Fiscal policy

Fiscal policy involves the government budget—revenues and expenditures. Traditionally, economists and governments had stressed the importance of a balanced budget and the dangers of budget deficits, which might fuel inflation, undermine business confidence and investment, and in other ways harm the economy. Both President Herbert C. Hoover and President Franklin D. Roosevelt held to the conventional wisdom of balanced budgets in the early years of the Great Depression, although because of the ravages of the depression on national income and thus government revenues, neither was able to achieve a balanced budget. Roosevelt for his part was willing to countenance deficits in order to finance RELIEF and other essential New Deal measures. But by the middle and late 1930s, a number of economists and officials in the Roosevelt administration became persuaded of the arguments of the British economist John Maynard Keynes that fiscal policy was a crucial tool in managing the economy and that purposefully incurred deficits might in fact spur an economy toward full production and full employment. The RECESSION OF 1937-1938 seemed to confirm the validity of Keynesianism to many New Dealers, and subsequently Keynesian fiscal policy became more central to New Deal planning and policy. For many economists, WORLD War II was a fundamental proving ground for Keynesianism: Though nearly half the wartime expenses were financed by current revenues, the costs were so high that federal deficits skyrocketed—to as much as $50 billion per year (as compared to the highest deficit in the 1930s of some $4.4 billion). And with the burgeoning deficits, the gross national product doubled and UNEMPLOYMENT plummeted, from some 15 percent in 1940 to just 1 percent in 1944. By the end of World War II, Keynesian fiscal policy was a central component of liberalism, and fiscal policy was increasingly accepted by professional economists and by some business officials as vital to managing the economy.

See also Full Employment Bill; monetary

POLICY.

Further reading: Herbert Stein, The Fiscal Revolution in America (Chicago: University of Chicago Press, 1969).

To win the presidential nomination for Roosevelt. Flynn continued to use his influence as Bronx County leader and as national committeeman for New York to garner support for the president throughout the 1930s. In 1938, during FDR’s attempt to “purge” the Democratic Party of conservative opponents to the New Deal, Flynn campaigned on behalf of pro-New Deal candidates for the president. Although, concerned for the president’s health, he urged Roosevelt not to seek a third term in the ELECTION OF 1940, Flynn helped Harry Hopkins to organize the efforts to renominate Roosevelt at the Chicago convention.

In 1943, FDR appointed Flynn minister to Australia and ambassador-at-large for the South Pacific. This appointment provided fodder for Roosevelt’s critics in the Senate, who argued that Flynn was unqualified for the job. In order to stave off the developing controversy Flynn withdrew his name. Although Flynn, anticipating his appointment, had resigned his position as Democratic National Committee chairman, he returned to the DNC until he was succeeded by Robert Hannegan in 1944.

With the ELECTION OF 1944, Flynn was assigned the task of finding a suitable vice-presidential candidate. He settled on Missouri senator Harry S. Truman and helped secure his nomination. After FDR’s death, Flynn largely retired from national politics. He remained involved in local politics and emerged as a champion of the liberal wing of the Democratic Party in New York during the postwar struggle between liberals and conservatives, led by James Farley. In 1953, Edward Flynn died while on vacation in Ireland.

See also POLITICS IN THE ROOSEVELT era.

Flynn, Edward J. (1891-1953) Democratic Party leader, government official

Edward Joseph Flynn, a New York lawyer and leader of the Bronx County [New York] Democratic organization, rose to national prominence as a political adviser to Franklin D. ROOSEVELT. Flynn was a close associate of Roosevelt’s during the 1920s, and in 1928 helped to persuade FDR to run for governor of New York. Throughout the 1930s and 1940s, Flynn continued to serve Roosevelt as an informal adviser, and in 1940 succeeded James A. Farley as chairman of the Democratic Party National Committee.

Flynn was born on September 22, 1891, to a well-to-do Irish-American family in New York, and in 1912 graduated from Fordham Law School. He entered politics in 1917 as a member of the New York State Legislature, where he remained for four years. Flynn was then elected sheriff of Bronx County and in 1922 was elected chairman of the Bronx Democratic committee. After Roosevelt was elected governor of New York in 1928, Flynn accepted an appointment as New York secretary of state. In 1932, Flynn worked with James Farley and Louis McHenry Howe in helping

Further reading: Edward J. Flynn, You’re the Boss (New York: Viking, 1947).

—Shannon L. Parsley