New Deal
Keynesians: halted the collapse but lacked Keynesian deficit spending

At the beginning of the Great Depression, many economists traditionally argued against deficit spending. The fear was that government spending would "crowd out" private investment and would thus not have any effect on the economy, a proposition known as the Treasury view, but Keynesian economics rejected that view. They argued that by spending vastly more money—using fiscal policy —the government could provide the needed stimulus through the multiplier effect. Without that stimulus, business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynes visited the White House in 1934 to urge President Roosevelt to increase deficit spending. Roosevelt afterwards complained, "he left a whole rigmarole of figures—he must be a mathematician rather than a political economist."

The New Deal tried public works, farm subsidies and other devices to reduce unemployment, but Roosevelt never completely gave up trying to balance the budget. Between 1933 and 1941, the average federal budget deficit was 3% per year. Roosevelt did not fully utilize deficit spending. The effects of federal public works spending were largely offset by Herbert Hoover's large tax increase in 1932, whose full effects for the first time were felt in 1933 and it was undercut by spending cuts, especially the Economy Act. According to Keynesians like Paul Krugman, the New Deal therefore was not as successful in the short run as it was in the long run.

Following the Keynesian consensus (that lasted until the 1970s), the traditional view was that federal deficit spending associated with the war brought full-employment output while monetary policy was just aiding the process. In this view, the New Deal did not end the Great Depression, but halted the economic collapse and ameliorated the worst of the crises.
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