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The Enduring Myths of Herbert Hoover, Franklin D. Roosevelt, and the New Deal

One of the greatest myths told about American history is the idea that Franklin D. Roosevelt’s New Deal propelled the nation out of the Great Depression. This fallacy has been sustained by our education system ever since the Depression became a history class topic. It is also unfortunate that history remembers Herbert Hoover as a do-nothing, laissez-faire type President. If he only he was! President Hoover’s interventionist policies turned a recession into a depression, and paved the way for the economically ignorant policies of FDR. Statistics, rather than the Left’s emotional rhetoric, expose the New Deal and its massive expansion of government for what it really was: A failure that has been judged by its intentions rather than its economic results. In the age of Barack Obama, the economic failures of the Roosevelt Administration (or should I say Monarchy?) linger on. Failed spending projects like Obama’s stimulus, wasted investments like Solyndra, and economically moronic legislation such as Dodd-Frank are just as worthless today as they were in the 1930’s. When people realize that interventionist policies hinder growth rather than stimulate it, then we will see an end to boom and bust cycles and create a safe haven for economic prosperity.

When politicians remind us that we must look to the past for economic advice, it seems they always try to emulate interventionist policies rather than hands-off economic policies. Perhaps creating more programs and bankrupting the treasury makes you look busy and helps win more votes, but it is not a recipe for success. After the financial crisis of 2008, many people wished for President Obama to implement activist policies early in his term. Many liberals, perhaps even Obama himself, saw the President as the reincarnation of FDR and his New Deal. They got their wish, and four years later, we have seen the result: Anemic economic growth, record spending, and the molestation of personal liberty. Like the New Deal, Obama’s policies have failed. That is why we should look to Presidents like Warren Harding and Calvin Coolidge for economic advice, rather than the fiscally obtuse Franklin Delano Roosevelt.

An economic event that garners little attention in history textbooks is the Depression of 1920. Immediately after World War I and the beginning of Prohibition, the United States faltered economically. By 1920, unemployment rose from 4% to 12%, and our Gross National Product declined by 17%. While Secretary of Commerce Herbert Hoover (The supposed lazy do-nothing Capitalist) urged President Warren Harding for steadfast government intervention, he was rightfully ignored. Against the wishes of Hoover, Harding cut the federal budget by almost half, cut taxes for every income bracket, prevented the Federal Reserve from inflating the currency, and even reduced the National Debt by one-third. Unemployment sunk to 6.7% in 1922, and by 1923 was at an amazing 2.4%! Harding-omics arguably led to one of the greatest periods of economic growth and prosperity in American history, but why doesn’t history remember his free market solutions? I guess The New Deal has a better storyline.

The “non interventionist” Herbert Hoover took the office of the Presidency in 1929. That fall, the stock market crashed. Rather than take a lesson from the Harding recovery, President Hoover envisioned a government fueled rebound (an oxymoron if you study the Austrian School of Economics). He summoned leading businessmen to the White House for economic meetings. In these meetings, he demanded that businesses raise wages to give consumers more capital. The private sector complied with Hoover’s demands. Subsequently, businesses cut jobs to compensate for the higher wages, and unemployment skyrocketed. The President made the mistake that liberals to this day are guilty of: Falsely assuming that high wages resulted in prosperity and growth, rather than the opposite. Setting mandatory wage increases defies basic laws of economics, and is severely hazardous to economic growth.

At the time of the crash, food prices in America were very low. This was hurting the profits of farmers and the country’s GNP. To combat the low prices, Hoover established a Federal Farm Board. This encouraged farmers to produce less wheat and cotton (what a great idea, producing less will lead us to prosperity!) in order to drive up prices. When this didn’t work, the Farm Board started the Grain Stabilization Corporation, a program that began buying up the surpluses of American agriculture. The Bureaucrats hoped that this would create a world wide grain shortage, leaving foreign markets in need of buying American grain. Instead, the world markets created their own solutions, and Canada and Argentina took America’s place in global grain exports. Even after Hoover’s zealous intervention into the grain industry, prices still did not rise, and his initiatives failed.

Hoover then turned his attention to tax policy. In 1930, the President signed the Smoot-Hawley tariffs into law, raising tariffs an average of 59% on more than 25,000 products (Thomas E. Woods, Jr. “The Politically Incorrect Guide to American History”). This resulted in retaliation tariffs by European countries, particularly on American automobiles. Subsequently, American car sales in Italy fell by 90%, and countries like France and Spain basically stopped importing American cars at all! Talk about “letting Detroit go bankrupt!” In addition to his tariff hikes, Hoover raised taxes on the wealthiest Americans 25% to 63%, the largest tax increase in history to that point. This obviously deterred people from investing, and made the economy even worse.

As if President Hoover had not done enough to hinder the economy, Franklin Delano Roosevelt made the issue worse after he defeated Hoover in the 1932 election. Upon taking office in 1933, Roosevelt began to implement his New Deal. Contrary to popular belief, it was largely modeled after Hoover’s ideas. To quote Rexford Tugwell, one of the authors of the New Deal, “We didn’t admit it at the time, but practically the Whole New Deal was extrapolated from programs that Hoover started.” I guess that quote doesn’t have the same ring to it as “We have nothing to fear but fear itself.” Maybe that’s why it was left out of the politically correct textbooks.

FDR’s policies were to the left of even Hoover’s. He established the National Recovery Administration. The bureaucracy created legal cartels that were forced to establish minimum prices and higher wages! This meant that there was a lack of competition in the economy, and prices remained high. This, along with the prolonged unemployment due to artificially high wages, meant even more struggles for American citizens. In addition to these asinine economic interventions, FDR built on the already failed agricultural policies of Herbert Hoover. His American Agriculture Administration slaughtered six million pigs (I thought liberals were concerned for the hungry?) and destroyed ten million acres of cotton! This substantially slowed growth in agriculture. In 1936, James E. Boyle of Cornell University argued that the AAA was responsible for the joblessness of at least two million Americans, mainly farmhands and sharecroppers. I agree, considering that discouraging people from economic growth usually doesn’t lead to good employment figures.

Like most big government overhauls, many of Roosevelt’s bureaucracies were riddled with partisans and political hacks. After the Senate investigated the Works Progress Administration, they found some severe cases of political intimidation. There were multiple accounts of public workers being forced to donate to FDR’s reelection campaign, support certain candidates, or change their political affiliation to the Democratic Party. These cases of corruption never came to light due to FDR’s intimidation of the Supreme Court and Congress. For further reading, research his Court Packing Plan and the Supreme Court Decision in Wickard v. Fillburn. Roosevelt’s four terms in office allowed the government to grow to a level in which corruption and one party rule was allowed to run rampant.

Unfortunately, the public opinion of American history offers a much distorted view of the legacies of Herbert Hoover and Franklin Roosevelt. Modern history books paint one as an incompetent lame duck, and the other as an activist champion of economic rebound. Truthfully, both these depictions are false. Both favored aggressive interventionist policies that molested economic growth and sewed the seeds of Keynesianism in America. It seems like the modern Democratic Party paints Franklin Roosevelt as its inspiration in their present day lame attempts at economic recovery. From 1933-1940, unemployment averaged 18%, and was still stuck at 14% in 1940 ! That’s not the record of someone I would look to for economic advice.

Barack Obama has echoed the economic policies of Roosevelt in his first term. He has done nothing to incite economic growth, and only hinders it. His tenure only provides us with more evidence that government forces do not have the power to stimulate the economy. The only way we can turn a corner in this recession is through libertarian policies, small government, and faith in the citizenry, not the government. The New Deal was an absolute failure, why would it work now?

For further reading, I strongly recommend The Politically Incorrect Guide to American History by Thomas E. Woods, Jr., which has had a substantial influence on me.

Colin Snell | Burlington College | @SnellColin

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19 Responses

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  1. Definitely imagine that which you stated. Your favourite reason appeared to be at the web the simplest thing to take into account of. I say to you, I definitely get irked while other folks think about worries that they just don’t recognize about. You managed to hit the nail upon the highest and also defined out the whole thing without having side-effects , other people can take a signal. Will probably be back to get more. Thank you

    Reply
  2. Jim Prokop
    Nov 13, 2012 - 06:06 PM

    Looks like we had some pretty good discourse until Mark got involved. Seems like both Colin and Chelle made some pretty good points. But, again, as Chelle said it ALWAYS devolves down to the which-hunt in the eyes of the true blue fire-breathing “conservative.” When facts begin to fail then the epitaphs ALWAYS start to spew: Socialist,Marxist,Communist and what the hell even Fascist gets thrown in to boot! It just never seems to fail. I think every post I have made on this blog has EVENTUALLY elicited the spew. Colin, I do have to give you credit for avoiding the worst of it.You seem to be maturing nicely.

    Reply
    • Mark
      Nov 13, 2012 - 06:41 PM

      Of course it NEVER devolves down to a witch-hunt in the eyes of the true blue fire-breathing “progressive”, does it Jim? But you are correct, when the facts begin to fail then the epitaphs ALWAYS start to spew: racist, homophobe, rich, Nazi.

      You evidently missed the point of my post, which was to let Colin know that he was in a “Yes you did, No you didn’t” type of arguement.

      Reply
      • Chelle
        Nov 13, 2012 - 08:16 PM

        Colin started the epitaphs and you’ll noticed that I didn’t throw them back like I could of. (Or you won’t rather.)

        Anyway, I’m a producer, so I’m not sure why conservatives get off with the suggestion that everyone who is a liberal is a mooch.

        Over half the country voted for Obama and yet unemployment is only 8%. And some of the states that voted for Romney actually recieve more from the federal government.

        And generally wayward children don’t present facts. And generally the people who are in the right don’t conceal facts. Which was my main beef but then Colin decided he didn’t want to concede that he should knock that stuff off.

      • Mark
        Nov 13, 2012 - 08:50 PM

        Chelle:

        If you noticed, my comment to Jim was that more than just “conservatives” devolve into epithets.

        No matter what facts Colin or anyone else provides, do you really see your positions as changing? Sorry, but I don’t.

        If you’re a producer, Congratulations! But remember what Abraham Lincoln said in his Second Inaugural Address: “It may seem strange that any men should dare to ask a just God’s assistance in wringing their bread from the sweat of other men’s faces.” Of course, he was talking about slavery, but the quote still applies. I for one, as do all conservatives I know, do not for one minute wish to deny help to the truly needy and infirm. We balk at making able-bodied adults dependent on the state for their every need.

        Every ask someone holding a “Will work for food” sign to actually come to your home and do some work? The overall work ethic in this country has been destroyed over the past 50 years by Liberal Democratic policies, meant to assuage their own guilt (primarily white guilt) and make them feel good.

      • Chelle
        Nov 13, 2012 - 09:58 PM

        “If you noticed, my comment to Jim was that more than just “conservatives” devolve into epithets.”

        My mistake, thanks for clarifying!

        “do you really see your positions as changing?”

        What positions are we talking about? If we’re talking about me being upset about Colin concealing facts, no, I probably will never change my position on that.

        If we’re talking social issues, nope, prob not. I think the government should stay out of people’s privates lives.

        If we’re talking economy, I go with who has a better plan (or in the case of the last election, who actually has a plan.)

        If a Republican came along who actually believed in a limited government (ie, no religious interferance, no deciding a woman’s health choices, letting two consenting adults decide if they want to be legally bound) and gave us a plan that was fiscally stragetic (meaning not just cutting for any social program that doesn’t benefit him and growing the military budget), I’d consider voting for him.

        I’m a progressive – not a Democrat. I vote for who pushes our society forward.

        Also, conservatives need to stop saying they’re going to become slaves whenever a Democratic president is elected. You aren’t slaves – you actually did pretty well under Clinton like everyone else – and it makes you guys look like assholes when you do compare yourself to slaves.

        Also, Lincoln supported high taxes via tariffs. At Republicans at the time disliked the rich land owners. Sound familier?

        “We balk at making able-bodied adults dependent on the state for their every need.”

        They’re not: http://truth-out.org/news/item/12264-lies-of-plutocracy-exploding-five-myths-that-dehumanize-the-poor

        And this is what people who vote Democrat balk – conservatives continued assumptions that they know everything about everyone’s life. That because you saw a lady buying food with EBT that you assume she’s a lazy unemployed person. The assumption that people are enjoying cable tv, lobster tails and new cell phones on the taxpayer’s dime.

        We also get upset that just because a small percentage takes advantage of the system, conservatives default to “the whole program is ruined!” but turn a blind eye to when corporations take advantage of taxes.

        “Every ask someone holding a “Will work for food” sign to actually come to your home and do some work?”

        Nope, I’m a single female who lives alone, so if I did that and was taken advantage of, I’d be shit out of luck because conservatives control my state and have attempted to elimated those silly social programs like sexaul abuse assitance.

        “The overall work ethic in this country has been destroyed over the past 50 years by Liberal Democratic policies”

        Actually, when the welfare program started in the 60s, it was a success at moving people off the poverty line. You may of heard of a famous case – George Romney, Mitt’s dad recieved welfare when he was starting out.

        “(primarily white guilt)”

        Most people on welfare are white.

        Really, I appericate your civil tone but its clear that you don’t know much about welfare other than what the media likes to protray.

      • Chelle
        Nov 13, 2012 - 10:08 PM

        Also, your tax dollars go to military, social secruity and medicad/medicare (and Obamacare moved people out of medicad/medicare.)

        Why conservatives keep acting like half their paycheck goes to some Welfare Queen and her five kids I’ll never know.

        Proirties people! This is why I can’t take the “fiscally conservative” argument seriously. You guys always go after the smallest things and refuse to look at the military budget at all. Romney even wanted to add to it!

      • Chelle
        Nov 13, 2012 - 10:11 PM

        Actually, I take “my mistake” back to since you basically lost a leg to stand on with the epitaphs when you called me a “wayward child,” assumed I didn’t have a job and I just wanted hand outs.

      • Jim Prokop
        Nov 13, 2012 - 10:15 PM

        Touche! Yes, both sides can be guilty of the spew. My point was that
        I have experienced it almost universally on this blog. Even so, I have never really taken the bait at least in the manner you describe. Your point would have been better made had you left out the usual epitaphs. You simply made my point rather than yours.

  3. Mark
    Nov 13, 2012 - 04:37 PM

    Colin:

    Here’s a piece of advice:

    When you get to be my age (50) you will have learned not to argue with a True Believer of the Church of Liberal/Progressive/Socialist/Marxist/Communist Dogma.

    It’s best to pat them on the head like a wayward child and let them go on their way while you go back to being part of the Producer class. When this entire economy collapses, as it must, then you can say I told you so, when Chelle comes looking for handouts.

    Remember: Liberalism is Moochers electing Looters to steal from Producers.

    Reply
  4. Chelle
    Nov 13, 2012 - 02:43 AM

    But its also amusing that my only objection to this article was you hiding that stat and you’ve turned this into a witch hunt. “Socialist!” “I bet you love Kennedy!” “You want us to all be dependent on the government!” “You hate Reagan and would never give him credit for things!”

    No, I hate when people try to twist facts because they can’t stand having to work with them.

    Unemployment dropped 10% under FDR. Any body today would be happy with a 14% unemployment rate after experiencing a 23.6% unemployment rate and you know it.

    Reply
    • Colin Snell
      Nov 13, 2012 - 06:24 AM

      It went down from 23.6% to 14.6%, so that is 9%. Also, they were government jobs. That is not real economic growth. Paying people with their own tax money to dig holes and refill them is not adding additional growth; it is just regurgitating and redistributing wealth. You said they weren’t all govt jobs. Would you like to provide some statistics? The only statistics you gave me were the ones I already provided! You also said he ended the depression. Does 14% sound like a recovery to you? That is still abysmal. Look at what Harding did! He brought unemployment from 12% to 2.4% in less than 3 years without spending a dime or a Lend Lease agreement adding manufacturing jobs. He actually cut the federal budget, cut taxes, cut tariffs, and dropped unemployment 9.6% in 3 years. Roosevelt bankrupted the treasury, expanded government to unprecedented levels, raised taxes to astonishing highs (which backfired, see The Laffer Curve), and demolished the constitution. Private Citizens were not even allowed to own gold! To be a part of his jobs programs you basically had to be a donor to his campaign. He tried vigorously to pack the Supreme Court with his cronies, and sack judges who actually followed the Constitution. And what did he have to show for all this? A decrease in unemployment of 9.0%, in 7 years.

      A brief recap

      Harding Recovery: Unemployment drops 9.6% in 3 years. Tax Rates cut, National Debt decreased. All Private Sector jobs. Triggers 1920′s prosperity.

      Roosevelt Recovery: Unemployment drops 9.0% in 7 years. Highest Tax Rates over 90%. Treasury Bankrupted. Constitution Ravaged. Corruption runs rampant. Recession of 1937, where unemployment rose again! If it hadn’t been for World War II, FDR would have had some serious explaining to do for his economic failures.

      Reply
      • Chelle
        Nov 13, 2012 - 05:15 PM

        This is a lot of effort just to avoid admitting that you were wrong in misleading your readers on the unemployment rate.

        You’ll also notice that at no point I critized Harding. In fact, I didn’t critize anything other than that misleading point at the end. So why you’re obessed with painting me as something I’m not is odd.

        Anyway, private sector jobs.

        1) when prohibition was repealed, do you honestly think that the government was paying people to make beer? What Act did that fall under?

        2) The private industrial sector recovered because of FDR making people into construction workers. You can sit around and say they don’t count because its “government jobs” but that’s no different from corporate tax subsizes that conservatives are arguing for today.

        3) The Labor Beaur didn’t track stats until 1939 but here’s where FDR increased the private sector in just that year alone: http://www.scribd.com/doc/94035727/Private-Sector-Job-Creation-Under-the-Last-13-Presidents

        4) And frankly, if you have an issue with FDR paying people to work, I’m not sure why you’re praising Harding. You have heard of the Federal Highway Act of 1921? You also know that Harding “interfered” with the private sector during the Railroad Strike of 1922? And you know he expanded the federal government with the creatoin of the Budget Bureau? On a similar note, Reagan also expanded the federal government by creating a new budget.

        5) You know the Fordney–McCumber Tariff is thought to have contributed to the Great Depression?

        6)The New Deal was found to be consitutational in US vs Bulter. And don’t give me that bullshit about “liberal” judges and how FDR stacked the courts. If he did that, then why was the National Recovery Administration found to be unconsitutational? People’s parroting of the “unconsitutational” stance of US vs Bulter is just them being pissed off that the Supreme Court currently upholds Hamilton’s and the Washington and Adams Adminstration of the interpation of Congress being able to tax to provide for the general welfare.

        7) At no point did you acknowledge that future Republican presidents didn’t touch FDR’s program and dismantling of them didn’t come until the 1990s with Glass–Steagall Act being overturned. Which again, was a leading cause of our current economy state. Noticed you didn’t address that.

        8) You didn’t mention that FDR started social secruity, one of the many reasons that he’s looked at fondly.

        9) Its hilarious that you’re all “Corruption” runs rampant under FDR. You realize the many scandals under Harding is why historians don’t look at his adminstration too fondly right?

        10) http://www.ourfuture.org/blog-entry/2009020603/fdr-failed-myth

        In conclusion, stop being pissed off that FDR had an impact on the economy just because it wasn’t your desired way. There’s a reason why so many people, including Republicans, didn’t touch his programs.

  5. Colin Snell
    Nov 12, 2012 - 04:32 PM

    Of course it went down 2%! He expanded the government to an unprecedented level, someone had to fill those jobs! However, they were all government jobs. Thats not economic growth! The private sector didn’t expand at all. All’s he did was pay workers to dig holes and refill them. Thats not what I call an economic recovery.

    Reply
    • Chelle
      Nov 12, 2012 - 04:42 PM

      So you think going down 10% in less than 10 years isn’t economic growth?

      Those weren’t all government jobs my dear.

      OMG a Democrat got us out of a Depression! But it doesn’t account because he gave people jobs!

      *Shake my head*

      Reply
    • Chelle
      Nov 12, 2012 - 04:59 PM

      But that’s not the point – you purposefully didn’t include actual stats because “unemployment going down 2% in two years and 10% in less than 10 years. That’s not the record of someone I would look to for economic advice.” would make you look stupid and you know it.

      If you can’t write something using all the facts, than you shouldn’t write the article.

      If your only beef is that FDR was able to turn the economy around in a way that’s different from your political beliefs, then you don’t really have an argument. You just have a complaint about something that did work because it gives less creditablity to your beliefs.

      Reply
      • Colin Snell
        Nov 12, 2012 - 10:20 PM

        “Mr. Roosevelt has contributed to the end of capitalism in our own country, although he would probably argue the point at some length.” – John F. Kennedy, 1945. Probably one of your heroes.

        That’s funny, because I bet you don’t like talking about Ronald Reagan and his recovery from the economically abysmal Carter Administration.

        I provided links to the facts; I assumed people would generally agree that unemployment decreasing from 24% to 14% isn’t a recovery. Just because unemployment went down 10%, doesn’t mean he ended the depression. In 1940, unemployment was still at 14%. I wouldn’t call that a recovery. Unemployment plummeted during World War II because we were engaged in the largest conflict in history. I wouldn’t give Roosevelt credit for the wartime unemployment rates; those were all jobs necessary for the war effort. The war didn’t save us from the depression either, we had rationing and people didn’t enjoy readily available access to the most basic items. Very few Americans enjoyed wealth during World War II. I wouldn’t call that prosperity. Tax rates were also upwards of 90%. When the government owns all the wealth and everyone works for the government that is not capitalism. That is socialism, and it sounds like you are a fan.

        The reason the economy roared after World War II, was similar to the reason it roared after Harding’s libertarian policies after World War I. When the Republicans and Conservative Democrats (Like Freshman Congressman John F. Kennedy) took back congress in 1948, the Federal Budget was cut significantly, as well as tax rates. This ushered in a period of sustained growth fueled by the private sector, the only part of the economy capable of creating growth.

        If a Libertarian Fiscal Conservative was in the White House after the crash, their would have been a quick recovery, as evidence of the 1920 Stock Market Crash. All that the New Deal was good for was curtailing freedom, creating dependency, and prolonging the depression.

      • Chelle
        Nov 12, 2012 - 11:48 PM

        I give Reagan and his Adminstration a lot of credit for raising taxes in order to turn that economy around.

        By the way, unemployment during Reagain’s first term went up and then down again. He started back at 7% where he began and only managed to bring it down 3%. I’m sure you’d call that a great achievement though.

        Meanwhile FDR doubled that achievment and you’re all “I wouldn’t call that the record of someone I’d seek economic advice from.”

        I like how you assume I like JFK by the way. Thanks. I’m of the opinion that he wasn’t in office long enough for people to have opinions on and generally that’s why people view him favorly.

        And Regean only managed a 4% during his two terms. And yet FDR’s 10% was not impressive?

        Yea, no bias!

        But really, I like how I pointed you covered up this fact because it invalids your argument and you’re now all “you must like socialim!”

        No, I like people who don’t try to cover up facts to fit their argument. Sorry I tried to hold you to some standards.

        I also like how you ignored the good things the New Deal gave us, like the bank regulation that was overturned and lead to our current economic state.

        But FDR was a democrat and no democrat is allowed to acheive anything unless its throughly approved by a conservative!

  6. Chelle
    Nov 12, 2012 - 02:41 PM

    Why do you people do this? You decline to share information but then you link to information that can contradicat what you’re saying.

    The New Deal went into effect in 1933. According to your link, unemployment was at 23.6%. In two years, it went down 2%.

    So yes, when you say it averaged 18% by adding things up and dividing them, your point looks amazing.

    But then people look at the actual rates and saw that once the New Deal went into effect, unemployment consistantly dropped – why, then your point doesn’t look so great.

    Its easy to create an article against the New Deal when you don’t share that kind of fact. But I’m pretty sure anyone would be happy today with unemployment dropping 2% in two years and dropping 10% in less than 10 years.

    Reply

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