New Deal Or Raw Deal?

I was noodling around the net looking for a good book on FDR and the Depression Economy and came across New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America. Philosophically I agree with that. So let's see what some reviewers think.

...many of FDR's programs were struck down as unconstitutional. These include the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA). The NIRA imposed economy-wide price controls and production regulations on domestic manufacturing. The AAA was similar in spirit, except it focused on price and production controls on agriculture. The extent of the controls evidently became so detailed where, for example, the purchasers of a live chicken were required by law to blindly reach into the coop to randomly choose a chicken. Customers were not free to choose whichever chicken they fancied. Recognizing the absurdity of this, one of the Supreme Court justices quipped "what if the chickens are all on the other side?" before the Supreme Court unanimously ruled the NIRA unconstitutional.

Folsom also emphasizes the crushing tax burdens imposed by the New Deal. Under FDR, the highest income tax rate was 79%, meaning that four out of five earned dollars was confiscated by the government! According to Folsom, FDR also seriously entertained the idea of imposing a 99.5% income tax rate on all who earned over $100,000 in income. Flippantly justifying this, FDR joked that nobody in his administration would ever make that kind of money. Under FDR, the national debt grew more in the 1930s than it grew in the previous 150 years of the existence of the United States. Putting it in other words, Folsom indicates that if $100/minute was deposited into an account the day Columbus discovered North America up until FDR took office, there would not be enough money in this account to fully defray the costs of the New Deal.

The last major point that I will reiterate is the extensive level of corruption of the FDR administration. According to Folsom's research, the Works Progress Administration (WPA) offered large government handouts to whichever lobbyists ingratiated themselves most with the administration. FDR used the WPA to make or break the careers of public officials, depending on whether they supported him. This corruption rose to such an overt and perverse level that officials at the WPA used to cheerfully greet callers with "Democratic headquarters!"

I'm starting to see some parallels here between FDR and that new guy. What's his name?

Another reviewer had this to say:

I'll confess to not being a fan of big government so I was prepared to be receptive to a harsh assessment of the New Deal. However, I was not prepared for the scathing indictment armed with facts, logic, primary source quotes and data that constitute this powerful book.

The book is hard to put down even as you recoil in horror at the lunatic economic policies of the era and the blatant turn to fascism. If you tried to design a program to extend the Great Depression indefinitely, you could have done little better than FDR did. The economic incompetence and unintended consequences which are detailed in all their frightening glory is mind boggling, but it is only part of the story.

The book also demonstrates the endemic political patronage and vote buying that resulted from the concentration of money and power in the hands of the federal government. State and local politicians who supported Roosevelt were rewarded with a cascade of federal dollars, those who opposed him were frozen out and inevitably lost subsequent elections.

Citizens who opposed FDR were set upon by the IRS or the NRA. The use of government power to persecute and intimidate dissension is chilling. There are several quotes or diary entries from even Roosevelt's supporters and cabinet members that point out both the insanity of the policies and the dangers of FDR's abuse of power.

With our government setting out on what's been called the "New New Deal", this book should be required reading for every citizen so they can understand both the failure of the New Deal as an economic cure and the abuse of power and vote buying that the huge transfer of money and independence from the private sector to the public sector caused and will undoubtedly cause again.

Those reviewers both gave the book five stars.

Here is an interesting three star review.

As a staunch supporter of FDR and his New Deal policy I found this book difficult to read, not because it was intellectually challenging but because it was 300 pages attacking FDR and the New Deal. Despite this I must applaud Mr. Folsom's argument. Not through his own ideological beliefs does Folsom attempt to prove the New Deal actually made the Depression worse, but his use of quantitative research gives merit to his theory.

As I have already stated, Folsom argues that FDR's New Deal policy actually worsened and lengthened the Great Depression of the 1930s. To prove this, Folsom evaluates the impact each major New Deal legislation had on the economy. In short, Folsom concludes that since unemployment stayed approximately the same throughout the '30s and into the '40s the New Deal was a failure. No piece of the New Deal is safe. Folsom attacks Social Security, minimum wage, the FDIC, the WPA, the AAA, and he even argues the 1936 election was a fraud.

Although I understand Folsom's argument, he does not convince me that the entirety of the New Deal was a sham. With the help of hindsight I feel that any past president's policy can be evaluated in a harsh manner, especially FDR. Of course we evaluate the New Deal now and criticize it, but I truly believe FDR's intentions were good with each New Deal reform signed into law.

Ah. Yes. Good intentions are enough. Results don't matter. Did he say he was a staunch supporter of FDR? Yes he did.

Well it looks like a very good read. And when the new guy's policies work no better than FDR's the book will provide good ammunition for the "I told you so" crowd. I hope to be a member in good standing. Of course there is always the possibility that this time it will be different and I will have to eat a couple of plates of crow. I think history and the odds are on my side.

Cross Posted at Power and Control

posted by Simon on 04.26.09 at 06:15 PM


You need to check out The Forgotten Man: A New History of the Great Depression by Amity Shlaes. It is a very good book on the failures and unintended consequences of FDR's policies.

melo   ·  April 26, 2009 7:12 PM

I was a history major and took an entire semester on FDR with my favorite older professor. He had lived through the Depression and was obviously a fan of FDR.

Despite his best efforts, I didn't get it. It was so painfully obvious that everything Roosevelt tried made the Depression worse, not better. Less government, lower taxes, pro-business policies never seemed to occur Roosevelt and his sycophants in Congress (or Hoover to be fair) despite the fact that it pulled the economy out of a deep recession a decade earlier.

Now I get to see the government interference from inside a business. We've circled the wagons, stopped capital spending and hiring, invested in overseas ventures, and will be waiting for competent government to return.

Bram   ·  April 27, 2009 8:26 AM

Simon, your last paragraph reflects my own perspective perfectly: I believe that I'm on the correct side of the debate, but what if I'm wrong this time? What I don't understand about our shared perspective is why we're not fully confident that we're on the correct side. I have NO reason to believe that increased government intervention (all right, interference, takeover) in the private sector, and concomitant increases in the public sector, will work any better now than they've EVER worked; instead, I think the American economy (foundation of the world economy, and the most robust and flexible in the history of economies) is going to recover no matter what Obama's administration tries to do to it.

And then the Obama administration will take, and willingly be granted, credit for its recovery. And we, on the correct side of the issue, will be expected to eat those plates of crow, regardless of our rightness. Sigh.

Jamie   ·  April 28, 2009 8:04 AM


Yes. But the bigger the load on the system - the more sluggish the acceleration. Sometimes, if the load is big enough, people notice.

M. Simon   ·  May 1, 2009 10:18 PM

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