The New Deal and Recovery, Part 21: Happy Days

George SelginBy the start of 1948, there could no longer be any doubt: the Great Depression wasn ' t coming back. Instead of collapsing at war ' s end, as many feared it would, combined government and private spending (as measured by nominal Gross Domestic Product) hardly budged between 1945 and 1946, and started climbing again thereafter. Consequently, as we ' ve seen, the unemployment rate ended up being as low as it had been in the latter 1920s; and the consumer price level, far from falling again as many feared it would, rose at alarming rates once controls were lifted, settling down by the end of the decade.Nor was this postwar improvement short-lived: a decade later, Brookings economistBert Hickman (1958, p. 117) was able to commemorate twelve years of " impressive " growth " unmarked by serious economic contraction. "Missing the MarkWhat lay behind this remarkable achievement? The proximate answer was a revival of private spending far exceeding what many economists, and Keynesians especially, predicted, and doing so by more than enough to compensate for a reduction in government spending that was itself greater than most had anticipated.Consider, for example, a pair of painstaking and influential but otherwise representativeforecasts prepared just after V-J Day by Everett Hagen, who was then chief of the Fiscal Policy and Program Planning Division of the Office of War Mobilization and Reconversion. Despite the late date, and the fact that Hagen somewhatoverestimatedpos...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs