The Great Depression included two distinct recessions

The Great Depression in the U.S. began roughly with the stock market crash in October 1929 and lasted until the onset of World War II, roughly somewhere between 1939 or the early 1940's. That was all considered one depression. But, that period in fact encompassed two distinct business cycles or recessions, making it somewhat problematic to contrast a recession with a depression.

According to the Business Cycle Dating Committee of the National Bureau of Economic Research, the first recession lasted from August 1929 until March 1933. That was the worst of the depression. Then the economy actually rebounded strongly, hitting a new peak of industrial production in early 1937, higher than 1929. But then the economy fell apart again, with a second recession from May 1937 until June 1938. To be sure, the trough in 1938 was well above the depression bottom in 1933, but still deep by traditional recessionary standards.

One of the lessons here is that even if $500 billion of fiscal stimulus enables a recovery from the current recession, it is very possible that we could see a second recession within a few years unless the fiscal stimulus actually results in sufficient structural change and the creation of sufficient sustainable jobs to sustain the economy as that fiscal stimulus peters out. Sure, it is easy to "create" construction jobs with government spending, but many of those jobs will promptly evaporate once the government spending ceases.

So, maybe the key takeway is that the fiscal stimulus may need to last for five or even ten years, until the underlying structure of the U.S. economy is actually truly "sound" again, and not based on mountains of debt and complex financial instruments -- or dependent on government spending. I suspect that we actually will need to permanently include about $250 billion or more of that fiscal stimulus in the federal budget, if for no other purpose than to enable the private sector to withstand future financial, economic, and political shocks.

-- Jack Krupansky