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One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. -- Plato (429-347 BC)

Sunday, October 05, 2014

The Real Story About What Ended the Great Depression (Hint: It Wasn’t the New Deal)

by Stephen Moore, Heritage Foundation: 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.

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 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.
--------------
Stephen Moore / (@stephenmoore) is a Fox News contributor and formerly writer on the economy and public policy for The Wall Street Journal . He is the chief economist at the Heritage Foundation where this article was shared.

Tags: Real story, end of great depression, wasn't the New Deal, Stephen Moore, Heritage Foundation To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. and "Like" Facebook Page - Thanks!
Posted by Bill Smith at 4:16 PM - Post Link

9 Comments:

Anonymous Melanie Angell Elliott said...

The author didn't actually come out and say what ended the GD! He left it incomplete.

10/05/2014  
Blogger Bill Smith said...

Melanie, Thanks for reading the article. You are right. What ended the great depression was a composition of many items not addressed by this article. I hope Steve Moore, as an economist, will address this in future articles. Part of the answer is the harnessed technology used in WWII and the decision made immediately at the end of the war to handle returning veterans and eventually to address the social situations of that day. But must leave that for another day.

10/05/2014  
Anonymous Jeffrey Locke said...

Now that is what I call a great write-up!

10/05/2014  
Blogger Bill Smith said...

Indeed. However, as Melanie noted in comment to me. Stephen Moore did not address all the aspects that ended the great depression which a composition of many items. I hope Steve Moore, as an economist, will address this in future articles. Part of the answer is the harnessed technology used in WWII and the decision made immediately at the end of the war to handle returning veterans and eventually to address the social situations of that day.

10/05/2014  
Anonymous Larry H Davis said...

There is no such thing as "Government Money"

10/06/2014  
Anonymous Jeffrey Locke said...

President Calvin Coolidge was my favorite President. He was a fiscal hawk.

10/06/2014  
Anonymous Helen Jeck said...

Excellent.

10/06/2014  
Anonymous Deborah Mulholand said...

Stephen Moore got it correct. FDRs policies extended the Great Depression. When taxes are lowered, government programs cut back dramatically, and capitalism and small businesses are allowed to flourish, the economy runs like a freight train--full speed ahead. FDR prolonged the Great Depression much longer than necessary and made it much harder for families.

10/06/2014  
Anonymous Helen Jeck said...

Bill, Always so many factors....

10/06/2014  

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