Does "Stimulus" Work?

FDR's June 1934 Fireside Chat declared an end to the Great Depression. His New Deal Stimulus package, which ultimately rocketed American child debt to bankers to 130% GDP (about $18T in today's banker-inflated dollars), he believed, had substantially ended the downturn. Here are his thoughts on the effectiveness of his stimulus spending:

"It has been several months since I have talked with you concerning the problems of Government. Since January, those of us in whom you have vested responsibility have been engaged in the fulfillment of plans and policies which had been widely discussed in previous months. It seemed to us our duty not only to make the right path clear, but also to tread that path.

As we review the achievements of this session of the Seventy-third Congress, it is made increasingly clear that its task was essentially that of completing and fortifying the work it had begun in March, 1933. That was no easy task, but the Congress was equal to it. It has been well said that while there were a few exceptions, this Congress displayed a greater freedom from mere partisanship than any other peace-time Congress since the Administration of President Washington himself. The session was distinguished by the extent and variety of legislation enacted and by the intelligence and good-will of debate upon these measures.

I mention only a few of the major enactments. It provided for the readjustment of the debt burden through the corporate and municipal bankruptcy acts and the Farm Relief Act. It lent a hand to industry by encouraging loans to solvent industries unable to secure adequate help from banking institutions. It strengthened the integrity of finance through the regulation of securities exchanges. It provided a rational method of increasing our volume of foreign trade through reciprocal trading agreements. It strengthened our naval forces to conform with the intentions and permission of existing treaty rights. It made further advances toward peace in industry through the Labor Adjustment Act. It supplemented our agricultural policy through measures widely demanded by farmers themselves and intended to avert price-destroying surpluses. It strengthened the hand of the Federal Government in its attempts to suppress gangster crime. It took definite steps toward a national housing program through an act which I signed today designed to encourage private capital in the rebuilding of the homes of the Nation. It created a permanent Federal body for the just regulation of all forms of communication, including the telephone, the telegraph and the radio. Finally, and I believe most important, it reorganized, simplified and made more fair and just our monetary system, setting up standards and policies adequate to meet the necessities of modern economic life, doing justice to both gold and silver as the metal bases behind the currency of the United States.

In the consistent development of our previous efforts toward the saving and safeguarding of our national life, I have continued to recognize three related steps. The first was relief, because the primary concern of any Government dominated by the humane ideals of democracy is the simple principle that in a land of vast resources no one should be permitted to starve. Relief was and continues to be our first consideration. It calls for large expenditures and will continue in modified form to do so for a long time to come. We may as well recognize that fact. It comes from the paralysis that arose as the after-effect of that unfortunate decade characterized by a mad chase for unearned riches, and an unwillingness of leaders in almost every walk of life to look beyond their own schemes and speculations. In our administration of relief we follow two principles: first, that direct giving shall, wherever possible, be supplemented by provision for useful and 'remunerative work and, second, that where families in their existing surroundings will in all human probability never find an opportunity for full self-maintenance, happiness and enjoyment, we shall try to give them a new chance in new surroundings.

The second step was recovery, and it is sufficient for me to ask each and every one of you to compare the situation in agriculture and in industry today with what it was fifteen months ago.

At the same time we have recognized the necessity of reform and reconstruction—reform because much of our trouble today and in the past few years has been due to a lack of understanding of the elementary principles of justice and fairness by those in whom leadership in business and finance was placed—reconstruction because new conditions in our economic life as well as old but neglected conditions had to be corrected.

Substantial gains well known to all of you have justified our course. I could cite statistics to you as unanswerable measures of our national progress- statistics to show the gain in the average weekly pay envelope of workers in the great majority of industries—statistics to show hundreds of thousands reemployed in. private industries, and other hundreds of thousands given new employment through the expansion of direct and indirect Government assistance of many kinds, although, of course, there are those exceptions in professional pursuits whose economic improvement, of necessity, will be delayed. I also could cite statistics to show the great rise in the value of farm products—statistics to prove the demand for consumers' goods, ranging all the way from food and clothing to automobiles, and of late to prove the rise in the demand for durable goods—statistics to cover the great increase in bank deposits, and to show the scores of thousands of homes and of farms which have been saved from foreclosure.

But the simplest way for each of you to judge recovery lies in the plain facts of your own individual situation. Are you better off than you were last year? Are your debts less burdensome? Is your bank account more secure? Are your working conditions better? Is your faith in your own individual future more firmly grounded?

Also, let me put to you another simple question: Have you as an individual paid too high a price for these gains? Plausible self-seekers and theoretical die-hards will tell you of the loss of individual liberty. Answer this question also out of the facts of your own life. Have you lost any of your rights or liberty or constitutional freedom of action and choice? Turn to the Bill of Rights of the Constitution, which I have solemnly sworn to maintain and under which your freedom rests secure. Read each provision of that Bill of Rights and ask yourself whether you personally have suffered the impairment of a single jot of these great assurances. I have no question in my mind as to what your answer will be. The record is written in the experiences of your own personal lives."

- FDR, Fireside Chat, June 28, 1934

Contrast FDR's impression of a 1934 government-stimulated "recovery" with what happened next:

• The Great Depression raged-on for 20 more years
• The Dow finally reclaimed 1929 levels in 1954
• 25% of American families became unemployed, most destitute
• 70-80 million people died to affect the actual recovery which followed WWII