Dale Dietrich
friedman: always supply your comparative advantage
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Can the U.S. Stimulus Package Work?

Categories: policypolitics
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Of late, I’ve heard countless Republicans, Fox News pundits and others emphatically state that:

  • Keynesian stimulus spending has never worked in the past;
  • World War II was the sole impetuous for recovery after the Great Depression – not spending; and
  • the New Deal had no ameliorating effect on the Great Depression’s high unemployment rates.

All of this is said, of course, in argument against the current Obama/Democratic stimulus package.

It is certainly true that World War II proved to be an enormous, if not THE most important, stimulus to post Depression recovery. The chart* below, however, makes it clear that Roosevelt’s stimulus spending did have an important, positive effect on the U.S. economy:

msnbc (Feb 9 2009) - U.S. Gross Domestic Product 1929 to 1941

U.S. GDP doubled after the New Deal spending began – between 1933 and 1941 -before the U.S. entered World War 2. While it’s true that the unemployment rate in the U.S. was still high, at 15%, just prior to the commencement of World War II , the unemployment rate was 23% in 1933. As such, 8% of Americans were put back to work during the intervening years before WW2 .

I don’t know if the Obama/Democratic stimulus package will yield similar or better results. But in light of history, for Republicans and others to continue to make the unqualified assertions listed above, shows ignorance at best, or dishonesty at worst.

*The chart above was displayed on MSNBC’s Rachael Maddow show on Monday February 9, 2009.

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