Echoes of 1933? While the economy is in bad shape, right now it's nowhere near as dire as in 1933. Yet FDR's response to the Great Depression clearly holds lessons for President Obama and the nation today.

• Author: Lohr, Steve
• Position: Franklin D. Roosevelt and Barack Obama - Cover story

When Franklin D. Roosevelt became President in 1933, the country was in the depths of the Great Depression. Four years after the 1929 stock market crash brought the economy to a halt, a quarter of the nation was jobless. Millions had lost their homes and farms to bank foreclosures, and in cities nationwide, people waited in long lines for handouts of food.

Today, as America deals with a severe recession, millions of people are losing their homes to foreclosure. Some of Wall Street's largest financial institutions are failing, and companies large and small are laying off workers, sending the unemployment rate to a 16-year high.

But however troubled the economy is now, the situation isn't nearly as serious as what FDR confronted in 1933. Why then are so many people comparing 2009 to the Depression and President Obama to FDR?

There are several reasons. First, the two men share some important qualities, such as a willingness to experiment and a talent for communicating with the American people--a critical skill at a time of crisis.

Second, everyone agrees the nation is now facing the worst economic crisis since the Great Depression, so it's natural for the media to compare today to the worst crisis.

Finally, there's the fact that so many of FDR's New Deal programs remain in existence today and are, in fact, softening the impact of the current crisis (see "Five Reasons Things Aren't Worse," p. 11).

But economists and historians say there are also cautionary lessons to be drawn from the Roosevelt years in the 1930s.

"Barack Obama should learn from FDR's failures as well as from his achievements," says New York Times columnist Paul Krugman. "The truth is that the New Deal wasn't as successful in the short run as it was in the long nan. And the reason for FDR's limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious."

WILL $789 BILLION DO THE TRICK?

The Obama administration's first major effort at repairing the ailing economy is the $789 billion economic stimulus package. It includes tax cuts for individuals, families, and businesses; help for jobless and low-income Americans; aid to states; and investments in infrastructure. It was the source of intense debate in Congress, and passed with very little of the Republican support Obama had hoped for.

"I can't tell you for sure that everything in this plan will work exactly as we hope," Obama said, "but I can tell you with complete confidence that a failure to act will only deepen this crisis."

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That's what happened after the 1929 stock-market crash that sparked the Depression. President Herbert Hoover's failure to use the spending power of the federal government to inject money into the economy is now seen as a disastrous mistake.

Another lesson from the 1930s, economists say, is how difficult it is to engineer a recovery when an economy has spiraled down as far as it had by 1933. Swift action early in a downturn, they say, can help avoid a much deeper decline. And President Obama has the advantage of taking over far earlier in an economic descent than Roosevelt did.

The economic picture today, however, is increasingly bleak. The U.S. has lost 3.6 million jobs since the recession began in late 2007, bringing the unemployment rate to 7.6 percent--the...