|Franklin D.Roosevelt, 1933 (3)|
The answer to that question (or questions) is yes. From 1933-1936, President Franklin Delano Roosevelt, working with Congress, spent heretofore unheard of amounts of federal money (at least during peace time) in an effort to ameliorate the effects of the Great Depression. By 1937, the U.S. economy had improved markedly. Some (perhaps even Roosevelt) believed that the depression was over. Unemployment was still around 14% but was significantly lower than at the height of the crisis (when it may have been as high as 25%). As important, factories were producing more than they had in 1929. Roosevelt and Congress responded by cutting federal spending significantly. In that same year, the U.S. government started collecting a new payroll tax to cover future Social Security payments (1). Sound familiar?
The payroll tax increase and spending cuts almost certainly had a hand in derailing any gains the U.S. economy had made since 1933. During the 1937-1938 "recession," the stock market tanked, production dropped off significantly, and unemployment went to 20% (2).
The U.S. economy has changed markedly since 1937, and the Great Recession was not nearly as severe as the Great Depression. Nonetheless, I think we can learn something about the ramifications of going over the fiscal cliff by looking at the causes of the 1937-1938 "recession."
1. McElvaine, R. S. (1984). The Great Depression: America, 1929-1941. New York: Times Books.
pgs. 75, 297-298.
2. Ibid., 298-300.
3. Photo of Franklin D. Roosevelt. Photographer is Elias Goldensky. The photo was taken on Dec.
27, 1933. It is located on Wikimedia Commons and is in the public domain.