President Obama as FDR
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“We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.” -Henry Morgenthau, Jr., Treasury Secretary under FDR, testifying before the House Ways and Means Committee, May 1939.
As the economic data for the first two quarters of this year are being digested, almost everyone inWashingtonnow believes that President Obama’s economic stimulus package, which was supposed to keep the unemployment rate under 8.5 percent, is a dismal failure. The reason for this failure some Progressives such as Larry Summers, former Chief Economic Advisor for the Obama administration, have given was that the stimulus was too small. Some in the administration were pushing for another stimulus package before the Debt Ceiling debate took center stage in the capital along with surprising tenacity of some newly elected “Tea Party” Republicans forcing the present Congressional showdown. Over a year ago, I wrote that the passage of the stimulus would not bring relief to our economic situation, but would accelerate our path toward national bankruptcy. I do not claim to have received any divine revelations on economics; however, I would venture to say that looking objectively at the past, especially FDR’s New Deal policies, one should come to the same conclusion.
One of the greatest historical myths of the last century is that Franklin Roosevelt’s New Deal programs pulledAmericaout of the Great Depression. In fact I, along with many historians and economists, believe the exact opposite — that FDR’s policies exacerbated the downturn and extended it for almost a decade. The Great Depression started as a normal cyclical recession after the long expansion of the roaring twenties. It was worsened by the Republican Progressive President Herbert Hoover by his federal tax increases and protectionist policies such as the Smoot-Hawley Import Tariff in 1931. Adding to this economic “witches’ brew” was the Federal Reserve policy which overly constricted the monetary supply. These policies caused the stock market crash and the economy to continue to fall deeper into recession.
The price tag for FDR’s New Deal programs from 1933 to 1939 cost approximately $500 billion in 2011 dollars according to research by Nation Magazine. FDR also raised taxes three times in that period, the biggest being the Revenue Act of 1935. The unemployment rate was 4% in 1928, hit 8.5% in 1930, rose to 24% in 1932, and peaked at 25% in 1933. The rate dropped to 17% in 1936 but rose to 19% in 1938, falling to 17.5% in 1939 and ending in 1940 at 15%. Unemployment returned to “normal” in 1942 at 5% after the bombing ofPearl Harbor and fell to 1.5% in 1944 after 16 million were taken out of the workforce to serve in the military during World War Two. One of the biggest reasons for the continued sky-high unemployment during the Depression was the high taxation which confiscated capital that could have been used to hire new workers. The constant tax changes during this period added uncertainty to would-be employers who, if they had available capital, sat on the sidelines because they found it impossible to forecast the financial future captive to the whims of the administration. Walter Lippmann, Progressive journalist and political commentator, observed that New Deal reformers would “rather not have recovery if the revival of private initiative means a resumption of private control in the management of corporate business.” Progressives who continued to support the New Deal’s Socialist tendencies of tax, spend and “crony capitalism” were delighted about their control over major aspects of the economy and the limitation of individual economic freedom. The economy ( Household Wealth/ Stock Prices) did not ascend back to pre-Depression levels until 1949.
This all sounds eerily familiar to today. Small- to medium-sized businesses are facing uncertainty, such as new taxes imbedded within “Obama Care” that will hit them in full-force in 2013 and 2014 and the stimulus plan of 2009 with its enormous price tag of $787 billion (at least the New Deal spending spanned 7 years, not 2 years like the 2009 package). New business regulations are being put into place at a blistering pace. Again, I would venture to say to the Obama administration’s main goal is not a resurgence of the economy and the lowering of the unemployment rate, but in the President’s own words, “to fundamentally transformAmerica.” I offer as proof his obsession to pass a bill transforming healthcare in his first year in office instead of offering pro-growth /free market policies to help the economy recover. I am sure the President would welcome a decline in the unemployment rate, but only as so far as it would assist his re-election chances.
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June 2, 1935, Boston Globe, “[Road Closed
I fear that as long as destructive Progressive policies are in place, there will not be a recovery.When are we going to learn that a nation cannot spend itself into prosperity, nor can it thrive when limiting its citizens’ economic freedom through taxation and excessive regulation? We as citizens can only prosper when the government allows us to decide our own economic destiny and gets out of the way.
-Just my Opinion D.B.
Associate Member Online News Association 2011-2014