Lessons from the Great Depression

 

LESSONS FROM THE GREAT DEPRESSION


During the 1932 presidential campaign, in the midst of the Great Depression, the Democratic challenger, Franklin D. Roosevelt, came to old Forbes Field in Pittsburgh's Oakland neighborhood. There he unveiled the major pledge of his campaign. As president, he would "balance the budget."

 

As it happened, the economy was in such collapse it didn't matter what the Democratic challenger promised. He was guaranteed victory against the Republican incumbent, seen as responsible for the economic shambles.

 

Once in office, FDR discovered the only way out of the economic mess he'd inherited was through a big government economic stimulus program. So, he funded a number of such programs, such as the Civilian Conservation Corps and the Works Progress Administration.

 

But, because FDR and most of Congress still believed the most important priority was "balancing the budget," none of these programs, known collectively as "The New Deal," were funded enough to completely pull the economy out of the Depression.

 

Yet they did bring about enough of a recovery so that things began to look better and, in 1936, the slight recovery helped FDR win a historic re-election landslide victory.

 

Encouraged by the margin of safety his re-election gave him, and the slight economic recovery, FDR decided it was now time to get serious about "balancing the budget." So, in his second term, he cut back on all the meager deficit stimulus spending he'd promoted.

 

The economy promptly relapsed into what historians call "The Roosevelt Recession" of 1937. His Republican opponents surged back to victory in the 1938 congressional elections and FDR's New Deal was effectively ended.

 

Meanwhile, the economy hobbled on to the end of the 1930s, only to be finally pulled out of the Great Depression by the massive government deficit spending required to win World War II.

 

FDR never did fulfill his Pittsburgh Promise to "balance the budget" and stop deficit spending. But the economy was booming -- and so no one cared about "balancing the budget" for many, many years.

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