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FDR's Raw Deal Exposed
Chicago Sun-Times ^ | 9.30.03 | Thomas Roeser

Posted on 08/30/2003 11:59:46 AM PDT by Cathryn Crawford

FDR's Raw Deal Exposed

August 30, 2003

BY THOMAS ROESER

For 70 years there has been a holy creed--spread by academia until accepted by media and most Americans--that Franklin D. Roosevelt cured the Great Depression. That belief spurred the growth of modern liberalism; conservatives are still on the defensive where modern historians are concerned.

Not so anymore when the facts are considered. Now a scholar at the libertarian Cato Institute has demonstrated that (a) not only did Roosevelt not end the Depression, but (b) by incompetent measures, he prolonged it. But FDR's myth has sold. Roosevelt, the master of the fireside chat, was powerful. His style has been equaled but not excelled.

Throughout the New Deal period, median unemployment was 17.2 percent. Joblessness never dipped below 14 percent, writes Jim Powell in a preview of his soon-to-be-published (by Crown Forum) FDR's Folly: How Franklin Roosevelt and His New Deal Prolonged the Great Depression. Powell argues that the major cause of the Depression was not stock market abuses but the Federal Reserve, which contracted the money supply by a third between 1929 and 1933. Then, the New Deal made it more expensive to hire people, adding to unemployment by concocting the National Industrial Recovery Act, which created some 700 cartels with codes mandating above-market wages. It made things worse, ''by doubling taxes, making it more expensive for employers to hire people, making it harder for entrepreneurs to raise capital, demonizing employers, destroying food . . . breaking up the strongest banks, forcing up the cost of living, channeling welfare away from the poorest people and enacting labor laws that hit poor African Americans especially hard,'' Powell writes.

Taxes spiraled (as a percentage of gross national product), jumping from 3.5 percent in 1933 to 6.9 percent in 1940. An undistributed profits tax was introduced. Securities laws made it harder for employers to raise capital. In ''an unprecedented crusade against big employers,'' the Justice Department hired 300 lawyers, who filed 150 antitrust lawsuits. Winning few prosecutions, the antitrust crusade not only flopped, but wracked an already reeling economy. At the same time, a retail price maintenance act allowed manufacturers to jack up retail prices of branded merchandise, which blocked chain stores from discounting prices, hitting consumers.

Roosevelt's central banking ''reform'' broke up the strongest banks, those engaged in commercial investment banking, ''because New Dealers imagined that securities underwriting was a factor in all bank failures,'' but didn't touch the cause of 90 percent of the bank failures: state and federal unit banking laws. Canada, which allowed nationwide branch banking, had not a single bank failure during the Depression. The New Deal Fed hiked banks' reserve requirement by 50 percent in July 1936, then increased it another 33.3 percent. This ''triggered a contraction of the money supply, which was one of the most important factors bringing on the Depression of 1938--the third most severe since World War I. Real GNP declined 18 percent and industrial production was down 32 percent.''

Roosevelt's National Recovery Administration hit the little guy worst of all, Powell writes. In 1934, Jacob Maged, a 49-year-old immigrant, was fined and jailed three months for charging 35 cents to press a suit rather rather than 40 cents mandated by the Fed's dry cleaning code. The NRA was later ruled unconstitutional. To raise farm prices, Roosevelt's farm policy plowed under 10 million acres of cultivated land, preventing wheat, corn and other crops from reaching the hungry. Hog farmers were paid to slaughter about 6 million young hogs, protested by John Steinbeck's The Grapes of Wrath. New Deal relief programs were steered away from the South, the nation's poorest region. ''A reported 15,654 people were forced from their homes to make way for dams,'' Powell writes. ''Farm owners received cash settlements for their condemned property, but the thousands of black tenant farmers got nothing.''

In contrast, the first Depression of the 20th century, in 1920, lasted only a year after Warren Harding cut taxes, slashed spending and returned to the poker table. But with the Great Depression, the myth has grown that unemployment and economic hardship were ended by magical New Deal fiat. The truth: The Depression ended with the buildup to World War II.


TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; Editorial; Extended News; Front Page News; Government; News/Current Events; Politics/Elections
KEYWORDS: bankers; banking; bookreview; economy; fdr; greatdepression; history; investmentbanking; michaeldobbs; myth; newdeal
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To: liberallarry
As well, economics was and is largely propaganda.

It certainly has not achieved the state that we could call science, but this is statement is clearly wrong.

In my college days - the '60s - economists were still teaching that unemployment was an impossibility in a free-market economy. Moreover, you misunderstood what the instructors were telling you. This is much like the "monopoly is bad" lesson of Econ 101 learned today. Which monopoly? With a single good? Static or dynamic? Natural (protected by patents)? The answer depends on the model, and most have seen only the simplest ones. Moreover, as evidenced by your remark, most have misunderstood even those simplest models.

261 posted on 08/30/2003 10:43:12 PM PDT by TopQuark
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To: liberallarry
This still does not answer the question of what prompts you to praise Stalin in this context. Jews were treated better at that time in Arab countries as well --- you did not think of that, did you? Your sympathies show a bit, Larry.

More importantly, and you should not this, in early 1953 freight cars (much like those of the Nazis) were prepared for a deportation of all Jews to Siberia. Stalin's deapth in April of that year prevented the implementation of the plan.

262 posted on 08/30/2003 10:49:06 PM PDT by TopQuark
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To: liberallarry
I have problems with all three monotheistic faiths. I believe intolerance is built into them.

This is a logical necessity. The ethical aspect of religion comes down to axioms about good and evil. However, the latter is defined, to uphold the good one must be intolerant of eveil (at least in certain exreme forms of it).

The only doctrine that does away with this is actually non-ethical: moral relativism of today. It declares that, as you know, that there are no shared forms of good and evil. Hence, its love with "tolerance," "understanding," "love of mandkind." It's going to end soon: this is nothing more that the self-centered creed that robs the children, and the children will eventually figure it out.

263 posted on 08/30/2003 11:07:41 PM PDT by TopQuark
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To: liberallarry
The reality is that humanity is often faced with problems it doesn't understand and can't solve.

This is an excellent point! It is definitely true when it comes to FDR. And we witness many other examples today, where the anti-corporate sentiment leads many --- including those on this supposedly concervative board -- to impute the corporate management with all sorts of malice where those managers are simply doing their best with the objectively limited knowlege at their disposal.

264 posted on 08/30/2003 11:11:43 PM PDT by TopQuark
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To: liberallarry
I don't know how to eliminate unemployment and starvation.

Starvation has been eliminated in this country.

As for unemployment, it is not the duty of society to eliminate it: the job-seeker has a responsibility here. Again, Larry, it is the basic premise of SOCIALISM that one is ENTITLED to a job.

265 posted on 08/30/2003 11:15:23 PM PDT by TopQuark
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To: WOSG
Stalin was easily a far more deadly character than Hitler

Probably not. Firstly, Hitler ruled for a much shorter period of time, so you should compare the rates of murder and not the totals. Secondy, the military casualties of war -- and that includes 20M Russians --- may be attributed to Hitler to started that war.

266 posted on 08/30/2003 11:19:42 PM PDT by TopQuark
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To: WOSG
I dont recall the Bolshevik Jew Trotsky getting very good treatment from Stalin.

Trotsky was not persecuted for his religious beliefs (which he had abandoned) or his Jewish origin. He was persecuted as political rival.

267 posted on 08/30/2003 11:21:31 PM PDT by TopQuark
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To: nicollo
Unlike his policies, FDR's "sunshine" worked, and it has worked on history.

Very true. It wasn't FDR's ideology or economics that carried the day, but his confidence and personal skills. Like Ronald Reagan, Roosevelt convinced people that the future would be better. Hoover was more like Carter or GWB. Reagan's interpretation of FDR was interesting: he rejected many of the claims and goals of the New Deal, but respected and imitated Roosevelt's persona, and aimed his appeal at the groups that FDR had won over, rather than simply to convinced Republicans or Conservatives alone.

FDR did help to bring in "happy face" or "feel good" government which uses all the techniques of advertising, public relations, and management to keep the public contented and obedient. But such a development was implicit in the system long before, as Tocqueville forsaw and Two Adamses and Van Buren learned at their own cost. When people are getting fired and losing their businesses, no politician can afford to look like the guy who gave you your pink slip, called in your loan, or auctioned off your farm.

Context matters a lot, too. Roosevelt wasn't seen in the context of Washington or Reagan, but against the background of Hitler and Stalin, the lackluster, unappealing Hoover and Mellon and the uninspiring leaders of the other interwar democracies. Nobody will ever take FDR for a deep thinker or cultural hero, but in the thirties and forties, he had to be built up into one to serve as an alternative to Hitler and Stalin on the world scene.

I'm curious about Taft and income tax, though. How responsible was he for it?

268 posted on 08/30/2003 11:30:24 PM PDT by x (DEMOCRACY is also a form of religion. It is the worship of jackals by jackasses. H. L. Mencken)
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To: TopQuark
One of the main reasons the German Army could advance so quickly at the start. Is that the Sovite people saw Hitler as there rescuer from Communism and Stalin. They surrender at first to the advancing front.
A high number of Soviet “ combat deaths ” were really. Political executions.
Stalin was very shrewd. Why just waste bullets & lives. Why not make them useful to the State! People that the state wanted to get rid of. Were formed into Penal outfits. Backed up by a Guard unit.
Now the Guard unit was not there to help the Penal unit. Or fire into the German line. There were to shoot an the backs of the Penal men. To make them charge forward.
Stalin was very very much worst that Hitler. They came to power around the same time.
But by even 1940 Stalin body count was already in the millions.
But because Stalin was more PC He didn’t discriminate. That’s why all the Rats love him I guess;)
I’m not saying Hitler was good. Just not “ as bad “ as Stalin.

269 posted on 08/31/2003 12:38:23 AM PDT by quietolong
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To: elbucko; Cathryn Crawford
To the Left, the easy answer to poverty is give the poor money. The real answer is give the poor justice. Arrest the pimps, dealers and cheats.

You have touched on a key truth. The primary prerequisites for general prosperity are: (1) individual liberty, so that a person can act according to his own knowledge and judgement, (2) clear and predictable laws, so that everyone knows in advance what they can and cannot do, and (3) honest courts, so that people are protected from marauders, whether they be poor or rich, well connected or not, violent or not.

The rich can always buy protection from the government, but the poor are at the mercy of the law and the court for their protection from the lawless. Those who are prepared to purchase influence can manage to survive in a lawless country but the poor are stuck on the bottom in the absense of the rule of law.

And, of course, people who cannot govern themselves are doomed to poverty, and their families are saddled with an additional burden. Individual liberty, of course, implies the ability to govern oneself which is a moral quality. You can't separate liberty from morality, and you can't separate general prosperity from it either.

270 posted on 08/31/2003 12:58:24 AM PDT by marron
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To: liberallarry; WOSG; Cathryn Crawford
I am glad I delayed responding, in reading the thread I see that others, particularly WOSG, have stated my case better than I.

I particularly want to refer you to the link at post #2. This is as good an explanation as any as to what caused the Great Depression. If you want to point out that its causes were bipartisan, thats fine, you'll get no argument from me there. The events that caused it involve both parties, but the events that caused it are not unknowable. They involve direct government intervention in the economy, followed by more intervention which magnified the effects of the previous intervention.

Specifically, you have a decade of Federal Reserve manipulations of the dollar, first maintaining excessive liquidity, followed by a decision to drastically reduce liquidity. It was this decision that was the direct cause of the crash.

In any event such as this, you have a politically irresistable temptation on the part of political leaders to "do something", and Hoover did. He responded to Fed intervention in the economy with more intervention, which reduced liquidity even more, and drove the economy into the ground.

Roosevelt, under tremendous pressure to "do something", took government intervention in the economy to heights never before seen in the US, and his policies sucked even more liquidity out of the economy. He continued to pile up more and more liquidity-killing measures until the war started, whereupon he took action that had the effect of pumping liquidity back into the economy.

His pre-war economic policies were never going to bring the economy back, they couldn't. To say that no one understood that at the time is probably true, but it wasn't unknowable. The Austrians were active at the time, but they weren't anywhere near Washington or the Roosevelt Administration (or many administrations since, either, truth be told).

His policies were a continuation of the ideas then in vogue, and still in vogue, that the economy required the direction of good managers in government. This was the idea behind the establishment of the Federal Reserve which placed control of monetary policy in the hands of Fed geniuses, who were the immediate cause of the crash, and it was the idea behind Hoover's incompetent "fixes" after the crash, and Roosevelt's even more aggressively incompetent "fixes" after 1933.

I have seen this sort of thing in latin america, where a series of populist governments run the economy into the ground, each new government intervening more aggressively than the last in an effort to create a more humane economy, and the result is more stagnation than ever. Imagine Hoover followed by Roosevelt followed by Roosevelt on steroids, followed by Mussolini. This is your typical latin american economic history.

In the thirties the idea of an economy managed by "qualified" people was very much in vogue, and Roosevelt was the one that got carte blanche to try every statist idea in the book. Alone he couldn't have done the damage he did, but combined with Fed manipulations and a political environment that allowed almost unlimited government control over the economy, there was nothing to stop us from hitting bottom and nothing to bring us back.

The solution to the depression? Take action to increase liquidity. Thats it. It really is that simple. It was Fed incompetence that caused the crash, followed by Hoover's incompetence that agravated it, followed by Roosevelt's that was the coup de grace. Cut taxes, repeal the tariffs, and pump up the liquidity, thats all that was needed. Hoover and Roosevelt did precisely the opposite, and 10 years of their expert monkeying left us in the same stagnation at the end as at the beginning.

If you understand the things that had to happen to snap us out of it, then re-read what Roosevelt actually did, and you cannot continue to see him as the hero of the depression. He was not its author, that belongs to whoever thought we needed an agency to manipulate the dollar, and to Hoover; but he was its grand champion, who did everything possible to pile on and make recovery all but impossible.

You also cannot understand Roosevelt as a war leader until you have thought through the full significance of the Venona records. As others have said, McCarthy got it wrong; he never had a clue how bad it really was. Roosevelt surrounded himself with Stalinist agents. Not communists, mind you, well meaning professorial types that just want to help the common folks, but actual on-the-payroll Stalinist agents. These are the people he had designing our Japanese policy, these are the people that he had negotiating with Stalin. These are the people that designed our pre-war stance and our war strategy.

I am not an isolationist. I am proud that we stopped the Japanese; the Rape of Nanking and other atrocities in China forever disqualified them to be Asia's liberators. Stopping Hitler was an absolute necessity. The isolationists who couldn't see the need to confront him were wrong. But Stalin's death toll was several times that of Hitler's. To say that Stalin didn't kill as many Jews as Hitler is of course rather lame; he wasn't trying to kill all of the Jews, he was killing everyone. His death toll was well above twenty million in a 5 or 6 year period. And Roosevelt's people were on his payroll. You have to think about the significance of this when you judge who and what Roosevelt was.

We won the war when we smashed Hitler and Japan. Stalin won, in that he acheived all of his ambitions and pushed his empire to the Elbe River. With Roosevelt's approval. Wars are messy, and you make messy agreements under the pressure of events that are hard to explain later, that is a truism. Our alliance with Saddam against the Ayatollah is a good example. But it would be an important piece of the puzzle, if we knew that among those making the policy were National Security Advisors on Saddam's payroll. And if those same Saddamist agents led our president to acquiesce in the annexation of Kuwait, for example.

If I speak a little strongly where Roosevelt is concerned, it is because for too long he has been deified, and critical examination of his actual record has been somewhat off limits. People have idealized what he did and who he was, and that is a mistake. He led us into a war that I consider necessary, I'm not an isolationist, but despite your assertion to the contrary, we were not at all prepared. Our military was the smallest ever, on the eve of a two front war against the largest armies the world had ever seen. That is his legacy, that and the depression he could not solve and could never have solved.

The stuff about his opposition to anti-lynching laws was true, but gratuitous; how can you blame him for supporting what most Democrats in those days supported? But if you consider his attitude toward this rather basic issue, his unwillingness to respond to reports of Nazi atrocities prior to the war, and his willingness to repatriate refugees to their deaths takes on a slightly different texture.
271 posted on 08/31/2003 2:43:58 AM PDT by marron
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To: TopQuark
failed to prevent WWII.
By this standard, you shouldn't vote next time unless G-d himself is a presidential candidate.
I admit that the people who were willing to face the reality of German rearmament were thin on the ground.

But, it has to be said, there were two things which were important for leaders to do in the 1930s--one was to get the economy going again, and the other was to confront Hitler.

It's one thing to say that FDR couldn't do either of them, and another thing to say that they were literally impossible. You can't say that no one knew that Hitler had to be stopped; Churchill was screaming that--from a back bench--for years in Britain.

Maybe the historical necessity was for FDR to do something which would have prevented his reelection in 1936; would it be unjust of me to say it's a shame we didn't have a president then who did that? It seems to me that we have grown up with a circular argument: FDR was a great man, so the fact that he didn't do either of the things that history screams out were needed proves that neither of them could have been done. Whatever FDR did was great--because FDR was a great man. And FDR was a great man because whatever he did was great.

Contrast FDR with Reagan. The people who say that FDR was a great man said that you couldn't cure inflation and unemployment at the same time; Mario Cuomo made his reputation as a speaker at the DNC convention screaming that Reagan's policies would fail. Democrats had no solution but they wouldn't have it that someone who did, should be able to show them up. So according to those who deify FDR, Reagan's domestic success had to be luck.

Again on foreign policy, FDR's adorers didn't know how to end the energy crisis; Reagan got the Saudi's to do it. That helped our (oil importing) economy and whacked the (oil-exporting) Soviet economy. And most signally, neither conservatives nor liberals thought that we would be free of the Soviet Union within a decade of the inauguration of Reagan. Reagan went in determined to "transcend" Communism, and he did it.

So I simply do not accept the conceit that anything which FDR did not do, has been proven to be impossible simply because FDR couldn't do it. Any more than I think that of x42, who I think actually resembles FDR. Don't forget, without the 22nd Amendment we might now be suffering through the 3rd term of that oaf. He has his impeachment, and FDR has his very own Constitutional Amendment to prevent a repitition of his administration.


272 posted on 08/31/2003 4:50:40 AM PDT by conservatism_IS_compassion (The everyday blessings of God are great--they just don't make "good copy.")
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To: Scenic Sounds
Oh, no. Now we're going to trash George Washington, the Father of our Country?

No, we are going to trash his use of the Army to kill Americans.

Nixon launched the EPA and other big-government programs.

Everyone had their weaknesses. FDR just had them every day of his presidency.

273 posted on 08/31/2003 5:10:37 AM PDT by eno_ (Freedom Lite - it's almost worth defending)
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To: TopQuark
You confuse impetus with a cause.

You could very well be correct considering that impetus is a noun which means that which causes a given response.

274 posted on 08/31/2003 5:36:07 AM PDT by MosesKnows
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To: nicollo
Well, it's a long story, but Taft indeed launched the 16th amendment. The book discussed in that thread tells the story.

The Sixteenth Amendment was also ratified while Taft was president. ;-)

275 posted on 08/31/2003 6:59:01 AM PDT by Scenic Sounds
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To: Paulus Invictus
Are you saying that what history says about FDR is wrong? How is Polk or other presidents involved in this study? Enlighten me.

All of our past presidents have become part of our American heritage. We must respect them all. ;-)

276 posted on 08/31/2003 7:02:09 AM PDT by Scenic Sounds
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To: TopQuark
Moreover, as evidenced by your remark, most have misunderstood even those simplest models

That simple model had been used repeatedly, by both economists and politicians, to try to blame unions for unemployment. It should never have been so used. It was a model that left out too much and did not explain the real world.

I'll stand by my statement - much of economics is propaganda. The only caveat is that many economists are aware their theories are being misused.

277 posted on 08/31/2003 7:02:46 AM PDT by liberallarry
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To: conservatism_IS_compassion
Let's not forget that the United States, via Lend-Lease, sent tens of tons of nuclear materials (including enriched uranium) to the USSR in the Spring of 1943. That is about 18 months before the Trinity Test.

Oh, yes, the head of Lend-Lease at the time, one Harry (the "Hop") Hopkins - FDR's alter ego. The Hop is now known to have been Soviet agent Number 19 from the Venona project's decrypts.

Go it goes ...

278 posted on 08/31/2003 7:04:42 AM PDT by jamaksin
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To: eno_
No, we are going to trash his use of the Army to kill Americans.

Nixon launched the EPA and other big-government programs.

Everyone had their weaknesses. FDR just had them every day of his presidency.

I never dreamed that I would see someone trash Washington, Nixon and FDR, all on the same day! You must have very high standards.

God bless America. ;-)

279 posted on 08/31/2003 7:07:07 AM PDT by Scenic Sounds
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To: norwaypinesavage
It may be true that FDR didn't cure the depression. But the New Deal programs employed and fed some people who would have otherwise starved. It was that bad. We got some cool ski lodges and hiking trails out of the bargain.
280 posted on 08/31/2003 7:17:05 AM PDT by risk
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