The End of Balanced Budgets

Winfree, Paul

doi:10.1007/978-3-030-30959-6_5

Paul Winfree²

277 Accesses

Abstract

The government grew in size, scope, and responsibility during the Great Depression. By the end of World War II, the dominate position of public policy was that the government had a formal role in promoting economic outcomes. As the government grew to take on new roles, a reorganization became necessary. The new budgeting institutions, in particular the Bureau of the Budget, took on additional responsibilities. Congress and the White House also formerly engaged in a comprehensive policy to replace tariffs with taxes to finance federal spending but also to manage individual behavior. At the same time, the government came to be seen as having an active role in the economy. This was exemplified by the New Deal programs and the Employment Act of 1946.

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Notes

1.
U.S. Bureau of the Budget, The Budget of the United States Government For the Fiscal year Ending June 30, 1941 (Washington, DC: U.S. Government Printing Office, 1940).
2.
Major wars include the War of 1812, the Mexican–American War, the American Civil War, the Spanish–American War, and World War I. Recessions include periods of significant decline in economic activity equivalent to the National Bureau of Economic Research definition.
3.
The Victory Liberty Loan Act of 1919 established a sinking fund. For details, see: Willoughby (1931).
4.
John. F. Cogan, The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs (Stanford, CA: Stanford University Press, 2017).
5.
Ibid.
6.
J. Bradford De Long, “Keynesianism, Pennsylvania Avenue Style: Some Economic Consequences of the Employment Act of 1946,” The Journal of Economic Perspectives 10, no. 3 (1996): 41–53.
7.
Ibid.
8.
Cogan, The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs.
9.
“Republican Party Platforms: Republican Party Platform of 1936,” The American Presidency Project, June 9, 1936, https://www.presidency.ucsb.edu/documents/republican-party-platform-1936
10.
Dennis S. Ippolito, Congressional Spending (Ithaca, NY: Cornell University Press, 1981).
11.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
12.
Dennis Ippolito, Why Budgets Matter : Budget Policy and American Politics (University Park, PA: Pennsylvania State University Press, 2003).
13.
Herbert L. Fenster and Christian Volz, “The Antideficiency Act: Constitutional Control Gone Astray”, Public Contract Law Journal 11, no. 1 (1979): 155–231.
14.
Ibid.
15.
Ibid.
16.
Ibid.
17.
Ibid.
18.
Business Cycle Dating Committee of the National Bureau of Economic Research, “US Business Cycle Expansions and Contractions,” The National Bureau of Economic Research, September 20, 2010, https://www.nber.org/cycles.html
19.
Michael D. Bordo, and David C. Wheelock, “Chapter Two – The Promise and Performance of the Federal Reserve as Lender of Last Resort 1914–1933” in The Origins, History, and Future of the Federal Reserve: A Return to Jekyll Island, ed. Michael D. Bordo and William Roberds (Cambridge: Cambridge University Press, 2013): 59–98.
20.
Ibid; Hugh Rockoff, “Until it’s Over, Over There: The U.S. Economy in World War I,” NBER Working Paper, no. w10580 (2004); Margaret G. Myers, A Financial History of the United States (New York: Columbia University Press, 1970).
21.
Rockoff, “Until it’s Over, Over There: The U.S. Economy in World War I.”
22.
Ibid.
23.
Ibid.
24.
Ibid.
25.
Ippolito , Why Budgets Matter : Budget Policy and American Politics.
26.
Rockoff, “Until it’s Over, Over There: The U.S. Economy in World War I.”
27.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
28.
Ippolito , Why Budgets Matter : Budget Policy and American Politics.
29.
Ibid.
30.
Rockoff, “Until it’s Over, Over There: The U.S. Economy in World War I.”
31.
Ibid.
32.
Ibid.
33.
Robert Barro, “Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701–1918”, Journal of Monetary Economics 20, no. 2 (1987): 221–247.
34.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
35.
Rockoff, “Until it’s Over, Over There: The U.S. Economy in World War I”; Library of Congress, World War I Poster Collection.
36.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
37.
Roy G. Blakey, “The War Revenue Act of 1917”, The American Economic Review 7, no. 4 (1917): 791–815.
38.
Rockoff, “Until it’s Over, Over There: The U.S. Economy in World War I.”
39.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
40.
Ippolito , Why Budgets Matter : Budget Policy and American Politics.
41.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
42.
Eichengreen et al., “Public Debt Through the Ages.”
43.
Ibid.
44.
“Democratic Party Platforms, 1932 Democratic Party Platform,” The American Presidency Project, June 27, 1932, https://www.presidency.ucsb.edu/documents/1932-democratic-party-platform
45.
Ippolito , Why Budgets Matter : Budget Policy and American Politics.
46.
Ibid.
47.
Ibid.
48.
Ibid; Eichengreen et al., “Public Debt Through the Ages.”
49.
Eichengreen et al., “Public Debt Through the Ages.”
50.
In 1936, Roosevelt would also issue Executive Order Number 7298 empowering the Director of the Bureau of the Budget as the first line of approval, above the Attorney General, on all Executive Orders or Presidential Proclamations.
51.
Beard and Smith (1933).
52.
Fisher, “The Politics of Impounded Fund.”
53.
Ibid.
54.
“FDR: From Budget Balancer to Keynesian,” Franklin D. Roosevelt Library and Museum, https://www.fdrlibrary.org/budget
55.
“President Franklin D. Roosevelt’s Message to Congress Announcing a Program for Social Security, June 8, 1934,” U.S. Senate , National Archives and Record Administration.
56.
Paul Winfree, “Bringing Proverbs to Policy: Classical Economics, Proverbial Wisdom, and Applications for Welfare Policy,” Social Science Research Network Working Paper (2018).
57.
Cogan, The High Cost of Good Intentions: A History of U.S. Federal Entitlement Programs.
58.
Ibid.
59.
Ibid.
60.
Byrd L. Jones, “The Role of Keynesians in Wartime Policy and Postwar Planning, 1940–1946,” The American Economic Review 62, no. 1/2 (1972): 125–133.
61.
Ibid.
62.
Ibid.
63.
Ibid.
64.
Ibid.
65.
Ibid.
66.
Ibid.
67.
Ibid.
68.
Ibid.
69.
J. Bradford De Long, “Keynesianism, Pennsylvania Avenue Style: Some Economic Consequences of the Employment Act of 1946,” The Journal of Economic Perspectives 10, no. 3 (1996): 41–53.
70.
Ibid.
71.
Alvin Hansen and Jacob Viner, “Two Discussions of the Employment Act of 1946 and Its Early Operation,” The Review of Economics and Statistics 29, no. 2 (1947): 69–79. On general background regarding Hansen’s views on fiscal policy, see: (A. H. Hansen 1968).
72.
Ibid.
73.
De Long, “Keynesianism, Pennsylvania Avenue Style: Some Economic Consequences of the Employment Act of 1946.”
74.
Ibid.
75.
Ibid.
76.
James Feyrer and Bruce Sacerdote, “Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Recovery and Reinvestment Act,” NBER Working Paper, no. 16759 (2011). Feyrer and Sacerdote (2011) find that the cost of each additional job was between $100,000 and $400,000 implying a multiplier between 0.5 and 1.0.
77.
James Buchanan, “Clarifying Confusion About the Balanced Budget Amendment,” National Tax Journal 48, no. 3 (1995): 347–355.
78.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
79.
Ibid.
80.
“Republican Party Platforms, Republican Party Platform of 1936,” The American Presidency Project, June 9, 1936, https://www.presidency.ucsb.edu/documents/republican-party-platform-1936
81.
Roy G. Blakey and Gladys C. Blakey, “The Revenue Act of 1936,” The American Economic Review 26, no. 3 (1936): 466–482.
82.
Ibid.
83.
Roy G. Blakey and Gladys C. Blakey, “The Revenue Act of 1937,” The American Economic Review 28, no. 3 (1938): 447–458.
84.
Ibid.
85.
Ward Macy, “Social Security Taxes in the War Finance Program,” Journal of Political Economy 51, no. 2 (1943): 135–147.
86.
Ibid.
87.
Paul G. Kauper, “Significant Developments in the Law of Federal Taxation, 1941–1947: I,” Michigan Law Review 45, no. 6 (1947): 659–678.
88.
The President’s Committee on Administrative Management, “The Report of the Committee with Studies of Administrative Management in the Federal Government” (Washington, DC: U.S. Government Printing Office, 1937).
Note: Commonly known as “The Brownlow Committee Report.”
89.
Fisher, “The Politics of Impounded Funds.”
90.
Ibid.
91.
Ibid.
92.
Brooke W. Graves, “Legislative Reference Service for the Congress of the United States.” The American Political Science Review 41, no. 2 (1947): 289–293.
93.
Kennon and Rogers, The Committee on Ways and Means : A Bicentennial History.
94.
Ibid.
95.
L. B. Wheildon, “Legislative budget-making,” Editorial Research Reports 1948 1 (Washington, DC: CQ Press, 1948).
96.
Ibid.
97.
Ibid.
98.
Ibid.
99.
Ibid.

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Paul Winfree

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Winfree, P. (2019). The End of Balanced Budgets. In: A History (and Future) of the Budget Process in the United States. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-30959-6_5

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DOI: https://doi.org/10.1007/978-3-030-30959-6_5
Published: 26 October 2019
Publisher Name: Palgrave Macmillan, Cham
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