Monday, January 5, 2009

FDR's New Deal

A new book, "Nothing to Fear: FDR's Inner Circle and the Hundred Days That Created Modern America" by Adam Cohen, describes how FDR's New Deal was crafted through a process of rigorous argument within the president's innermost circle during FDR's First Hundred Days in office.

Cohen, a member of the New York Times editorial board, "delivers an exemplary and remarkably timely narrative of FDR's famous first Hundred Days as president," according to Publishers Weekly.
"Providing a new perspective on an oft-told story, Cohen zeroes in on the five Roosevelt aides-de-camp whom he rightly sees as having been the most influential in developing FDR's wave of extraordinary actions. These were agriculture secretary Henry Wallace, presidential aide Raymond Moley, budget director Lewis Douglas, labor secretary Frances Perkins and Civil Works Administration director Harry Hopkins. This group, Cohen emphasizes, did not work in concert. The liberal Perkins, Wallace and Hopkins often clashed with Douglas, one of the few free-marketers in FDR's court. Moley hovered somewhere in between the two camps. As Cohen shows, the liberals generally prevailed in debates. However, the vital foundation for FDR's New Deal was crafted through a process of rigorous argument within the president's innermost circle rather than ideological consensus. Cohen's exhaustively researched and eloquently argued book provides a vital new level of insight into Roosevelt's sweeping expansion of the federal government's role in our national life."
Right Wing efforts to re-write history will accelerate as they try to oppose Obama's policies by attacking FDR's legacy and blaming the Great Depression on FDR's policies - notwithstanding the fact that the Great Depression was well under way when FDR took office in 1933. Many FDR bashers quote skewed and factually misinterpreted data presented in a book by libertarian author Jim Powell, "FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression." Richard Nixon biographer Conrad Black writes a piece in The Daily Beast about “Why The Right Should Leave FDR Alone:”
Hoover had made the worst possible selection of policy options - higher taxes and tariffs and a shrunken money supply. The unemployment rate was approximately 33%, about five times what it is now, and there was no direct relief for the unemployed. They could beg, steal, or starve, though Hoover claimed that they prospered selling apples.

On Inauguration Day, 1933 (then March 4), there were machine gun nests at the corners of the great government buildings in Washington, for the only time since the Civil War. All banks in 32 states had been closed. Six other states had closed almost all their banks. In the other ten states and D.C., withdrawals were limited to 5 percent of deposits, and in Texas to $10 per day. The New York Stock Exchange and Chicago commodity exchanges had also been closed, indefinitely. The financial system had effectively collapsed, and was threatening to take the life savings of millions of people and what was left of the world’s financial system with it.

In a fever of activity, Roosevelt guaranteed bank deposits, made the federal government a temporary non-voting preferred shareholder in thousands of suddenly under-capitalized banks—more than half the banks in the country—refinanced millions of residential and farm mortgages, tolerated cartels and collective bargaining to raise prices and wages, increased the money supply, effectively departed the gold standard, repealed Prohibition of alcoholic beverages (wrenching one of the nation’s largest industries out of the hands of the underworld), and legislated reduced working hours and improved working conditions for the whole work force. In the next two years, he set up the Securities and Exchange Commission, created the Social Security system, and broadened the powers of the Federal Reserve to equal those of other national central banks, in what became known as the Second New Deal.

Unemployment declined from about 33 percent when Roosevelt entered office to half of one percent when he died in office 12 years and 39 days later, and had been at that point for four and a half years, since several months before Pearl Harbor. The average per capita income doubled under Roosevelt, and was more equitably distributed, as the United States led the Allies to victory over the Nazis and Japanese imperialists, and the admission or restoration of Japan, Germany, France, and Italy to the democratic and civilized Western Alliance.

Roosevelt won four consecutive presidential elections with an average of more than 56 percent of the vote, and his party, while he led it, won seven consecutive elections of both houses of Congress. These are not the usual rewards for prolongation of economic distress. FDR had his faults, but he was a great leader at a time when America and the Western world had to have a great leader in the White House, and the American loony right should aim their spitballs elsewhere. There is no shortage of deserving targets.
University of California historian Eric Rauchway says:
The most important thing to know about Roosevelt's economics is that, despite claims to the contrary, the economy recovered during the New Deal. During Roosevelt's first two terms, the U.S. economy grew at average annual growth rates of 9 percent to 10 percent, with the exception of the recession year of 1937-1938...

Excepting 1937-1938, unemployment fell each year of Roosevelt's first two terms. In part, the jobs came from Washington, which directly employed as many as 3.6 million people to build roads, bridges, ports, airports, stadiums, and schools -- as well as, of course, to paint murals and stage plays. But new jobs also came from the private sector, where manufacturing work increased apace.

This basic fact is clear -- unless you quote only the unemployment rate for the recession year 1938 and count government employees hired under the New Deal as unemployed, which conservative commentators have taken to doing.
1937-1938 was the period Roosevelt dialed back the New Deal in the name of conservative budget principles. By 1937 things were a lot better than they were in 1933. FDR himself actually subscribed to conservative budget principles and in 1937 he was persuaded to balance the budget, or try to. When FDR cut New Deal spending, to balance the budget, the economy went back down again. What saved the economy, and the New Deal, was the enormous fiscal stimulus program known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.

Aside from Krugman there has been few in the media to respond to conservative revisionists who try to indirectly attack Obama's proposals by attacking FDR's New Deal. In the coming months and years Right Wing efforts to re-write history will accelerate as they try to oppose Obama's policies by attacking FDR's legacy. Democrats must be prepared to aggressively respond to such retroactive propaganda efforts.

No comments:

Post a Comment