wolff.
So what will it take to turn most people's thinking around? Answer: Capitalism must prove again, just as it did in the 1930s, that when you go through a period of pulling the government back (as happened in the 1920s under President Warren Harding), you get the very same economic problems that brought Keynesian economics into existence in the first place: ever increasing inequality of income and wealth, ever increasing numbers of people barely getting by, insufficient job quality and quantity, housing and education that's ever less affordable to ever more people.
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