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When, therefore, these vast expenditures were made, the noblestand most heroic explanations were offered. Having denounced timiddeficits, the administration embarked upon a program of huge deficits,but it did it in characteristic American fashion, with proclamationsof righteousness as if America had suddenly discovered somethingnew. In fact, it was called a New Deal, Actually, it wasAmerica dropping back into the old European procession.The recession of 1937-38 marked a turning point of the greatestimportance in American public policy. Up to this point spendinghad been done on the pump-priming theory. That is, public funds,flowing out into business, were expected to produce a resumption ofbusiness activity. But business utterly failed to respond to thistreatment. Apparently the pump itself was seriously out of order.From this point on we hear no more about balanced budgets. Wefind the administration committed to the same policy that markedthe fiscal programs of republican Germany. It turned to the deviceof public spending and borrowing as a continuing and permanentmeans of creating national income.There was a renewal of depression, and the President himself hadto admit in his 1939 message that his expectations of recovery whenhe reduced expenditures were overoptimistic. It had become plainto the political elements in the government that there was somethingwrong, that the idea of public works during an emergency, usedeven on an enormous scale, had not produced recovery and wasmerely a stopgap. The situation of the administration was criticalin the highest degree. Almost all its plans had been discarded. TheAAA was declared unconstitutional; the NRA was scrapped by theSupreme Court just as it was falling into utter chaos; the devaluationof the dollar and the idea of a managed currency, as well asthe gold-buying plan, had proved ineffective; social security wasan aid to the unfortunate but did nothing to make the economicsystem work. Apparently nothing was holding back a tidal wave ofdeeper depression save the spending and borrowing program whicheveryone had either denounced or apologized for. The public debthad risen as total depression deficits amounted to 19 billions. Whatpossible avenue of escape opened for the government in the presenceof rising unemployment, rising taxes at last, farmers, workers, thei79