Skeptics of the New Deal like to say that World War II ended the Great Depression, but that’s still an acknowledgment that a burst of public spending was essential to reviving the economy. Faced with the Great Recession, Obama took this experience into account by boosting spending. However, while this prevented a recurrence of the Great Depression, he didn’t raise public spending enough to prevent an initial increase in unemployment. That awakened century-old American suspicions—historian Louis Hartz called it Americans’ “Lockian” liberalism—that big government was responsible for the country’s economic ills. Many Americans came to believe that increased spending was the cause of growing unemployment. That conviction, erroneous but deeply felt, fueled the rise of the Tea Party and the Republican landslide in 2010.
Since then, congressional Republicans have fought to reduce government spending, and Obama has reluctantly acceded to their demands. Spending has fallen as a percentage of GDP, which is one reason that the recovery has failed to fully take hold. And the budget deal that concluded the shutdown didn’t reverse this pattern—it continued it. The congressional budget conference committee, which is supposed to come up with a new plan, will probably not agree to any significant increase in spending. Instead, it’s more likely that a new round of sequester cuts will take effect this winter.
Over time, continued austerity could put the United States on a political path similar to that traveled by Japan. After its downturn in the ’90s, Japan’s failure to apply a consistent Keynesian remedy resulted in palsied growth and a continual churn of administrations for more than two decades. In the United States, a slow recovery, along with creeping social inequality, could thrust Republicans into the White House in 2016. But unless they see that public spending is essential to the country’s stability, they too will face a political revolt, and American politics will be thrust into a state of perpetual upheaval.