Thanks to the Roosevelt Recession, in the spring of 1938 the New Deal’s “Keynesians” finally found themselves in the saddle, displacing the planners, reformers, and trust-busters whose legislative efforts had petered out some months before. The Keynesians’ rise was symbolized by the $3 billion spending program FDR announced during his fireside chat that April.[1]
But the crisis that gave Keynesians the upper hand also proved fatal to the Roosevelt administration’s more ambitious plans, Keynesian or otherwise. Thanks to it, voters sent many Democrats, and New Deal democrats especially, packing that November. Although Democrats retained a strong majority in Congress, the election’s real winners consisted of a combination of Republicans and Southern Democrats that came to be known as the “conservative coalition,” which was to dominate Congress for the next three decades.
While some historians have since labeled the Keynesian ascendancy a “Third New Deal,” the Keynesians themselves saw their preferred policies as far less radical, if more expensive, alternatives to the more aggressive sorts of interference with private enterprise their predecessors favored. In that important respect, although they were certainly in the New Deal, they weren’t truly of it. Even so, their large-scale spending plans were hardly likely to sail through the new Congress. On the contrary: the conservative coalition first showed its mettle in June 1939, by scuttling the $3 billion-plus Works Financing Act—some Newsweek wag dubbed it FDR’s “Great White Rabbit”—that was supposed to continue the administration’s 1938 spending program. The New York Times’s Arthur Krock therefore had every reason to report, after the elections, that “The New Deal has been halted.”
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