The New Deal and Recovery, Part 17: The Keynesian Myth, Concluded

George Selgin(Previous installments of " The Keynesian Myth " arehereandhere.)Balancing ActAsRichard Adelstein (1991, p. 177) observes, far from taking Keynes ' s advice that he ratchet-up the federal government ' s deficit spending, " Roosevelt held fast to the ideal of a balanced budget and remained the chief opponent within the administration of an aggressive program of public works. " Instead of making spending on public works a central component of the New Deal ' s recovery program,Vladimir Kazak évich (1938, p. 476) explains, FDR regarded it as a mere " auxiliary to [that program ' s] other schemes. "Despite Roosevelt ' s desire to avoid large deficits, for three fiscal years during the 30 ' s —1934, 1936, and 1939—his administration ' s deficits were higher than Hoover ' s largest. But as I noted in a previous essay, the ' 36 deficit was only as large as it was because Congress passed a $2 billion veteran ' s bonus bill over FDR ' s veto. As the chart below shows, though federal expenditures themselves more than doubled between 1933 and 1937, federal receipts also rose considerably. Consequently, Roosevelt ' s deficit spending never quite reached 7 percent of GDP in any fiscal year before the U.S. entered the war.Furthermore, as Bradford Lee (1982, p. 65) points out, according to standard measures of the" full employment surplus, " no two consecutive New Deal budgets packed a greater fiscal-stimulus punch than that of Hoover ' s 1930 and 1931 budgets; and relative...
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