It’s an article of faith that running budget deficits during the
New Deal helped end the Great Depression. This myth has been
demolished countless times, but it hasn’t penetrated to the
pundits and pop economists who host cable news-talk shows. In
fact, FDR did not run extraordinarily large budget deficits, and
J.M. Keynes actually criticized FDR for this. For details see
this New York Times article by Price V. Fishback of the
University of Arizona and the National Bureau of Economic
Research. Fishback writes, “Once we take into account the
taxation during the 1930’s, we can see that the budget deficits
of the 1930’s and one balanced budget were tiny relative to the
size of the problem [reversing the fall in GNP since 1929]."
This point was also made by Jim Powell in FDR’s Folly: “Changes
in federal budget deficits didn’t correspond with changes in
gross domestic product, and in any case the federal budget
deficit at its peak (1936) was only 4.4 percent of the gross
domestic product, much too small for a like