Yesterday Burton W. Folsom, professor of history at Hillsdale College spoke to a capacity crowd at a luncheon sponsored by Americans for Prosperity-Kansas and the Flint Hills Center for Public Policy.
His topic was three myths of the New Deal, based on his recent book
New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America.
The first myth is that the New Deal got us out of the Great Depression, or at least made good headway. Massive spending and a doubling of the public debt, however, didn’t do much to cure unemployment, as admitted by Roosevelt’s treasury secretary Henry Morgenthau, Jr.
Besides unemployment, other measures were bad. The arrest and murder rate was high throughout the 1930s. Life expectancy, which had increased rapidly in the decades before Roosevelt’s presidency, declined slightly during his first two terms.
Why didn’t spending solve the problem and lift us out of the Great Depression? The money to support government spending has to come from somewhere. Even if the money is well spent — and there’s ample evidence it isn’t — it would have been spent in the private sector when it was in the hands of taxpayers. Government spending only shifts jobs from the private sector to the public sector.
The second myth is that if the New Deal didn’t get us out of the Great Depression, it was at least a step in the right direction, a view commonly held today. A look at specific programs tells a different story.
The Agricultural Adjustment Act (AAA) paid farmers to leave some of their land vacant, thereby reducing their production. Prices for crops, then, should go up. Some farmers, however, took the money, and then planted on the land that was to remain vacant. So Roosevelt sent inspectors. Farmers bribed the inspectors, so Roosevelt had inspectors inspect the inspectors. Then aerial surveillance started.
Then, in 1935 there were shortages of farm products. We imported 11 million bushels of wheat, 34 million bushels of corn, and 36 million pounds of cotton — at the same time we were paying farmers to not produce these products.
The National Recovery Act (NRA), another of Roosevelt’s programs, lasted for 2.5 years before it was unanimously ruled unconstitutional by the Supreme Court.
Folsom told how Massachusetts — back then a conservative state with a free-market orientation — took care of their own hungry people. But after seeing what other states (Illinois in particular) did to get federal funds, Massachusetts decided to take federal money.
The third myth is that Roosevelt had good intentions. His actual goal was to put together a political coalition so he could remain in office. The WPA, in particular, served to reward loyal Democrats with jobs, and to do actual campaigning for Roosevelt. He was also the first to use the IRS as a weapon against his political opponents.
Concluding, Folsom gave his recommendation for today: “We need to remember that massive spending did not work well back then. It carries with it a host of unintended consequences. Cutting taxes can often liberate people, produce more freedom, and turning the American economy loose with lower tax rates and more individual liberty would provide more of an opportunity to get us out of the current recession.”