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The Real Story About What Ended the Great Depression (Hint: It Wasn’t the New Deal)
COMMENTARY BY
Stephen Moore, who formerly wrote on the economy and public policy for The Wall Street Journal, is chief economist at The Heritage Foundation.Read his research.
My seventh-grade son recently wrote a U.S. History paper extolling the virtues of President Franklin Roosevelt’s New Deal. “It ended the Great Depression,” he wrote with great certainty. He’s only 12 and parroting what the history texts and his teachers told him.
That’s his excuse. What’s Ken Burns’?
Mr. Burns’ docudrama on the Roosevelts—for those who weren’t bored to tears—repeats nearly all the worn-out fairy tales of the FDR presidency, including what I call the most enduring myth of the 20th century, which is that FDR’s avalanche of alphabet-soup government programs ended the Great Depression. Shouldn’t there be a statute of limitations on such lies?
Ask nearly anyone over the age of 80, and they will say that FDR cared about the working man and “gave the country hope,” a point that Mr. Burns emphasizes. Roosevelt exuded empathy, which isn’t a bad thing—remember Bill Clinton’s memorable line “I feel your pain”?—but caring doesn't create jobs or lift gross domestic product.
Nor does spending government money revive growth, despite the theories put into practice by the then-dean of all economists, John Maynard Keynes. Any objective analysis of these facts can lead to no other conclusion. U.S. unemployment averaged a rate of 18 percent during Roosevelt’s first eight years in office. In the decade of the 1930s, U.S. industrial production and national income fell by about almost one-third. In 1940, after year eight years of the New Deal, unemployment was still averaged a god-awful 14 percent.
That’s his excuse. What’s Ken Burns’?
Mr. Burns’ docudrama on the Roosevelts—for those who weren’t bored to tears—repeats nearly all the worn-out fairy tales of the FDR presidency, including what I call the most enduring myth of the 20th century, which is that FDR’s avalanche of alphabet-soup government programs ended the Great Depression. Shouldn’t there be a statute of limitations on such lies?
Ask nearly anyone over the age of 80, and they will say that FDR cared about the working man and “gave the country hope,” a point that Mr. Burns emphasizes. Roosevelt exuded empathy, which isn’t a bad thing—remember Bill Clinton’s memorable line “I feel your pain”?—but caring doesn't create jobs or lift gross domestic product.
Nor does spending government money revive growth, despite the theories put into practice by the then-dean of all economists, John Maynard Keynes. Any objective analysis of these facts can lead to no other conclusion. U.S. unemployment averaged a rate of 18 percent during Roosevelt’s first eight years in office. In the decade of the 1930s, U.S. industrial production and national income fell by about almost one-third. In 1940, after year eight years of the New Deal, unemployment was still averaged a god-awful 14 percent.
Former President Franklin D. Roosevelt and his wife Eleanor with their Scotch terrier Fala on the terrace of his house in Hyde Park, New York. (Photo: Newscom)
Think of it this way. The unemployment rate was more than twice as high eight years into the New Deal than it is today, and American workers now are angry as hornets. Imagine, if jobs were twice as scarce today, the pitchforked revolt that would be going on. This is success?
Almost everything FDR did to jump-start growth retarded it. The rise in the minimum wage kept unemployment intolerably high. (Are you listening, Nancy Pelosi?) Roosevelt’s work programs like the Works Progress Administration, National Recovery Administration and the Agricultural Adjustment Administration were so bureaucratic as to have minimal impact on jobs. Raising tax rates to nearly 80 percent on the rich stalled the economy. Social Security is and always was from the start a Madoff-style Ponzi scheme that will eventually sink into bankruptcy unless reformed.
The cruel irony of the New Deal is that the liberals’ honorable intentions to help the poor and the unemployed caused more human suffering than any other set of ideas in the past century.
The most alarming story of economic ignorance surrounding this New Deal era was the tax increases while the economy was faltering. According to economist Burt Folsom, FDR signed one of the most financially devastating taxes: “On April 27, 1942, he signed an executive order taxing all personal income above $25,000 [rich back then] at 100 percent. Congress balked at that idea and later lowered it to 90 percent at the top level.” The New Dealers completely ignored the lessons of the 1920s tax cuts, which just a decade before had unfurled an age of super-growth.
Then there was the spending and debt barrage. Federal spending catapulted from $4.65 billion in 1933 to nearly $13.7 billion in 1941. This tripling of the federal budget in just eight years came at a time of almost no inflation (just 13.1 percent cumulative during that period). Budget surpluses during the prosperous Coolidge years became ever-larger deficits under FDR’s fiscal reign. During his first term, more than half the federal budget on average came from borrowed money.
The cruel irony of the New Deal is that the liberals’ honorable intentions to help the poor and the unemployed caused more human suffering than any other set of ideas in the past century.
What is maddening is that thanks to this historical fabrication of FDR’s presidency, dutifully repeated by Mr. Burns, we have repeated the mistakes again and again. Had the history books been properly written, it’s quite possible we would never had to endure the catastrophic failure of Obamanomics and the “stimulus plans” that only stimulated debt. The entire rationale for the Obama economic plan in 2009 was to re-create new New Deal.
Doubly amazing is that at this very moment, the left is writing another fabricated history — of the years we have just lived through. The history books are already painting Obama policies as the just-in-time emergency policies that prevented a Second Great Depression. I wonder if 80 years from now, the American people will be as gullible as they are today in believing, as my 12-year-old does, that FDR was an economic savior.
Originally appeared in The Washington Times
http://dailysignal.com/2014/09/28/new-deal-end-great-depression/?utm_source=heritagefoundation&utm_medium=email&utm_campaign=saturday&mkt_tok=3RkMMJWWfF9wsRonsqXJZKXonjHpfsX54%2BsoX6C%2BlMI%2F0ER3fOvrPUfGjI4DRMdgI%2BSLDwEYGJlv6SgFQrLBMa1ozrgOWxU%3D
Almost everything FDR did to jump-start growth retarded it. The rise in the minimum wage kept unemployment intolerably high. (Are you listening, Nancy Pelosi?) Roosevelt’s work programs like the Works Progress Administration, National Recovery Administration and the Agricultural Adjustment Administration were so bureaucratic as to have minimal impact on jobs. Raising tax rates to nearly 80 percent on the rich stalled the economy. Social Security is and always was from the start a Madoff-style Ponzi scheme that will eventually sink into bankruptcy unless reformed.
The cruel irony of the New Deal is that the liberals’ honorable intentions to help the poor and the unemployed caused more human suffering than any other set of ideas in the past century.
The most alarming story of economic ignorance surrounding this New Deal era was the tax increases while the economy was faltering. According to economist Burt Folsom, FDR signed one of the most financially devastating taxes: “On April 27, 1942, he signed an executive order taxing all personal income above $25,000 [rich back then] at 100 percent. Congress balked at that idea and later lowered it to 90 percent at the top level.” The New Dealers completely ignored the lessons of the 1920s tax cuts, which just a decade before had unfurled an age of super-growth.
Then there was the spending and debt barrage. Federal spending catapulted from $4.65 billion in 1933 to nearly $13.7 billion in 1941. This tripling of the federal budget in just eight years came at a time of almost no inflation (just 13.1 percent cumulative during that period). Budget surpluses during the prosperous Coolidge years became ever-larger deficits under FDR’s fiscal reign. During his first term, more than half the federal budget on average came from borrowed money.
The cruel irony of the New Deal is that the liberals’ honorable intentions to help the poor and the unemployed caused more human suffering than any other set of ideas in the past century.
What is maddening is that thanks to this historical fabrication of FDR’s presidency, dutifully repeated by Mr. Burns, we have repeated the mistakes again and again. Had the history books been properly written, it’s quite possible we would never had to endure the catastrophic failure of Obamanomics and the “stimulus plans” that only stimulated debt. The entire rationale for the Obama economic plan in 2009 was to re-create new New Deal.
Doubly amazing is that at this very moment, the left is writing another fabricated history — of the years we have just lived through. The history books are already painting Obama policies as the just-in-time emergency policies that prevented a Second Great Depression. I wonder if 80 years from now, the American people will be as gullible as they are today in believing, as my 12-year-old does, that FDR was an economic savior.
Originally appeared in The Washington Times
http://dailysignal.com/2014/09/28/new-deal-end-great-depression/?utm_source=heritagefoundation&utm_medium=email&utm_campaign=saturday&mkt_tok=3RkMMJWWfF9wsRonsqXJZKXonjHpfsX54%2BsoX6C%2BlMI%2F0ER3fOvrPUfGjI4DRMdgI%2BSLDwEYGJlv6SgFQrLBMa1ozrgOWxU%3D
THE NEW DEAL
• Franklin D. Roosevelt
• MESSAGE TO CONGRESS REVIEWING THE BROAD OBJECTIVES AND ACCOMPLISHMENTS OF THE ADMINISTRATION. JUNE 8, 1934.
• 'THE NEW DEAL'. The beginning of social programs in America.
• http://www.ssa.gov/history/fdrstmts.html#message1
"You are completing a work begun in March 1933, which will be regarded for a long time as a splendid justification of the vitality of representative government. I greet you and express once more my appreciation of the cooperation which has proved so effective. Only a small number of the items of our program remain to be enacted and I am confident that you will pass on them before adjournment. Many other pending measures are sound in conception, but must, for lack of time or of adequate information, be deferred to the session of the next Congress. In the meantime, we can well seek to adjust many of these measures into certain larger plans of governmental policy for the future of the Nation.
• You and I, as the responsible directors of these policies and actions, may, with good reason, look to the future with confidence, just as we may look to the past fifteen months with reasonable satisfaction.
• On the side of relief we have extended material aid to millions of our fellow citizens.
• On the side of recovery we have helped to lift agriculture and industry from a condition of utter Prostration.
• But, in addition to these immediate tasks of relief and of recovery we have properly, necessarily and with overwhelming approval determined to safeguard these tasks by rebuilding many of the structures of our economic life and reorganizing it in order to prevent a recurrence of collapse.
• It is childish to speak of recovery first and reconstruction afterward. In the very nature of the processes of recovery we must avoid the destructive influences of the past. We have shown the world that democracy has within it the elements necessary to its own salvation."
• Franklin D. Roosevelt
• MESSAGE TO CONGRESS REVIEWING THE BROAD OBJECTIVES AND ACCOMPLISHMENTS OF THE ADMINISTRATION. JUNE 8, 1934.
• 'THE NEW DEAL'. The beginning of social programs in America.
• http://www.ssa.gov/history/fdrstmts.html#message1
"You are completing a work begun in March 1933, which will be regarded for a long time as a splendid justification of the vitality of representative government. I greet you and express once more my appreciation of the cooperation which has proved so effective. Only a small number of the items of our program remain to be enacted and I am confident that you will pass on them before adjournment. Many other pending measures are sound in conception, but must, for lack of time or of adequate information, be deferred to the session of the next Congress. In the meantime, we can well seek to adjust many of these measures into certain larger plans of governmental policy for the future of the Nation.
• You and I, as the responsible directors of these policies and actions, may, with good reason, look to the future with confidence, just as we may look to the past fifteen months with reasonable satisfaction.
• On the side of relief we have extended material aid to millions of our fellow citizens.
• On the side of recovery we have helped to lift agriculture and industry from a condition of utter Prostration.
• But, in addition to these immediate tasks of relief and of recovery we have properly, necessarily and with overwhelming approval determined to safeguard these tasks by rebuilding many of the structures of our economic life and reorganizing it in order to prevent a recurrence of collapse.
• It is childish to speak of recovery first and reconstruction afterward. In the very nature of the processes of recovery we must avoid the destructive influences of the past. We have shown the world that democracy has within it the elements necessary to its own salvation."
See information below for study of The New Deal and how the social programs that have led us to financial insolvency in our Nation today were born in the era of 'The New Deal'.
Below is a list of topics that provide you with information on how The New Deal affected the various areas of social programs and economics in the U.S. The actual explanations of each topic are covered in the link provided in the Button at the bottom of this page. At the link, you can find everything you ever wanted to know about the "start" of the decline that is happening in America today. Outline follows:
History of the New Deal – Topics
Economic collapse (1929–1933)
New Deal (1933–1938)
Origins of the Great Depression
First New Deal (1933–1934) / The First Hundred Days (1933)
Fiscal policy
Banking reform
Monetary reform
Securities regulation
Repeal of Prohibition
Public works
Farm and rural programs
Recovery / NRA "Blue Eagle" campaign / Main article: National Recovery
Administration
Housing Sector
Trade liberalization
Puerto Rico
Second New Deal (1935–1938)
Social Security Act
Labor relations
Works Progress Administration
Tax policy
Housing Act of 1937
Court-packing plan and jurisprudential shift/ Main article: Judiciary Reorganization Bill of 1937
Recession of 1937 and recovery/ Main article: Recession of 1937
World War II and the end of the Great Depression
Legacy and historiography
The New Deal's enduring appeal on voters fostered its acceptance by moderate and liberal Republicans.
African Americans
Women and the New Deal
Charges of communism
Charges of fascism
New Left critique
Political metaphor
Evaluation of New Deal policies
Fiscal policy
Relief
Recovery / Keynesian interpretation
Monetarist interpretation
Economic growth and unemployment (1933-1941)
Effect on the Depression
Reform
The works of art and music
New Deal Programs
Depression statistics
Economic collapse (1929–1933)
New Deal (1933–1938)
Origins of the Great Depression
First New Deal (1933–1934) / The First Hundred Days (1933)
Fiscal policy
Banking reform
Monetary reform
Securities regulation
Repeal of Prohibition
Public works
Farm and rural programs
Recovery / NRA "Blue Eagle" campaign / Main article: National Recovery
Administration
Housing Sector
Trade liberalization
Puerto Rico
Second New Deal (1935–1938)
Social Security Act
Labor relations
Works Progress Administration
Tax policy
Housing Act of 1937
Court-packing plan and jurisprudential shift/ Main article: Judiciary Reorganization Bill of 1937
Recession of 1937 and recovery/ Main article: Recession of 1937
World War II and the end of the Great Depression
Legacy and historiography
The New Deal's enduring appeal on voters fostered its acceptance by moderate and liberal Republicans.
African Americans
Women and the New Deal
Charges of communism
Charges of fascism
New Left critique
Political metaphor
Evaluation of New Deal policies
Fiscal policy
Relief
Recovery / Keynesian interpretation
Monetarist interpretation
Economic growth and unemployment (1933-1941)
Effect on the Depression
Reform
The works of art and music
New Deal Programs
Depression statistics
