FDR, the New Deal and Revisionism of the Right
By
Richard J. Garfunkel
January 20, 2009
Most critics of the
New Deal and its sea change affects regarding the future of State's
Rights, interstate commerce, war powers, civil rights, the “Establishment
Clause,” collective bargaining, public power (TVA and Niagara Falls),
woman's rights, “choice,” and a plethora of other important issues,
see this as a usurpation of the Founders intent. Truthfully that may be
correct, but so what! The Founders never envisioned any of the following that
the country and the world has seen. They compromised on “slavery” and
look where it got us; strife and disaster for two centuries.
The Founders had
wise intent, and were socially progressive compared to their
day. Certainly the Declaration of
Independence was a radical departure from what had almost always
existed, but it was tempered by the US Constitution; a more conservative document. Thankfully the Bill of Rights was added and that
changed the Constitution from a
framework of government to a unique document truly protecting the individual
from the dictates of a potentially
malevolent “state.” But as it was said by Harold Ickes, (I
believe, and therefore paraphrase) “The Bill of Rights doesn't mean a thing to a hungry man!” And of
course Harry Hopkins said, “People need to eat every day, they don’t eat in the
long run!” Therefore, if our Constitution
doesn’t allow the government to protect people in need, it is a failure. If the
federal government ignored the plight of New
Orleans, under the aegis of the 1920's courts,
would justice or the “general welfare” be served?
Of course millions
upon millions of words have been written about these subjects. Therefore the
thrust of my thoughts are not on how conservatives feel about the loss of
individual rights, but on the necessity of change, and how “critical need”
fostered that change. Conservatives bellow about the confiscator nature of
the New Deal and how rights have been usurped to the detriment of the Country.
In other words owning a machine gun or an AK 47 is a right and if every one had
a gun by their side, crime would disappear and the rights to “life and
liberty, no less property” would be better protected. As far as I
remember, Wyatt Earp, and others like him, limited the carrying of guns in
Tombstone, Dodge
City and other places and brought civil order and
peace. I could just imagine millions of people carrying weapons and every time
someone looked cross-eyed at someone else, or they had a tough time at home, or
in the office, there would be a shoot-out. Mass murders, as we have evidenced
in the past 25 years, do not come with penknives, sticks, bats or etc. Those
crimes are actuated by the use of powerful, local weapons of mass destruction,
guns!
Of course one
doesn’t have to look far or listen very hard to hear the new “revisionist”
clamor on the right.
“Obama has
drawn the wrong lessons from the New Deal,” said Burton Folsom Jr., the
author of a new book that has helped reignite the controversy, “New Deal
or Raw Deal? How FDR's Economic Legacy Has Damaged America.” Folsom argues that Roosevelt's role in creating jobs is vastly overstated;
that he increased taxes too much, particularly on wealthier Americans; and that
his spending saddled Americans with debt for years.
But Jonathan Alter, who wrote “The Defining Moment,” a book on
Roosevelt's first 100 days in office – high on Obama's reading list – said
“the idea that none of it worked is just right-wing nonsense.” One
can hear Mr. Alter and his reflections on this subject on the July 26, 2007
edition of The Advocates, http://advocates-wvox.com.
But of course comments on the success or failure of the New
Deal don’t only come from some author’s trying to make a “fast buck” by pandering
to the right-wing. Rep. Virginia Foxx hopes to persuade her colleagues not to
release the second batch of financial industry bailout money and will press her
case before the House of Representatives.
Rep.
Foxx stated, “I don't think that we should make the same mistakes that were
made in the (1930s). We should learn from history,” Foxx also said, “The
policies of Franklin D. Roosevelt's New Deal were not really effective in turning the economy around, in March
of 1940, the unemployment rate was 14 percent.”
A columnist named Ellis Washington, currently a professor of
law and political science at Savannah
State University,
said:
At the ascendancy of
our 44th president of the United
States and a new administration, I have one
simple question to ask: Constitution or corruption? The latter principle of
governance has dominated politics beginning with the liberal Theodore Roosevelt
(1901-09) and his “Fair Deal.” Next came the socialist junta of Woodrow Wilson (1913-21) followed by FDR
(1933-45) where the apotheosis of
leviathan government over every aspect of our lives was ubiquitously called
“The New Deal.” Nevertheless, I truly believe that we can reform our decadent ways and return to the original intent of the Constitution's
framers. How?
In the early 1930s,
FDR used the pretext of the Great Depression to take Theodore Roosevelt's and
Wilson's experiments in socialism to a more comprehensive level with his
blatantly unconstitutional New Deal
programs, including Social Security, Aid to Families with Dependent
Children, the Federal Deposit Insurance Corporation, the Federal Housing
Administration, the Tennessee Valley Authority, Works Progress Administration,
the Securities and Exchange Commission and Fannie Mae,
just to name a few leviathan federal programs that have denigrated the liberty
and freedom of every American citizen. America is essentially a welfare
state where almost daily more of our liberties are confiscated by the
government. President-elect Barack Obama has promised to give America
“FDR, part II.” God help us all.
Mr. Ellis goes on to discuss Rep. John Shadegg, R, Ariz., proposed an “Enumerated
Powers Act,” or EPA (H.R. 1359 in the 110th Congress).
“If
this important bill were passed, it would force all 535 members of Congress to
literally cite chapter and verse of how their proposed legislation
lines up with the Constitution. The implication being if they could not clearly
show the constitutionality of their legislation, ipso facto it would
be deemed unconstitutional and summarily rejected from even given the respect
of a vote by Congress, because the proposed bill would have to first pass
constitutional muster to even be considered.”
Of course, Washington
not only denigrates the social advances brought on by reform Presidents like
Theodore Roosevelt and Woodrow Wilson, but states the following:
“Can you imagine how many welfare programs and
multi-trillion dollar spending plans America is currently entangled in
would be stopped dead in their tracks if Congress simply followed the original
intent of the Constitution's framers and enacted Rep. Shadegg's Enumerated
Powers Act? Government by definition and necessity would become smaller and
decentralized. The people would have
more of their own money to do with it what they will, and lazy bums who have
lived all their lives off other people's money would be compelled to get off
their butts and get a job. It would be tantamount to a third American
Revolution.”
These comments are not the ravings of a mad man, but very typical of the
right wing revisionists that abound in the land. As FDR characterized, in his
famous 1944, “My Little Dog Fala” speech, “the fiction writers, inside and
outside of Congress,” is quite apt.
One proto typical internet contribution came from a blog contributor, Mr.
Robert French, who stated about the New Deal:
Liberals
will tell you that these actions saved the economy then and will do so now.
Baloney! What they conveniently ignore is the fact that, after four-plus years
of FDR's vaunted programs, the economy was still in a deep hole and in 1937
plunged even deeper. After that, things started uphill very slowly but almost
certainly because of the cyclic nature of the economy, not any of the
government programs. The economy didn't really recover until World War II
descended upon us… If Obama accomplishes anything, it will probably be to make the recession longer and more severe.
It will, however, make the government bigger and more able to control our
lives, which, one suspects, is probably the real goal.
Note he has already predicted that if President-Elect Obama “accomplishes
anything he will make the recession longer.” In the mind of GOP/right-wing, the Depression
was a set-back that would have righted itself eventually. According to these revisionists,
if the economy were left alone, recovery would have eventually happened As
Herbert Hoover said, “Prosperity is just around the corner.” Not only did
recovery not come in the forty months of the Hoover Administration that
followed the late October1929, stock market crash, but Hoover,
in a campaign speech almost three years later to the day, On October 31, 1932,
predicted with a Roosevelt victory, “The grass
will grow in the streets of a hundred cities.” Well the grass did not grow in
the 100 cities under the New Deal!
As HW Brand has written in his new book on FDR, Traitor to his Class, “Herbert Hoover hated Roosevelt
during the campaign, and he hated him even more after the election,” He never
really understood what FDR’s landslide victory really meant. He even thought
that the slight up-tick in the economy right before the election was a sign
that his “patient policies has all but ended the depression, only for the
economy to swoon again as a result of Roosevelt’s victory, which frightened
investors and made them withdraw from the marketplace.” As Brand, wrote, “Like
many other counterfactual claims, Hoover’s
couldn’t be disproved.” Hoover finally came to his senses decades
later. Regarding his limitations on his
perspective, Hoover
said, “my education was that of an engineer, and I do not know all the nuances
of economics.”
Bob Schlesinger, the son of the late FDR biographer, Arthur M. Schlesinger,
Jr., wrote, Barack Obama, according to today's Times, has studied FDR's first 100 days, seizing on the
idea that Roosevelt had a “conversation
with the American public.” This is both smart and foreseeable—but he needs
to recognize his and the strategy's limitations. To understand why, ask
yourself how often FDR gave his famed fireside chats. The answer may surprise
you. It's smart because of the obvious historical
parallels—a Democratic president taking office at a time of economic crisis and
accompanying national psychological distress. It's foreseeable because Obama's
speech-giving skill is his greatest asset. Bob Schlesinger, who is an editor
and writer with US News and World Report,
was also on The Advocates on August 8, 2008.
Right after reading Schlesinger’s remarks on the internet, an unsigned
remark chimed in reflecting the revisionist right-wing:
The first thing that
FDR did was to move us to a socialistic
type of government with the confiscation
of gold. Who would of thought that it would be illegal to own your own real
money (gold) in the land of the free? I suppose any comment on the turnaround
from the depression would have to be that we bombed those Axis industrialized
nations into oblivion that would have been our competition in the world in a
gigantic war. Having thus done that we proceeded to be most prosperous nation
on the face of the earth for around 30 years. After that we decoupled our money
from any real standard. If what we have to look forward to is history repeating
itself, look out! Here comes WW-III…. Oh let's not forget BHO can communicate
real nice. That gives me a warm fuzzy.
On a side note to Mr.
Schlesinger, I think it is a shame that
you get paid to give your opinion because of your last name and not talent.
Note how it has been ingrained in many people’s minds that without World War
II the Depression would have never ended. Does that mean that the $350 billion
spending for the war, which was 5.5 times the total spent by the New Deal in
7-8 years, was the amount that should have been allocated by the government for
the recovery? Somehow the right-wing wants it both ways. On one hand they decry
the spending and the effort of the New Deal, and on the other hand they
assuredly feel that we needed greater spending!
From another perspective, Representative Henry Waxman, a Democrat from California seems to
believe that the New Deal also didn’t spend enough. When asked how the spending
in a stimulus package today would have a different effect than FDR’s spending
on federal programs, which did not significantly lower unemployment until the
start of World War II, Waxman said Roosevelt
did not spend enough.
“Well, a lot of
economists tell us that what Roosevelt failed to do was to spend as much money
as was needed to get people back to work and get the economy moving again,” he
said.
“It wasn’t until World War II when we had major expenditures that the
Depression was finally resolved,” said Waxman. “We’re going to be looking at
that experience. But I think what we are facing now is unique. But we’ve got to
approach it with what we’ve learned from the past but think through what we
need for the future.”
But was it Roosevelt alone, or the southern Dixiecrats of their day, and their
conservative GOP allies, who started to demand a cutback in spending? The
sharp, but short Recession of September 1937, seems to indicate that any cut
back in spending would send the economy back into a quick tailspin and slump.
That sharp economic setback, caused by the Fed’s tightening and budgetary
threats by the Congress to restrict the New Deal spending, cost the economy 4
million jobs, stultified steel production and reversed many gains of the
previous years. Quick intervention by the President and a reversal by the
Federal Reserve, ended the recession in the spring of 1938, and the recovery
was again on its way.
For more of the same, Michelle Malkin reminds us
of the UCLA study that concluded that FDR's policies not only did not end the Great Depression… but instead
actually prolonged it. Two UCLA economists say
they have figured out why the Great Depression dragged on for almost 15 years,
and they blame a suspect previously thought to be beyond reproach: President
Franklin D. Roosevelt. After scrutinizing Roosevelt’s
record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new
study that New Deal policies signed into law 71 years ago thwarted economic
recovery for seven long years.
“Why the Great Depression lasted so long has always
been a great mystery, and because we never really knew the reason, we have
always worried whether we would have another 10- to 15-year economic slump,”
said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a
relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived
stimulus policies.”
In an article in the August issue of the Journal of Political Economy, Ohanian
and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
How this
squares with history is a mystery to me and thousands of economists, professors
and historians. First of all, the Depression did not last 15 years and the New
Deal certainly reversed the free-fall of the economy that the country was
experiencing in March of 1933. On one hand they believe that the Depression
lasted 15 years (1929 through 1945), and on the other they feel World War II
ended it. There was certainly not a Depression from 1942 on when unemployment
reached 1.9%,
Of course
criticism of the New Deal doesn’t only reside in the hearts of aberrant
right-wing nuts, far out Members of Congress, or apostles of the “marketplace”
as a partner with G-d, but with establishment figures like Ms. Amity Shlaes.
Shlaes a graduate Yale University
magna cum laude with a bachelor’s degree,[ writes a syndicated
column for Bloomberg News]. She is a senior
fellow in economic history at the Council on Foreign Relations. Her many
appearances on television and radio include commentary on public radio for Marketplace.
Her Wall Street Journal piece on New Deal job
creation noted that such jobs may not always increase productivity. She wrote a
column for the Financial Times for five years, for which
she won the International Policy Network's Bastiat Prize for Journalism in 2002. Before
that, she worked at the Wall Street Journal, where she was a member
of the editorial board. She has
also written for The New Yorker, The American Spectator, Commentary Magazine, Foreign Affairs,
National Review, and The New
Republic, among others. Her obituary of Milton
Friedman appeared in The New York
Sun.
On 2 September 2005, Shlaes wrote a column for the Financial Times
arguing that the George W. Bush administration's response to Hurricane
Katrina showed that it had been well prepared for the disaster and
that George W. Bush had not been hindered by consideration of federalism
in his response. Ten days later, in another Financial Times column,
Shlaes noted that there had in fact been delays in responding to Katrina, but
argued that the Bush Administration should not be held responsible for them,
because they were simply an unfortunate result of federalism
In July 2008, Shlaes wrote a column defending Senator Phil Gramm's
comment that Americans were “whiners” with respect to the economy.
Shlaes endorsed Gramms's argument that the United States was not in a true
recession, saying that at the time, the US GDP had not shrunk during two
consecutive quarters
Of course Ms. Shlaes is one of the leading revisionists of the right.
She is avid defender of George W. Bush, and held that he should not be
responsible for the terrible follow-up regarding hurricane Katrina. She blames
that on “federalism.” Also, she seemed to be a recent “recession” denier, as
her statements in support of Phil Gramm seem to indicate. But this so-called
respected journalist was a member of the Wall Street Journal’s editorial board. In her
best-selling book, The Forgotten Man, a New History of the New Deal, she basically states:
That both
Presidents Hoover and Roosevelt failed to understand the prosperity of the
1920s and heaped massive burdens on the country that more than offset the
benefit of New Deal programs. The real question about the Depression, she
argues, is not whether Roosevelt ended it with
World War II. It is why the Depression lasted so long. From 1929 to 1940,
federal intervention helped to make the Depression great—in part by forgetting
the men and women who sought to help one another.
Even though
Shlaes talks about Hoover
and FDR not understanding the underlining prosperity of the 1920’s, in fact,
there are a number of accounts that the Depression had really started long
before the 1929 Stock Market crash. Many believe, including the eminent
historian, David M. Kennedy, the author of the Pulitzer and Parkman prize-winning
book, Freedom From Fear, The American People in the Depression and War, that the Depression
started in the early 1920’s and that the economic conditions in that halcyon
era were much overstated. He believes that the book, Only Yesterday, published in 1931, by
Frederick Lewis Allen, (1890-1954), which many of us read in the 1950’s and
1960’s presented a much rosier picture of the “flapper” era. Kennedy, like
others, realized that the 1920’s, as with the war years that preceded that
period, had artificially strengthened industries that were endemically flawed
and hurting before the Great War. The country’s largest employers in those days
were the farms, the railroads, and the coal mining industry. Supplying Europe during the war built American fortunes and turned
us from a debtor to a creditor nation.
After
the war, while Western Europe was suffering from a lack of food and fuel,
American mines, farms, railroads, and shipping created a false economic bubble
that started to end when Europe once again became
self-sufficient. In that period, farms couldn’t grow enough food
for needy Europe mouths, and between coal and
grain shipments the railroads were booming. But there were economic rumblings
being heard and even though there was a return to the pre-war wealth, there
would be great change stirring in the wind. Did President Calvin Coolidge, who
seemed to hate government, and sleep away his afternoons at the White House
really care? There many warnings, and in the in the words of Alan Greenspan, an
atmosphere of “irrational exuberance.” Author Kennedy even believes that the low unemployment
figures for that period were way over –stated. The collapse of pre-war Europe and the economic balance of employment and trade
sowed the seeds for a future world-wide economic meltdown.
Before the Crash of 1929, more
wealth was in the hands of fewer people then any other period in our long
history. Unrestricted capitalism led to wild speculation in the market places,
an eventual credit crunch, and since we didn't believe in “safety
nets” or entitlements, the ensuing collapse devastated our social order.
In Arthur M. Schlesinger Junior’s great works, on that period, which include The Crisis of the Old Order, and the Coming of the New Deal much of this
history is accurately reported and eloquently described. As in 1929, tax
policies from Reagan on, with the exception of the eight prosperous years of
the Clinton Administration, favored the rich, have shrunk the middle class, and
have concentrated more wealth in fewer hands than at any time since the crash.
This period
of “wonderful nothingness, which is what the 1920’s has been variously
described, ended with the fall of one of its great characters and swindlers,
Richard Whitney and the Bull Market in late October of 1929.
The Dow Jones Average had hit a high of on September
3, 1929, at 381.17. The market had been a bit shaky throughout the fall.
Richard Whitney (1888-1974), who had graduated from Groton and Harvard, as did Franklin D.
Roosevelt, but was admitted to Pocellian, unlike the late President, was a Wall
Street legend. He was a member of the New York Stock Exchange at age
twenty-three, was elected to the Board of Governors at thirty-one, and was the
head of his own investment company. He was the mirror of the “old guard” of the
New York Stock Exchange, which was a loose group of wealthy investors who
crafted and guided its direction and destiny. As the leader of this group and
at that time in the fall of 1929, he was a Vice-President of the Exchange and
its acting President. At the beginning of the Panic on “Black Thursday”,
October 24, 1929, he moved on the floor in the midst of the selling frenzy, and
placed huge orders in an attempt to bring confidence back to the marketplace
and to try to stem the avalanche of selling. He placed an order for 10,000
shares of US Steel at 205, which was 40 points above its current selling price.
He also placed other orders for his group in a number of other blue-chip
stocks. These orders were estimated to be in the range of $20 million. No one
in history had ever spent that type of money in a single afternoon. Of course
since he was associated with the House of Morgan, many traders assumed that
Morgan was behind such incredible action. This legendary effort seemed to work
for a while, and the market, which had dropped precipitously, seemed to take
pause. That day over 12.9 million shares had changed hands and the market had
lost an incredible amount of its value. Over the weekend investors thought over
the situation and decided to sell their holdings and the market absorbed a
record 13% loss in value. This set the stage for its ultimate collapse. On
“Black Tuesday”, October 29, 1929 the selling reached a historically un-reached
crescendo. The losses were incredible and with record 16.4 million shares
traded, the market lost another 12%. The market crash had wiped out an
incredible amount of wealth. It would eventually bottom out at 41.22 on July 8,
1932 to a level not seen since the 1800’s. By April of 1942 it would have lost
75% of its 1929 value and the Dow Jones Industrial Average would not
recover to its 1929 levels until November of 1954. Richard Whitney would still
represent the “old guard” as its spokesperson. He served multiple terms as its
President from 1930 onward and would be a frequent witness in front of
Congressional Hearings until 1935. Because reform elements had indicated he
would be opposed fore re-lection in 1935, he chose not to run again.
Ironically, he was a terrible manager of his own money. He borrowed from
friends and investors by using the name of JP Morgan as his assumed backer. It
was estimated that he had borrowed over $30 million and by 1938 he declared
bankruptcy and owed over $6 million personally. He was indicted, and pled
guilty to misuse of funds and spent three years and four months of his
five-to-ten year sentence in the Big House at Sing Sing.
The panic and collapse of the economy, brought on by the
crash resulted in a massive deflation that President Herbert Hoover called the
“Depression.” The New Deal, authored by Franklin D. Roosevelt, stopped
the bleeding, but because of the severity of the collapse it could never
resurrect the artificially inflated, halcyon days of the 1920’s. Of course
present day business -oriented “talking heads” like to say that the New Deal
prolonged the slump. Of course they have conveniently forgotten that the 1920’s
made the “Techie Bubble” of 2000 look like a walk in the park.
Many seem to have
forgotten or have totally ignored the disaster that we faced in 1933. After
three and one-half long years of inaction from the Hoover Administration that
left us an enduring and unending legacy of breadlines, shanty towns (Hooverville’s),
hobos riding the rails, abandoned farms, beggars, apple selling retailers
on the streets, unemployment in the tens of millions, social unrest, starvation,
and a net loss of population, as more left America then immigrated, we were
mired in an economic situation unlike any in history. What we learned quickly
from that era was that state's rights solved few problems, and that the south,
which was almost completely in ruins, embraced the New Deal with the most open
of arms. State's rights sustained “Jim Crow” laws which kept
African-Americans, and white tenant farmers uneducated, impoverished,
and certainly regarding Blacks, unable to vote. State's Rights enabled a
dictator like Huey Long to run Louisiana
like his own private fiefdom. State's right's allowed workers, women and
children to be abused by unscrupulous employers as wage slaves. Even with the
great centralized power FDR and the New Deal would bring to Washington, it
would take legislation like the Wagner Act of 1935, and the rise of
unionization, decades to reverse much of the state’s rights abuses of both its
minority citizens and its workers. Therefore without the enhanced federalism of
the New Deal, the country may have faced a greater threat to its unity than
even the Civil War posed.
FDR understood the
problem of regionalism, the power and the abuse of the “solid south,” and the
feelings of conservative wing of the Democratic Party. He had made an effort to
bring the southern and northern wings of the Democratic Party together with his
efforts to rehabilitate the image of Thomas Jefferson. He had Jefferson placed
on the nickel coin replacing the Indian head, had the magnificent Jefferson
Memorial built and sought to re-cast him as one of the founding fathers of the
Democratic Party with Andrew Jackson. But when it came to his policies, many of
these same southern committee chairmen thwarted his efforts in the latter
period of the New Deal. Because of their negativity, FDR attempted to purge
many of them in the primaries of 1938. This effort failed miserably, and FDR
learned his lesson. Later on FDR would need them to support Lend-Lease, and he
traded their support for issues he needed against those he could not win,
immigration quota reform, and anti-lynching legislation.
The size of
the economic cataclysm is almost hard to perceive. Even though the Department
of Commerce listed unemployment at 25% many estimates believe it ranged as high
as 36% and the most likely number is probably a bit above 30%. The amount of
new capital financing had declined 95% since 1929. The amount of new building
contracts had declined by at least 75% in those same years. The Dow Jones
Average was off 90% since its high in late 1929, and there were 5000 bank
closings since the crash, which eliminated nine million, pre FDIC uninsured
accounts. US Steel, which had almost a quarter of a million full-time employees
in 1929, now employed no one but executives. Schools in major cities and some
states virtually shut down for lack of money. In the first half of 1933,
250,000 homes were taken over by the banks, and over 1000 families per day were
cast homeless into the streets. This is what Franklin Roosevelt inherited on
March 4, 1933.
By 1933,
business failures had risen almost 50% from the end of 1928 (109 to 154 per
hundred thousand). From 1933 to 1935, only two years they dropped to almost 40%
from the 1928 levels (62 to 109 per thousand). Unemployment rose from 3% in
1929 to 25% in 1933. From 1933 through 1937 unemployment dropped 44% to 14%.
This figure did not include over 2 million workers employed by the WPA. As to
the Gross National Product, by 1933 it had dropped from $103.6 billion in 1929
to $56.4 billion in 1933. This represented a loss of 44% of the total goods and
services of the country in 3 years. In FDR’s first administration it rose
approximately 64% to $92 billion. By 1940, with defense spending still only 22
% of the federal budget (from 1928 through1932, defense spending represented an
average of 38% of the US Budget), and 2% of the GNP, the GNP had risen to
$101.4 billion or 4% higher than 1928!
Because of the New Deal, hourly wages which had dropped from 58 cents
per hour in 1928 to 49 cents for hour in 1933 (a drop of approximately 25%)
rose 74 cents per hour in 1940. This represented a strong recovery of 28% from
1928. These figures are undeniable.
FDR took bold
decisive action in the Hundred Days, and fifteen pieces of major legislation
passed. The hemorrhaging of the banking crisis ceased, stability was brought
back to the market places, and the NRA which came out of the National Recovery
Act was the first of many regulatory efforts which would eventually include,
the SEC, the AAA, the CCC, the PWA and the WPA.
On May 7, 1933, Roosevelt extolled the CCC in a fireside address on the
radio:
“First, we are giving opportunity of employment to one-quarter of a
million of the unemployed, especially the young men who have dependents, to go
into the forestry and flood prevention work. This is a big task because it
means feeding, clothing and caring for nearly twice as many men as we have in
the regular army itself. In creating this civilian conservation corps we are
killing two birds with one stone. We are clearly enhancing the value of our
natural resources and second, we are relieving an appreciable amount of actual
distress.”
The goal of the WPA was to employ
most of the unemployed people on relief until the economy recovered. Its
administrator, Harry Hopkins testified to Congress in January 1935 why he set
the number at 3.5 million, using FERA data. At $1200 per worker per year he
asked for and received $4 billion.
“On January 1 there were 20 million persons on relief in the United States.
Of these, 8.3 million were children under sixteen years of age; 3.8 million
were persons who, though between the ages of sixteen and sixty-five were not
working nor seeking work. These included housewives, students in school, and
incapacitated persons. Another 750,000 were persons sixty- five years of age or
over. Thus, of the total of 20 million persons then receiving relief, 12.85
million were not considered eligible for employment. This left a total of 7.15
million presumably employable persons between the ages of sixteen and
sixty-five inclusive. Of these, however, 1.65 million were said to be farm
operators or persons who had some non-relief employment, while another 350,000
were, despite the fact that they were already employed or seeking work,
considered incapacitated. Deducting this two million from the total of 7.15
million, there remained 5.15 million persons sixteen to sixty-five years of
age, unemployed, looking for work, and able to work. Because of the assumption
that only one worker per family would be permitted to work under the proposed
program, this total of 5.15 million was further reduced by 1.6 million–the
estimated number of workers who were members of families which included two or
more employable persons. Thus, there remained a net total of 3.55 million
workers in as many households for whom jobs were to be provided.”
The WPA employed a maximum of 3.3
million in November 1938. Worker pay was based on three factors: the region of
the country, the degree of urbanization and the individual's skill. It varied
from $19/month to $94/month. The goal was to pay the local prevailing wage, but
to limit a person to 30 hours or less a week of work.
As to the great Harry Hopkins,
later in his illustrious career he served as FDR’s special ambassador during
World War II. On his initial visit to war-torn Britain in early January of 1941,
he met with Prime Minister Winston Churchill to discuss Lend-Lease aid. At the end
of Hopkins’ tour of Britain
with the Prime Minister they ate dinner at the Station Hotel in Glasgow, Scotland.
Churchill drew out Hopkins with praise for
Roosevelt and a reference to “the Democracy of the great American Republic.”
Hopkins, who was quite ill from the affects of the long-grueling trip and his
own weakened constitution sat for a moment after Churchill’s remarks, and the
rose to face the Prime Minister.
“I suppose you wish to know what I am going to say to President Roosevelt
on my return.” In his soft-measured voice, “Well I ‘m going to quote you one
verse from the Book of Books in the truth of which Mr. Johnson (Tom Johnson, the secretary of state for
Scotland and a member of the party) and my own Scottish mother were brought up:
‘Whither thou goest, I will go; and where thou lodgest, I will lodge; thy
people shall be my people, the God my God.’” The dropping his voice, he added, “Even
to the end.” No one could have said it better. Churchill sat with tears in his
eyes.
This vignette reveals just a
fragment of what made up the great Harry Hopkins, who was one of FDR’s greatest
New Deal lieutenants.
The National Industrial Recovery Act on June 16, 1933, created the Public
Works Administration (PWA) and budgeted several billion dollars to be spent on
the construction of public works as a means of providing employment,
stabilizing purchasing power, improving public welfare, and contributing to a
revival of American industry. Simply put, it was designed to spend “big
bucks on big projects.”
Under the leadership
of Harold W. Ickes, the Secretary of the Interior, the PWA epitomized the
Rooseveltian notion of “priming the pump” to encourage economic
growth. Between July 1933 and March 1939, the PWA funded the construction of
more than 34,000 projects, including airports, electricity-generating dams, and
aircraft carriers; and seventy percent of the new schools and one third of the
hospitals built during that time. It also electrified the Pennsylvania Railroad
between New York and Washington, D.C.
Its one big failure was in quality, affordable housing, building only 25,000
units in four and a half years. It provided the federal government with its
first systematic network for the distribution of funds to localities, ensured
that conservation would remain an element in the national discussion, and
provided federal administrators with a broad amount of badly needed experience
in public policy planning.
When Franklin D.
Roosevelt was elected as president, he appointed Henry Wallace as
his Secretary of Agriculture. In 1933 Wallace drafted the Agricultural
Adjustment Act (AAA).
The AAA paid farmers
not to grow crops and not to produce dairy produce such as milk and butter. It
also paid them not to raise pigs and lambs. The money to pay the farmers for
cutting back production of about 30% was raised by a tax on companies that
bought the farm products and processed them into food and clothing. The AAA
also became involved in trying to help farmers destroyed by the creation of the
dust-bowl
in 1934. By
the time the Agricultural Adjustment Administration began its operations, the
agricultural season for many crops was already under way.
The agency oversaw a large-scale destruction of existing cotton crops and
livestock in an attempt to reduce surpluses. No other crops or animals were
affected in 1933, but six million piglets and 220,000 pregnant cows were
slaughtered in the AAA's effort to raise prices. Many cotton farmers plowed
under a quarter of their crop in accordance with the AAA's plans.
Large farms benefited from the AAA policy of reducing surpluses, having
“gross farm income increased by 50% during the first three years of the
New Deal.” The increase in gross income
for farmers was largely paid for through government subsidies.
These of
course are the major programs. FDR would have to fight the Courts over the
constitutionality of many of his programs, and a number would be voided. As for
example, in 1936 the Supreme Court
declared the AAA unconstitutional. The majority of judges (6-3) ruled that it
was illegal to levy a tax on one group (the processors) in order to pay it to
another (the farmers). In 1938, another AAA was passed without the processing
tax. It was financed out of general taxation and was therefore acceptable to
the Supreme Court.
This struggle
of course opened up the next phase of reform with his Second New Deal.
Eventually the Court ruled Social Security to be constitutional, and a number
of these very old Justices finally resigned after FDR’s effort to re-organize
the Federal court system (The Court Packing!). Eventually, he was able to put
his total imprint on the court despite losing his abortive court reform
initiative. But with all of his success, new generations of his critics have
been spawned in the 60+ years since his untimely death.
As per
example, I came across another article decrying the New Deal by William L.
Anderson, an assistant professor at Frostburg
State, Maryland, MD.
This article has
covered only a small portion of the post–New Deal Supreme Court’s crimes against the Constitution. For lack of space, I have not dealt with
the Court’s rulings on asset forfeiture, which has accompanied the government’s
“war on drugs,” nor have I dealt with the various Court assaults on free
speech, religious beliefs, and civil liberties.
To be able to fully
gauge the effect that the New Deal has had on our lives today through the
Supreme Court, a deforestation of North America
would be needed to write a volume large enough. However, there are two
consistent themes that have emerged in the past seven decades. The first is
that private property is considered to be an anachronism, useful only insofar
as it serves as a mechanism to raise tax revenues for government. The second is
that the U.S. Supreme Court and all U.S. courts, federal and state, are
expected to be movers and arbiters of social change. To put it bluntly, the
courts see themselves as having a mission to implement the policies of the
Progressive Era. Unfortunately, what the political classes see as being
“progressive” actually is little more than a regression into tyranny in which the
state has absolute power.
The
“right wing” of this country always seems to trash the rights of the
many for the rights of the few, by hiding behind “original
intent.” Again the Framers had no understanding of the modern
world that would come about. As Franklin Roosevelt said, “out of this
modern civilization, economic royalists carved new dynasties…The royalists of
the economic order have conceded that political freedom was the business of the
Government, but they have maintained that economic slavery was nobody's
business.” (FDR’s speech accepting re-nomination to the Presidency,
June 27, 1936.)
Also in his Second
Inaugural, the late President said, “The test of our progress is not
whether we add more to the abundance of those who have much; it is whether we
provide enough for those who have too little.” (Second Inaugural, January
20, 1937)
Little really has
changed in the minds of many of the old and new critics of the New Deal. But,
did we go back to unrestricted capitalism, and therefore trash the SEC, NASD,
and the Securities Laws of 1933, 1934, and 1940, wages and hours, child labor
laws and the like? No, thankfully! Should we go back to the great enduring
capitalistic legacy of the “Triangle Shirt-Waste Fire?” Or maybe we
should trash the reform legacy of Ida Tarbel, Upton Sinclair, Sinclair Lewis,
and others who revealed to the public the abuses of private capital and power.
Meanwhile how many judges did the “economic royalists” own? How
many of them came from the bosom of private capitalism and the world of
property? (Thankfully Holmes, Brandeis, and Cardozo didn't!)
The new president
has to face another generation of problems that has come out of an era of greed
and profit without a concern for economic sustainability and resiliency. In a sense
this all goes back to the real legacy of Ronald Reagan. It is hard to believe
that Reagan, who voted for FDR all four times he ran for president, would place
a picture of Calvin Coolidge in a place of honor in his office. What had Reagan
really learned? Interestingly, as much as Reagan seems to replicate Calvin
Coolidge more than Herbert Hoover, George W. Bush seems to have done the
impossible. He seems to have replicated Harding, Coolidge, and Hoover.
Hopefully when
Barack Obama takes the oath on this coming Tuesday, January 20, 2009, he will
be able to convey, in his own way and style, the same confidence, vision,
thoughtfulness and leadership FDR expressed on March 4, 1933. FDR’s remarks on
that famous day conclude my thoughts.
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The former Governor of New
York rode to the Capitol with President Hoover. Pressures of the economy
faced the President-elect as he took his oath of office from Chief Justice
Charles Evans Hughes on the East Portico of the Capitol. He addressed the
nation by radio and announced his plans for a New Deal. Throughout that day
the President met with his Cabinet designees at the White House.
Below is the text of FDR’s First Inaugural!
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President Hoover, Mr. Chief Justice, my
friends: This is a day of national consecration, and I am certain that my
fellow Americans expect that on my induction into the Presidency I will address
them with a candor and a decision which the present situation of our nation
impels.
This is pre-eminently the time to speak the
truth, the whole truth, frankly and boldly. Nor need we shrink from honestly
facing conditions in our country today. This great nation will endure as it has
endured, will revive and will prosper. So first of all let me assert my firm
belief that the only thing we have to fear. . .is fear itself. . . nameless,
unreasoning, unjustified terror which paralyzes needed efforts to convert
retreat into advance.
In every dark hour of our national life a leadership
of frankness and vigor has met with that understanding and support of the
people themselves which is essential to victory. I am convinced that you will
again give that support to leadership in these critical days. In such a spirit
on my part and on yours we face our common difficulties. They concern, thank
God, only material things. Values have shrunken to fantastic levels: taxes have
risen, our ability to pay has fallen, government of all kinds is faced by
serious curtailment of income, the means of exchange are frozen in the currents
of trade, the withered leaves of industrial enterprise lie on every side,
farmers find no markets for their produce, the savings of many years in
thousands of families are gone.
More important, a host of unemployed citizens
face the grim problem of existence, and an equally great number toil with
little return. Only a foolish optimist can deny the dark realities of the
moment. Yet our distress comes from no failure of substance. We are stricken by
no plague of locusts. Compared with the perils which our forefathers conquered
because they believed and were not afraid, we have still much to be thankful
for. Nature still offers her bounty and human efforts have multiplied it.
Plenty is at our doorstep, but a generous use of it languishes in the very
sight of the supply.
Primarily, this is because the rulers of the
exchange of mankind's goods have failed through their own stubbornness and
their own incompetence, have admitted their failures and abdicated. Practices
of the unscrupulous money changers stand indicted in the court of public
opinion, rejected by the hearts and minds of men.
True, they have tried, but their efforts have
been cast in the pattern of an outworn tradition. Faced by failure of credit,
they have proposed only the lending of more money. Stripped of the lure of
profit by which to induce our people to follow their false leadership, they
have resorted to exhortations, pleading tearfully for restored conditions. They
know only the rules of a generation of self-seekers. They have no vision, and
when there is no vision the people perish.
The money changers have fled their high seats
in the temple of our civilization. We may now restore that temple to the
ancient truths. The measure of the restoration lies in the extent to which we
apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of
money, it lies in the joy of achievement, in the thrill of creative effort. The
joy and moral stimulation of work no longer must be forgotten in the mad chase
of evanescent profits. These dark days will be worth all they cost us if they
teach us that our true destiny is not to be ministered unto but to minister to
ourselves and to our fellow-men.
Recognition of the falsity of material wealth
as the standard of success goes hand in hand with the abandonment of the false
belief that public office and high political position are to be values only by
the standards of pride of place and personal profit, and there must be an end
to a conduct in banking and in business which too often has given to a sacred
trust the likeness of callous and selfish wrongdoing. Small wonder that
confidence languishes, for it thrives only on honesty, on honor, on the
sacredness of obligations, on faithful protection, on unselfish performance.
Without them it cannot live.
Restoration calls, however, not for changes
in ethics alone. This nation asks for action, and action now. Our greatest
primary task is to put people to work. This is no unsolvable problem if we face
it wisely and courageously.
It can be accompanied in part by direct
recruiting by the government itself, treating the task as we would treat the
emergency of a war, but at the same time, through this employment,
accomplishing greatly needed projects to stimulate and reorganize the use of
our national resources.
Hand in hand with this, we must frankly
recognize the over-balance of population in our industrial centers and, by
engaging on a national scale in a redistribution, endeavor to provide a better
use of the land for those best fitted for the land. The task can be helped by
definite efforts to raise the values of agricultural products and with this the
power to purchase the output of our cities. It can be helped by preventing
realistically the tragedy of the growing loss, through foreclosure, of our
small homes and our farms. It can be helped by insistence that the Federal,
State, and local governments act forthwith on the demand that their cost be
drastically reduced.
It can be helped by the unifying of relief
activities which today are often scattered, uneconomical and unequal. It can be
helped by national planning for and supervision of all forms of transportation
and of communications and other utilities which have a definitely public
character.There are many ways in which it can be helped, but it can never be
helped merely by talking about it. We must act, and act quickly.
Finally, in our progress toward a resumption
of work we require two safeguards against a return of the evils of the old
order: there must be a strict supervision of all banking and credits and
investments; there must be an end to speculation with other people's money, and
there must be provision for an adequate but sound currency.
These are the lines of attack. I shall
presently urge upon a new Congress in special session detailed measures for
their fulfillment, and I shall seek the immediate assistance of the several
States. Through this program of action we address ourselves to putting our own
national house in order and making income balance outgo. Our international
trade relations, though vastly important, are, to point in time and necessity,
secondary to the establishment of a sound national economy. I favor as a
practical policy the putting of first things first. I shall spare no effort to
restore world trade by international economic readjustment, but the emergency
at home cannot wait on that accomplishment.
The basic thought that guides these specific
means of national recovery is not narrowly nationalistic. It is the insistence,
as a first consideration, upon the interdependence of the various elements in
and parts of the United
States. . . a recognition of the old and
permanently important manifestation of the American spirit of the pioneer.
It is the way to recovery. It is the
immediate way. It is the strongest assurance that the recovery will endure.
In the field of world policy I would dedicate
this nation to the policy of the good neighbor. . .the neighbor who resolutely
respects himself and, because he does so, respects the rights of others. . .the
neighbor who respects his obligations and respects the sanctity of his
agreements in and with a world of neighbors.
If I read the temper of our people correctly,
we now realize, as we have never realized before, our interdependence on each
other: that we cannot merely take, but we must give as well, that if we are to
go forward we must move as a trained and loyal army willing to sacrifice for
the good of a common discipline, because without such discipline, no progress
is made, no leadership becomes effective. We are, I know, ready and willing to
submit our lives and property to such discipline because it makes possibly a
leadership which aims at a larger good.
This I propose to offer, pledging that the
larger purposes will hind upon us all as a sacred obligation with a unity of
duty hitherto evoked only in time of armed strife. With this pledge taken, I
assume unhesitatingly the leadership of this great army of our people,
dedicated to a disciplined attack upon our common problems.Action in this image
and to this end is feasible under the form of government which we have
inherited from our ancestors.
Our Constitution is so simple and practical
that it is possible always to meet extraordinary needs by changes in emphasis
and arrangement without loss of essential form. That is why our constitutional
system has proved itself the most superbly enduring political mechanism the
modern world has produced. It has met every stress of vast expansion of
territory, of foreign wars, of bitter internal strife, of world relations.
It is to be hoped that the normal balance of
executive and legislative authority may be wholly adequate to meet the
unprecedented task before us. But it may be that an unprecedented demand and
need for undelayed action may call for temporary departure from that normal
balance of public procedure. I am prepared under my constitutional duty to
recommend the measures that a stricken nation in the midst of a stricken world
may require.
But in the event that the Congress shall fail
to take one of these courses, and in the event that the national emergency is
still critical, I shall not evade the clear course of duty that will then
confront me. I shall ask the Congress for the one remaining instrument to meet
the crisis. . .broad executive power to wage a war against the emergency as
great as the power that would be given to me if we were in fact invaded by a
foreign foe.
For the trust reposed in me I will return the
courage and the devotion that befit the time. I can do no less. We face the
arduous days that lie before us in the warm courage of national unity, with the
clear consciousness of seeking old and precious moral values, with the clean
satisfaction that comes from the stern performance of duty by old and young
alike. We aim at the assurance of a rounded and permanent national life.
We do not distrust the future of essential
democracy. The people of the United
States have not failed. In their need they
have registered a mandate that they want direct, vigorous action. They have
asked for discipline and direction under leadership. They have made me the
present instrument of their wishes. In the spirit of the gift I will take it.
In this dedication of a nation we humbly ask the blessing of God. May He
protect each and every one of us! May He guide me in the days to come!
