The Role of Government Spending in the US Economic Recovery from the 1929 Downturn

The Role of Government Spending in the US Economic Recovery from the 1929 Downturn

We discuss how the United States recovered from the 1929 downturn mainly through World War II, driven by high government spending that reached 80% of national income. This led to record public debt exceeding 120% of GDP. While achieving such high growth rates in exchange for this huge amount of public spending is expected, even if the government carried out this level of spending in the absence of war, it would still result in the same consequences and growth, and possibly even better outcomes.

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