Spending Debate A Throwback To New Deal The current debate in Congress over government spending harkens back to the pressures faced by President Franklin Delano Roosevelt in 1937. When FDR tried to balance the books that year, unemployment almost doubled.
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Spending Debate A Throwback To New Deal

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Spending Debate A Throwback To New Deal

Spending Debate A Throwback To New Deal

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Another Democratic effort on Capitol Hill didn't do as well. For weeks, Democrats pushed to extend unemployment benefits which expired last month. Last night that effort died on the Senate floor. The measure was blocked by a filibuster led by Republicans, who oppose the cost, which would've added $35 billion to the national debt over the next decade.

Democrats say to them it's starting to seem like 1937. That was the year, in the midst of the Great Depression, that President Franklin Delano Roosevelt bowed to pressure and curbed deficit spending, a move that many say set off a new recession. NPR's David Welna reports.

DAVID WELNA: Many economists agree that government spending, even when it's with borrowed money, boosts the overall economy, especially one battered by the worst recession in most people's lifetime. Republicans disagree. Last night, Senate Minority Leader Mitch McConnell cast his opposition to extending unemployment benefits as taking a stand against deficits.

Senator MITCH MCCONNELL (Republican, Kentucky): What we're not willing to do is to use worthwhile programs as an excuse to burden our children and our grandchildren with an even bigger national debt than we've already got.

WELNA: And here's Jon Kyl, the Senate's number two Republican.

Senator JON KYL (Republican, Arizona): Cutting spending is the whole point. You're trying to cut the spending so that you're not accumulating any more debt.

WELNA: Democrats agree - trillion dollar-plus deficits are a serious issue, but like St. Augustine's plea of Lord make me chaste but not yet, party leaders argue the need for continued economic stimulus outweighs any need to balance the budget.

The Senate's number two Democrat, Dick Durbin, says it was deficit spending that helped Franklin Delano Roosevelt cut unemployment levels in half during the Great Depression.

Senator DICK DURBIN (Democrat, Illinois): And then after few years, what happened? Republican critics came forward and said: Wait a minute, this is deficit spending. We are spending money we don't have. We've got to stop. And they prevailed, just as Senator McConnell wants to prevail today.

WELNA: Durbin notes that unemployment levels nearly doubled after FDR tried balancing the books in 1937.

Sen. DURBIN: We're about to repeat history. The Republicans come to us now and say, We've got to stop putting money back into the economy, it creates a deficit. Yes, it does. But if you don't get the 14 million unemployed Americans back to work, the deficit will get worse.

WELNA: Many experts agree. Alan Brinkley is a historian of the Depression at Columbia University.

Professor ALAN BRINKLEY (Columbia University): The Depression, as bad as it was, would have been much worse without government spending. And the 1937 effort to balance the budget - I think almost every economist would agree - was a catastrophe.

WELNA: Last week, President Obama wrote the leaders of the Group of 20 nations meeting here this weekend and warned them that cutting deficits too quickly could lead to what he called renewed hardships and recession.

Economist Mark Zandi of MoodysAnalytical.com advised John McCain when the Republican senator ran against President Obama. But Zandi thinks the president is doing the right thing in trying to keep the spending spigot open.

Dr. MARK ZANDI (Chief Economist, MoodysAnalytical.com): Until unemployment is definitively moving lower, I think it's premature to be focused on reducing the deficits right now. We need to make sure that the economy is off and running before we begin to bring down deficits.

WELNA: Still, even some Democrats are balking at deficit spending. House Majority Leader Steny Hoyer has spoken of spending fatigue.

Here's Senator Byron Dorgan of North Dakota.

Senator BYRON DORGAN (Democrat, North Dakota): You know, I think everybody here understands, and if not, they better understand quickly, the dilemma of these unbelievable growth of deficits or debt for this country. It is unsustainable.

WELNA: Republicans say what they fear is that deficits will add pressure to raise taxes. For Alabama Senator Jeff Sessions, that's the real aim of the Democrats' spending.

Senator JEFF SESSIONS (Republican, Alabama): They intend to let the tax cuts expire. So then they've in fact increased taxes, and they say it's to reduce the deficit, when really it is an expansion of the size of government.

WELNA: As a decades-old argument over deficit spending grinds on, nearly a million people have lost their extended unemployment benefits. They expired at the end of May due to congressional inaction.

David Welna, NPR News, the Capitol.

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