The Enduring Myth of FDR and the New Deal
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 only parroting what the history texts and his teachers told him.
That's his excuse, but what's Ken Burns'?
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 GDP.
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. The 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 almost one-third. In 1940, after eight years of the New Deal, unemployment was still averaged an awful 14 percent.
Think of it this way. The unemployment rate was more than twice as high seven years into the New Deal as it is today, and American workers now are angry as hornets. Just imagine if jobs were twice as scarce today the pitch forked 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 WPA, NRA, and the AAA were so bureaucratic, they had 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. 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," Folsom said. "Congress balked at that idea rate 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 $4.6 billion in 1933 to nearly $13.7 billion in 1941. This tripling in 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 rein. During FDR's 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 ideas in the last century.
What is maddening is that thanks to this historical fabrication of FDR's presidency, dutifully repeated by Burns this past week, we have repeated the mistakes again and again.
Had the history books been properly written, it's quite possible we would never have 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 recreate new New Deal.
What is 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 is chief economist at the Heritage Foundation.