Diary: 'Failure' of the New Deal, Part II

On Tuesday I posted a diary
http://www.opednews.com/populum/diarypage.php?did=12078
on what Republicans call the 'failure" of the New Deal on the Great Depression. It dealt with the contraction and expansion of the Gross Domestic Product (GDP) and unemployment rates under Herbert Hoover and Franklin Delano Roosevelt.

Today we will deal with the response the economy had to spending; examining consumer spending, industrial spending (on physical matters such as plants, machinery, materials, inventory, and not salary, wages and bonuses) and government spending. As with Part I, we will consider mostly data that occurred before World War II which conservatives falsely claim was the reason the Great Depression ended.

Consumer spending under Hoover's conservative approach:

1929 $79.0 billion (GDP was $104 b)
1930 $71.0 billion (GDP was $91.1 b)
1931 $61.3 billion (GDP was $76.3 b)
1932 $49.3 billion (GDP was $58.5 b)
1933 $46.4 billion (GDP was $56.0 b)

Consumer spending under the New Deal approach:

1934 $51.9 billion (GDP was $65.0 b)
1935 $56.3 billion (GDP was $72.5 b)
1936 $62.6 billion (GDP was $82.7 b)
1937 $67.3 billion (GDP was $90.8 b)
1938 $64.6 billion (GDP was $85.2 b)*
1939 $67.6 billion (GDP was $91.1 b)
1940 $71.9 billion (GDP was $100.6 b)
1941 $81.9 billion (GDP was $125.8 b)

* The reversal of progress occurred when Roosevelt ceased what was working and tried conservative calls to end deficit spending and balance the budget in 1937.

Industrial spending under Hoover's conservative approach:

1929 $16.2 billion (GDP was $104 b)
1930 $10.3 billion (GDP was $91.1 b)
1931 $5.5 billion (GDP was $76.3 b)
1932 $900 million (GDP was $58.5 b)
1933 $1.4 billion (GDP was $56.0 b)**

Industrial spending under the New Deal approach:

1934 $2.9 billion (GDP was $65.0 b)
1935 $6.3 billion (GDP was $72.5 b)
1936 $8.4 billion (GDP was $82.7 b)
1937 $11.7 billion (GDP was $90.8 b)
1938 $6.7 billion (GDP was $85.2 b)*
1939 $9.3 billion (GDP was $91.1 b)
1940 $13.2 billion (GDP was $100.6 b)
1941 $18.1 billion (GDP was $125.8 b)

* The reversal of progress occurred when Roosevelt ceased what was working and tried conservative calls to end deficit spending and balance the budget in 1937.

** Industrial spending increased slightly late in 1933 to satisfy demand after implementation of the Emergency Works Progress Act that created the Civilian Conservation Corps and the Works Progress Administration that purchased materials from the private sector while consumer spending didn't pick up until 1934.

Government spending under Hoover's conservative approach:

1929 $8.5 billion (GDP was $104 b)
1930 $9.2 billion (GDP was $91.1 b)
1931 $9.2 billion (GDP was $76.3b)
1932 $8.1 billion (GDP was $58.5 b)
1933 $8.8 billion (GDP was $56.0 b)

Increase in 1933 government spending rose because of FDR's Emergency Works Progress Program began operations late in the year, as stated above.

Government spending under the New Deal approach:

1934 $9.8 billion (GDP was $65.0 b)
1935 $10.0 billion (GDP was $72.5 b)
1936 $11.8 billion (GDP was $82.7 b)
1937 $11.7 billion (GDP was $90.8 b)
1938 $12.8 billion (GDP was $85.2 b)*
1939 $13.3 billion (GDP was $91.1 b)
1940 $14.1 billion (GDP was $100.6 b)
1941 $24.6 billion (GDP was $125.8 b)

* The lower 1938 GDP occurred after Roosevelt ceased what was working and tried conservative calls to end deficit spending and balance the budget in 1937. It had a definite effect on consumer and industrial spending, as the data show.

The 1941 figures are slightly skewed because of a quick increase in government spending following the declaration of war early in December.

As is clear to see, spending by both consumers and industry steadily declined throughout the Hoover years and pulled the GDP down with it, but as government spending under the New Deal increased so did industrial spending and consumer spending, even though government spending by FDR was not outrageous compared to spending by Hoover. Hoover's spending only appeared to grow because the GDP was contracting. And the outcome of heavier government spending to stimulate the economy does not appear to be "wasteful" as conservatives always claim government expenditures to be. The government spending that comes closest to "wasteful" is that going for lavish pensions for elected and appointed government officials who create our economic problems.

It is also noteworthy that Hoover's last full year in office (1932) government spending was 13.85% of GDP while FDR's last full year before the war (1940) government spending was 14.1% of GDP, a difference hardly worth mentioning. But the 1932 deficit under Hoover was 2.56% of GDP while the deficit in 1940 was 1.39% of GDP, reflecting that heavier government spending was more efficient because it had created a greater GDP.

Right-wingers, who are constantly rewriting history trying to exonerate themselves of responsibility for all problems, claim FDR "prolonged" the Great Depression. The only way that can be given serious consideration is to cite his reduced spending in 1937 ~ at conservative insistence ~ trying to balance the budget and lost at least one year in the recovery. Many astute economists (those who are not right-wing ideologues) say FDR didn't spend enough fast enough and that may have delayed the recovery. That's probably not what conservatives mean by "prolonged."

Most economists acknowledge that as industrial spending decreases it brings down consumer spending, creating a recession. When that happens, it is imperative that government spending increase to fill the vacuum decreased industrial spending created, but when industrial and consumer spending increase enough to sustain a vibrant and growing economy government spending should be restrained. That was what happened under the New Deal, government spending moved into the vacuum and spurred economic improvements which increased consumer and industrial spending and virtually brought us out of the Great Depression before World War II started, even though government spending couldn't be slowed or restrained because of the war.

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Raw economic data comes from a publication from the University of Houston, hardly a hotbed of radicalism, while commentary is the author's analysis.