Although the New Deal is remembered as a programme of optimism, there is a deeper sense in which it was actually founded on pessimism, namely pessimism about the prospects for the American economy. The New Dealers believed that the glorious age of American expansion was over. Adherents of the frontier thesis, they thought that U.S. economic growth had been largely due to the existence of the West as a safety valve to which the impoverished could escape and find abundant resources to develop.

The frontier had officially closed in 1890, and the orthodox explanation of the Great Depression among New Dealers was that the American continent's capacity for industrialization had been reached a few decades later. Largely discounting the possibility of further significant technological development, they saw that the markets for consumer goods had become saturated and hence growth had stagnated, while meanwhile businesses engaged in cut-throat competition to drive down prices and wages in the absence of promising new markets. FDR went as far as to say that "a mere builder of more industrial plants, a creator of more railroad systems, an organizer of more corporations, is as likely to be a danger as a help".

The key economic idea of the New Deal was hence to place greater focus on economic security for all. If the heroic phase of growth was over, it was time for the managerial phase, organizing existing resources to curtail competition and maximize the social benefits to all; abolishing child labour, for instance, was seen as an inherent moral good and a way of reducing competition in the labour market. Finding the right balance between unleashing the animal spirits of competition and curtailing its harmful impact through redistribution has been at the heart of most of our economic arguments since.