The microphone goes to Megan McArdle:
There’s really very little question that the main mistake which created the Great Depression was allowing the banking system to collapse. There were a number of reasons this happened, most notably horrific Federal Reserve policy and our insistence on sticking to the gold standard. If FDR hadn’t taken us off the gold standard and turned the banking system around, the Great Depression would have been even worse than it was.
So the main reason we didn’t have the Great Depression is that the Treasury intervened to prop up financial institutions, while the Federal reserve pumped money into the economy with a firehose. Special guest star credits go to the FDIC, which prevented the bank runs that crippled so much of our economy in the early 1930s. If you want to credit a government program, credit TARP, not ARRA.
DId the stimulus help? Sure. But Recovery.gov currently has a nifty graphic showing that of ARRA’s $787 billion in budget authority, the government has currently disbursed about $287 billion. You’d have to posit some really remarkable multipliers for the stimulus to think that this prevented us from sliding into the Great Depression.