Lessons Learned?

Lessons Learned from the Great Depression - Hopefully

The initial government response to the Great Depression was ineffective, as President Hoover insisted that the economy was sound [Jun 2008, John McCain – “the foundation of our economy is incredibly strong” - http://m.cnn.com/cnn/archive/archive/detail/130083/full;jsessionid=4CD4865183763817DE28E041188C1300] and that prosperity would soon return. Convinced that a balanced federal budget was essential to restoring business confidence, Hoover sought to cut government spending. But in the face of a collapsing economy, this served only to reduce demand further. To make matters worse, Hoover imposed protective tariffs which were quickly imposed by other countries in retaliation. This resulted in all but choking to death international trade. When Franklin Delano Roosevelt stepped into office in Jan 1932 unemployment had risen from a very small percentage to over 16%. Roosevelt quickly lifted the nation’s spirits with the rapid and unprecedented actions of the New Deal. Within days of his inauguration he called Congress into a special session, during which many pieces of emergency legislation were passed [Obama’s $787 billion stimulus package]. The New Deal pumped large amounts of money into the economy to reduce unemployment, and assist businesses and agriculture; and fund public works projects such as schools, dams, and road construction; and new social programs for the needy, elderly, and disabled. It also began to regulate banking and the stock market [Feb 26, 2009 - President Obama Urges New Banking Regulations - http://www.miamiherald.com/business/5min/story/922001.html]. Roosevelt almost doubled the U.S. debt from $22.5 billion in 1933 to $40.44 billion in 1939. Nevertheless, in the first year of his administration, unemployment rose from 16 to 25%. But by 1937 unemployment was down to 13.5%. Then a temporary reversal of recovery came when President Roosevelt ended the New Deal and raised taxes to balance the budget. Unemployment began to rise again and went up by about 2% to 16.5%. Roosevelt responded with a $5 billion spending program in the spring of 1938 [House Speaker Pelosi open to 2nd Stimulus Bill - http://www.politico.com/news/stories/0309/19888.html]. Because of his stimulus money, the economy began to get better again by mid-1938 but unemployment did not regain the 1937 level of 13.8% until late in 1939 which was followed less than a year later by the total evaporation of unemployment with the war boom.
http://en.wikipedia.org/wiki/Recession_of_1937
http://en.wikipedia.org/wiki/Economic_history_of_the_United_States

While many conservatives believed the New Deal turned the United States toward socialism, it instead helped to defuse tensions and preserve a democratic, capitalist system at a time when other nations turned to fascism or socialism. Most Americans took on a general feeling that a free market must be regulated in order to avoid another such economic catastrophe, and that a social safety net could be tolerated in a capitalistic society, especially after so many people in the 30’s has endured such horrific hardship and been so humiliated by having to stand in soup lines rather than work.
http://encarta.msn.com/encyclopedia_761584403/great_depression_in_the_united_states.html