Government spending Quote by Lawrence W. Reed
““Some defenders of FDR, such as economist Paul Krugman, blame the 1937–38 collapse on a reduction in government spending. In typical Keynesian fashion, they claim that the economy tanked that year because the president, after nearly doubling federal spending in his first term, caved to GOP demands to rein in expenditures. But in real terms, the reduction was puny — less than 1 percent of GDP. Even by Keynesian standards, this blip could hardly have produced the ensuing one-third decline in industrial production.””
About This Quote
Source Article: Economic Commentary, 2020
Critiques the claim that a tiny fiscal cut caused a major economic downturn, arguing the reduction was negligible.
In simple terms: Small spending cuts didn't cause the big slump.
Key Takeaway
Question the magnitude of policy impacts.
Themes
economics
policy analysis
history
Mood
analytical
critical
Type
academic
informative
When to use this quote
- academic debate
- policy formulation
- economic forecasting
Key Concepts
Keynesian economics
fiscal policy
Questions to Reflect On
- What other forces could explain the production decline?
- How reliable are historical economic at?
A Different Perspective
The argument may overlook other contributing factors.
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