Many people refer to incoming president Barack Obama as the next FDR. The myth of Franklin Roosevelt — primarily that he cured the Great Depression through his extreme interventionism — is starting to be exposed. In this review (The Disaster Called the New Deal) of Burton Folsom’s book New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America, David Gordon of the Ludwig von Mises Institute shows us the good and bad.
Did the New Deal cure unemployment? “In May 1939, Treasury Secretary Henry J. Morgenthau Jr., one of Franklin Roosevelt’s best friends, testified before the House Ways and Means Committee: ‘I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot.’”
Some today say that Roosevelt didn’t spend enough, that the stimulus was not powerful enough. Folsom refers to Henry Hazlitt: “Every dollar of government spending must be raised through a dollar of taxation,” Hazlitt emphasized. If the WPA builds a $10 million dollar bridge, for example, ‘the bridge has to be paid out of taxes… Therefore,’ Hazlitt observed, “for every public job created by the bridge project a private job has been destroyed somewhere else… All that has happened, at best, is that there has been a diversion of jobs because of the project.”
Reviewer Gordon has a problem with this book in that Folsom ignores Austrian economic theory, including its theory of the business cycle. Still, I believe Gordon thinks this is a book worth reading.