Biden’s stimulus looks bigger than the New Deal, economics professor says

fdr biden
FDR in the White House in 1933; Biden signing the American Rescue Plan in 2021.

  • President Joe Biden has evoked some comparisons to FDR and his famous New Deal spending.
  • But Biden’s American Rescue Plan is actually a much larger response to a downturn, one professor says.
  • Syracuse’s Leonard Burman told Insider that the New Deal was “way too small” for that crisis.
  • See more stories on Insider’s business page.

Two Democratic presidents. Two mass unemployment crises. Two federal spending plans to rescue the economy. So how does Biden’s stimulus stack up to Roosevelt’s New Deal? Maybe it’s bigger.

President Joe Biden’s large-scale federal spending has already earned comparisons to the New Deal, but a behavioral economics professor says the plan is setting its own precedent.

“People think of the New Deal as this really, really aggressive response to the Great Depression. But part of the reason the Great Depression lasted so long was that Roosevelt and the country, the political leaders were really concerned about deficits,” Leonard Burman, the Paul Volcker Chair of Behavioral Economics at Syracuse University’s Maxwell School, told Insider.

The New Deal packages yielded some historic measures – like Social Security and modern unemployment insurance (UI) – but didn’t actually bring the Great Depression to an end. Part of the proof of this is that FDR rolled out multiple New Deals, including a so-called Second New Deal, but high unemployment wasn’t really put to bed until wartime mobilization set in.

According to Burman, the New Deal “limited some of the pains by creating jobs for some people that needed them and providing other assistance, but it was way too small.”

Roosevelt’s New Dealers “spent much less than would have been appropriate for the size of the economic downturn at that point,” he said, “and we didn’t really recover until there was a massive infusion of spending in World War Two.”

When you contrast that with Biden’s American Rescue Plan, he said, “we’ve never done this.”

Biden’s big spending looks set to continue. He is due to roll out his next multitrillion-dollar package tomorrow, on infrastructure, which could come in anywhere between $3 trillion and $4 trillion, as The Washington Post reported.

Showing that deficit concerns remain a consideration, the package, which will be split into two parts, will include a large tax hike. However, that may be more to calm the inflation fears that have been roiling the markets since Biden took office, instead of the deficit specifically. The movement in Treasury yields indicates market concerns over future runaway inflation that hasn’t arrived yet and not on indicators of it happening at present.

Burman reiterated that this is something new, and should be useful to economists in the future. “I’m an economist. I like data,” he said. “I mean, this has got to be a new data point, and it will be helpful for us to calibrate future response to future economic downturns.”

The White House did not respond to a request for comment.

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