Question

Negative effects on the new deal

Answer 1

Answer:

One of the major negatives of the New Deal was that it upset the balanced Federal budget and created a huge deficit for the nation while at the same time failed to end massive unemployment. Roosevelt's program, based on Keynesian theories of economics, called for massive government spending to stimulate the economy. Roosevelt obviously could not do this with large tax increases; so instead large sums of money were borrowed to fund New Deal programs. When the economy did show some improvement, Roosevelt worried about inflation, and ordered cuts in government spending. Unfortunately, he did so at a time when the new Social Security tax had cut people's disposable income. Businesses were too scared to spend, and the economy in 1937 was in worse shape than in 1929. At the end of that year, two million people were out of work. Roosevelt eventually reinstituted government spending, but it was too little too late. Employment levels did not reach those which had existed prior to 1929 until the outbreak of World War II.

So, although the New Deal gave people hope, its program of Relief, Recovery and Reform did little to end the Great Depression other than push the country into more debt.

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