TakePart Looks Back: FDR's New Deal

With the Obama stimulus package on the verge of being enacted into law, everyone is wondering how effective it will be in turning around the ailing economy.  Obviously nobody can say for sure, but the one historical parallel as a nation we have for these troubled times is the Great Depression in the 1920's and 30's and Franklin Delano Roosevelt's massive New Deal spending to counter its disastrous effects. There has been a fair amount of revisionist history going regarding how effective FDR's massive Keynesian spending was at saving the United States out of the greatest economic peril it ever faced. A sentiment commonly heard is that "only WWII eventually pulled the country out of the Depression".  In recent weeks I have heard it on FoxNews, on other network news opinion programs, from friends and from business colleagues, most of whom naturally oppose the current stimulus package.  This history revision is categorically and demonstrably false.  As seen in the graph below, United States Gross Domestic Product, the most commonly used sum total measure of the economy, which had fallen around 30% after the stock market crash of 1929 during Herbert Hoover's Administration almost immediately began a steady rebound as soon as FDR took office and began spending big in his first 100 days to stimulate the economy. GDP was at a record high in the US at the time of the 1929 Crash, however a full rebound had been achieved with a new record GDP by 1936, over five years before the Pearl Harbor Attacks which drew America in World War II.  The modest recession that followed around 1937 occurred when Roosevelt cut back on governement spending in order to reduce the deficit.  But once again the economy came back and came back big, posting record GDP years from 1938 up until the eve of the War.  Which makes perfect sense, given that a country that's flat broke can't exactly finance the biggest War this world has ever known in multiple theaters around the Globe. Whether the Obama stimulus will have the same positive effect on the economy as Roosevelt's remains to be seen and there are plenty of factors, most notably the size of the stimulus and what programs are chosen to focus funding on, which could lead to different outcomes than what we experienced during the 1930's .  Deficits are also a serious concern going forward as what was already a huge national debt accumulated thanks to our friend's in the Bush Administration and his Republican Congress (who now by the way are Born Again Budget Balancers, just when we actually need to borrow big in order to save our way of life) is about to triple or even quadruple from the massive stimuli about to be enacted.  However as history has clearly shown, Keynesian spending during economic downturns works and works very well if done properly.  Plus you can even get additional benefits down the road if smart infrastructure and clean energy spending results in great public works. You can takepart by contacting your Senator or Representative in Congress and demanding they pass a responsible stimulus package ASAP. LINKS: Daily Kos: Once Upon a Time in Republican Land... Our Future: The "FDR Failed" Myth How Stuff Works: Roosevelt's New Deal