The Heritage Foundation

THE ECONOMY

More federal spending: New deal or raw deal?

Sources: Department of Commerce, Census Bureau, Global Insight

History has a lesson for those who want to pump up government spending to “stimu-late” the economy and create jobs: During the Great Depression, President Franklin D. Roosevelt’s New Deal programs never drove unemployment lower than 20 percent. The jobless rate actually climbed during the second phase. The onset of World War II, not government spending, prompted America’s economic recovery.

For updates on federal spending plans, visit heritage.org and click on Rapid Response.

Unemployment Rate for Non-Farm Workers, 1926-1947

0

5%

10%

15%

20%

25%

30%

35%

40%

’26 ’27 ’28 ’29 ’30 ’31 ’32 ’33 ’34 ’35 ’36 ’37 ’38 ’39 ’40 ’41 ’42 ’43 ’44 ’45 ’46 ’47

WWII ends

FDR’s first New Deal

Supreme Court declares muchof New Deal unconstitutional

World War II begins

U.S. creates “war economy”

New Deal, Part 2, begins

Stock market

crash

Stock market

crash

5.5% — Normal unemployment rate, 1970–2008

U.S. enters WWII