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posted on 12 June 2017

Which Was Bigger: The 2009 Recovery Act Or FDR's New Deal?

from the St Louis Fed

Which was larger: the American Recovery and Reinvestment Act of 2009 or the New Deal of the 1930s? It depends how the recovery programs are measured, according to an article in The Regional Economist.

Total Cost

Assistant Vice President and Economist William Dupor noted that ARRA’s total cost was $840 billion. The New Deal, on the other hand, cost $41.7 billion at the time, according to a 2015 study by economists Price Fishback and Valentina Kachanovskaya.1That figure translates to $653 billion in 2009 dollars (the year ARRA was passed).

“Without any other adjustment, one would conclude that the Recovery Act was the more expensive of the two stimulus programs, which also would make it the most expensive in U.S. history," Dupor wrote.

Other Cost Measurements

Dupor pointed out that the U.S. was simply not the same in the 2000s as it was in the 1930s. For instance, the nation’s population has more than doubled. Thus, the cost on a per capita basis in 2009 dollars was $2,738 for ARRA and $5,231 for the New Deal.

Dupor also compared the costs in terms of the size of the economy at the time of enactment. ARRA’s cost was equal to 5.7 percent of the nation’s 2008 output. The New Deal, however, was about 40 percent of the nation’s 1929 output.

It is important to note that the New Deal programs lasted much longer than ARRA programs. “Most of the Recovery Act spending took place over three years, but the New Deal spending stretched over seven years, Fishback and Kachanovskaya reported," Dupor wrote.

Share of Gross National Product (GNP)

Dupor looked at the effect of each stimulus plan on the federal debt as a fraction of GNP. “A larger increase in the debt may be interpreted as greater fiscal easing. The cost of programs such as CARS [the Car Allowance Rebate System program, also known as Cash for Clunkers] is reflected by an increase in the federal debt," Dupor wrote.

For the New Deal, Dupor calculated the increase in the federal debt between 1931 and 1939 as a fraction of GNP in 1931. For ARRA, he calculated the increase in the federal debt between 2008 and 2011 as a fraction of GNP in 2008. The results were pretty similar:

  • The New Deal increase was 30.3 percent.

  • The ARRA increase was 32 percent.

Beyond the Costs

Finally, Dupor examined some of the results of the programs that may not have dollar amounts attached. He noted that the New Deal introduced industrial and labor policies that influenced the operation of the private sector. As examples:

  • The National Industrial Recovery Act authorized the regulation of industry by the president as a potential way to stimulate the economy by raising prices.

  • The Wagner Act established the National Labor Relations Board, which increased the power of labor unions.

On the other hand, ARRA did not venture into industrial and labor policy areas.

Notes and References

1 Fishback, Price; and Kachanovskaya, Valentina. “The Multiplier for Federal Spending in the States during the Great Depression." The Journal of Economic History, Vol. 75, No. 1, 2015, pp. 125-62.

Additional Resources



Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

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