During a Fox News discussion about stimulus spending and the role New Deal programs and World War II played in ending the Great Depression, Chris Wallace falsely claimed that “unemployment in 1937, 1938 was higher than it was in 1933.” In fact, even without including “emergency” public employment under the New Deal, the unemployment rate in 1937 and 1938 did not surpass the 1933 unemployment rate.
During Fox News' coverage of President Obama's January 20 inauguration, in response to remarks by senior political analyst Brit Hume about stimulus spending and the role New Deal programs and World War II played in ending the Great Depression, anchor Chris Wallace falsely claimed that “unemployment in 1937, 1938 was higher than it was in 1933.” Hume responded: “That's right, because whatever [former President Franklin D.] Roosevelt did by virtue of enlarging the American spirit, of giving people hope, his programs -- while unemployment was reduced for a time, it went back up.” In fact, even without including “emergency” public employment under the New Deal, the unemployment rate in 1937 and 1938 did not surpass the 1933 unemployment rate. Moreover, according to several prominent economists, the unemployment rate -- which fell every year from 1933 until 1938 -- rose in 1938 not because New Deal stimulus spending failed but rather because Roosevelt did not go far enough in pursuing these policies.
According to Bureau of Labor Statistics (BLS) data -- which did not count those in work-relief programs as employed -- the U.S. unemployment rate was 14.3 percent in 1937 and 19 percent in 1938, compared to 24.9 percent in 1933. As Media Matters for America has documented, after World War II, BLS began counting those in work-relief programs as employed.
Several noted economists have defended New Deal policies by noting that the 1937 recession coincided with Roosevelt's implementation of more fiscally conservative policies, including efforts to balance the budget. As Media Matters has documented, these economists include Nobel Laureate Paul Krugman, Center for Economic and Policy Research co-director Dean Baker, and University of California-Berkeley economics professor Brad DeLong.
Wallace's false claim that unemployment was higher in 1937 and 1938 than it was in 1933 recalls other media conservatives who have cherry-picked unemployment figures during the 1937-38 recession to assert that the New Deal did not reduce unemployment, as Media Matters has noted.
From Fox News' coverage of the January 20 presidential inauguration:
WALLACE: All right. Let's talk, because -- let's pick up on what [Sen.] Lindsey Graham [R-SC] and [Fox News chief political correspondent] Carl Cameron were talking about. This economic stimulus package -- $825 billion now, but I think most people think it's going to grow.
Brit, do you think there's going to be a fight, or given the Democratic majorities in the House and Senate, that he basically is going to get what he wants?
HUME: He may get what he wants, but there will be a fight. And he will have a fight with Republicans over the composition of it, or at least the Democrats will have a fight because they -- clearly, a great deal of what the Democrats are talking about in this bill that they have advanced, which Obama has not yet really endorsed, is stuff that is not stimulus.
It may be valuable in some ways, but it looks -- a lot of it looks like just ordinary spending of the kind that members of Congress like. And whether it will be effective in generating the kind of instant economic activity or nearly immediate economic activity is very much open to question.
And there's also this: If you look at this whole issue of fiscal -- of stimulus -- stimulus generated by spending -- it's fair to ask the question of whether it has ever worked -- ever. You know, I remember when I was covering the Congress and there would be a downturn, and they passed what they intend to be a -- the book on it always was that by the time the projects got up and running, the recession would be long over, and that's what happened time and time again.
Liberals and Democrats often point to World War II, which certainly entailed a huge burst of deficit government spending, as having lifted us out of the Great Depression, which it certainly did. But that also involved the con -- excuse me -- conscription into the armed forces of some 12 million people. That got them off the unemployment rolls -- that fights unemployment pretty effectively -- and so on. And it was also a national mobilization.
WALLACE: The fact is that the economy and unemployment in 1937, 1938 was higher than it was in 1933.
HUME: That's right, because whatever Roosevelt did by virtue of enlarging the American spirit, of giving people hope, his programs -- while unemployment was reduced for a time, it went back up. And his programs are now seen, I think, widely as having failed to lift the country out of the Depression. The war did it.
That has become a kind of model in the minds of many that -- who would argue with you that fiscal stimulus can work, witness World War II. But other examples do not abound, and World War II is not a particularly good analogy for where we are today.