Although Roosevelt had advocated balancing the budget in his 1932 campaign, he demonstrated confidence and courage when he changed his stance in response to the stark reality of staggering unemployment. However, he was criticized by many as being fiscally irresponsible.
Historical Context
"In Keynes' theory, one person's spending goes towards another person's earnings, and when that person spends his or her earnings, he or she is, in effect, supporting another person's earnings. This cycle continues on . . . When the Great Depression hit, people's natural reaction was to hoard their money. Under Keynes' theory, this stopped the circular flow of money, keeping the economy at a standstill. Keynes' solution to this poor economic state was that the government should step in to increase spending..."
-Wise Geek ". . . a fascinating piece of historical skepticism in Roosevelt’s old copy of William Foster and Waddill Catchings’ The Road to Plenty (1928), a book that put forward a prototype of Keynes’ 'General Theory' eight years before the famous economist formalized it himself. Inside the front cover . . . Roosevelt scrawled: 'Too good to be true–you can’t get something from nothing.'”
-Evan Puschak, Economic Policy Journal |
Adapting to Conditions
". . . the lessons FDR drew from the 1937-38 recession were clear: cutting federal spending and tightening the money supply in the midst of a deep economic crisis were bad ideas and from this point on his administration pursued economic policies that can only be described as unabashedly Keynesian . . ."
-David B. Woolner, Roosevelt Institute “The economic experiments of President Roosevelt may prove, I think, to be of extraordinary importance in economic history, because for the first time . . . theoretic advice is being taken by one of the rulers of the world as the basis of large-scale action.” |
"Critics of the New Deal argued that deficit spending would never solve the economic crisis and that the programs advocated by Roosevelt bordered on socialism and the creation of the welfare state."
-Library of Congress "Conservative critics of FDR’s polices continually argue that the deficit spending that fueled the New Deal was the root cause of its inability to bring the unemployment rate down to acceptable levels. In short, they argue that . . . only the free market can provide the economic stimulus necessary to get the economy back on its feet again. "
-David B. Woolner, Roosevelt Institute |
Legacy
"By the time the United States was fully engaged in the World War II, federal spending accounted for more than half of the country's Gross National Product, business was booming and the scourge of unemployment had all but disappeared. And what were the long term consequences of all of this borrowing and spending? Economic chaos? A sovereign debt and default crisis? No, what followed was more than three decades of economic expansion and the creation of perhaps the best paid and best educated work-force America had ever seen. The modern middle class was born."
-David B. Woolner, Roosevelt Institute
-David B. Woolner, Roosevelt Institute