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Joseph Lazzaro - Did New Deal End Depression
Joseph Lazzaro - Did New Deal End Depression
Joseph Lazzaro - Did New Deal End Depression
During the initial phase of the New Deal (1933-37), the U.S. economy grew at a compound annual rate of about
9%, with GDP rising from $635 billion in 1933 to $911 billion in 1937.
We'll repeat that so that FDR naysayers -- including certain U.S. Senators -- can identify the statistic: During
the New Deal's initial phase, U.S. GDP increased from $635 billion in 1933 to $911 billion in 1937.
In late 1937, FDR felt pressured from Republicans to balance the budget for fiscal 1938, so he attempted to do
so -- reducing fiscal stimulus elements and making other changes to the New Deal. And guess what happened in
1938? That's correct: the economy contracted, with GDP falling to $879 billion in 1938.
FDR returns to New Deal philosophy
In late 1938, FDR then was able to turn back Republican pressures, and returned to his fiscal stimulus instincts,
newly confident that it was working and had expanded GDP, and rigorous GDP growth resumed through 1940.
Federal government spending for World War II (1941-45) then drove U.S. unemployment down to as low as
1.5%, as the nation mobilized to defeat the Axis threat of Nazi Germany, Fascist Italy, and Imperialist Japan.
The record, specifically U.S. unemployment rates for the period, clearly shows the positive impact of FDR's
New Deal policies on the U.S. economy:
1929: 3.1% (Hoover is president; U.S. stock market crashes, October 1929)
1930: 8.7%
1931: 15.8%
1932: 23.5%
1933: 24.8%, (FDR becomes president, New Deal begins)
1934: 21.6%
1935: 19.9%
1936: 16.8%
1937: 14.2% (Republican Party pressures to balance federal budget; FDR decreases New Deal
spending.)
1938: 18.9% (U.S. economy contracts after New Deal spending was reduced and taxes were raised.
FDR subsequently encouraged -- and succeeded in securing -- resumption of the New Deal.)
1939: 17.1%
1940: 14.5%
1941: 9.7% (World War II spending begins.)
Fiscal Stimulus/Economic Analysis: The New Deal increased U.S. GDP and resulted in a substantial decrease
in U.S. unemployment, both during its initial phase (1933-37) and after FDR turned back 1937-38 Republican
pressure to balance the budget (1939-41). The fiscal stimulus provided by the New Deal worked. That's the
record, and don't let anyone tell you otherwise.
If anything, FDR's New Deal spending was too small in the early years: had a larger stimulus been passed, U.S.
GDP would have increased more and unemployment would have declined to lower levels.
Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
http://www.dailyfinance.com/2009/03/07/did-new-deal-end-depression-history-says-deficit-spending-works/