The following is an excerpt taken from the book 'Franklin Delano Roosevelt', by Alan Brinkley.
Most damaging of all to the administration was a serious recession that began suddenly in August 1937, which seemed to be a direct result of Roosevelt's own actions. For years, goaded by his secretary of the treasury, Henry Morgenthau, Roosevelt had urged his colleagues to balance the federal budget. But the crisis of the economy had consistently thwarted such hopes. In 1937, however, Roosevelt decided that the economy was strong enough to justify cutting government spending so as to reduce the national deficit. In reality, the recovery of 1937 was fragile and incomplete, and the spending cuts contributed to a deep recession that wiped out nearly all the economic gains of the New Deal's first four years.
Unemployment rapidly grew from a Depression low of 14.3 percent in 1937 to 19 percent in 1938. The gross national product, which had grown by 5.5 percent in 1937, declined by 4.5 percent in 1938. The crisis was especially traumatic to many New Dealers because it came at a point when they had begun to believe that the Depression was over. Now, confronted with the hollowness of those claims, the president joined in an agonizing reappraisal of his policies and eventually launched two important new initiatives.
SOUND FAMILIAR?