THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Volume XI, Issue # 39, January 31, 2009
Dr. Almon Leroy Way, Jr., Editor
Government Committed to & Acting in Accord with Conservative Principles
Ensures a Nation's Strength, Progress, & Prosperity
DO WE NEED A NEW NEW DEAL?
By Dr. Burton W. Folsom, Jr.
WHY AMERICA DOES NOT NEED ANOTHER NEW DEAL: THE FEDERAL PROGRAMS COMPRISING THE ORIGINAL NEW
DEAL, THAT OF PRESIDENT FRANKLIN DELANO ROOSEVELT, DID NOT REDUCE UNEMPLOYMENT IN THE U.S.A. & SOME OF
THESE PROGRAMS HAD TERRIBLE UNINTENDED CONSEQUENCES. THE TAXES TO PAY FOR NEW DEAL BECAME
ASTRONOMICAL, THE MARGINAL TAX RATE IMPOSED ON TOP INCOMES BECAME CONFISCATORY, ENTREPRENEURS WERE
THEREBY DISCOURAGED FROM INVESTING, & THE GREAT DEPRESSION WAS CONSEQUENTLY PROLONGED. THE
AVAILABILITY OF U.S. TREASURY FUNDS FOR ECONOMIC DISTRIBUTION & REDISTRIBUTION ENRICHED SPECIAL INTERESTS
WITH EFFECTIVE POLITICAL LOBBIES, WHILE OTHER AMERICANS, WHO SOMETIMES HAD MORE JUST CAUSES & GREATER
NEED, RECEIVED LITTLE OR NOTHING FROM FDR'S NEW DEAL
FULL STORY:
The New Deal has probably been the greatest political force in America during the last 100 years, and Franklin Delano
Roosevelt has probably been the most influential President during this time. In our current economic crisis — which
some have compared with the Great Depression — many critics are calling for more federal programs and a “New New
Deal.” There are three reasons we do not need a New New Deal from President Barack Hussein Obama in 2009.
First, the federal programs in FDR’s New Deal did not lower unemployment. Sure, the Works Progress Administration
built roads, the Tennessee Valley Authority built dams, and the Civilian Conservation Corps planted trees. But every
dollar that went to creating a federal job had to come from taxpayers, who, by sending their cash to Washington, lost
the chance to buy hamburgers, movie tickets, or clothes and create new jobs for restaurants, theaters, and tailors.
What’s worse, some New Deal programs had terrible unintended consequences. The Agricultural Adjustment
Administration, for example, overhauled agriculture by paying farmers not to produce on part of their land. After
farmers took the federal dollars, the U.S.A. developed shortages of the very crops taxpayers were paying farmers not
to produce. By 1935, for example, the U.S.A. was importing almost 35 million bushels of corn, 13 million bushels of
wheat, and 36 million pounds of cotton. Simultaneously, we had an army of bureaucrats in the Department of
Agriculture to inspect farms (and even to do aerial photography) to ensure farmers were not growing the crops we
were importing into the country.
Second, the taxes to pay for the New Deal became astronomical. In 1935, Roosevelt decided to raise the marginal tax
rate on top incomes to 79 percent. Later, he raised it to 90 percent. These confiscatory rates discouraged
entrepreneurs from investing, which prolonged the Great Depression.
Henry Morgenthau, FDR’s loyal Secretary of the Treasury, was frustrated at the persistence of double-digit
unemployment throughout the 1930s. In May 1939, with unemployment at 20 percent, he exploded at the failed
New Deal programs. “We have tried spending money,” Morgenthau noted.
“We are spending more than we have ever spent before,
and it does not work. . . . We have never made good on
our promises. . . . I say, after eight years of this
administration, we have just as much unemployment as
when we started. . . . And an enormous debt to boot!”
Third, the New Deal divided and politicized the country in tragic ways. Those who lobbied most effectively won
subsidies and bailouts, even if their cause was weak. Others, who had greater needs, received nothing. Walter
Waters, who led a march of veterans on Washington, lobbied successfully for a special bonus for veterans,
whether they had been in battle or not. When asked why veterans — instead of longshoremen or teachers —
should receive a special bonus of taxpayer dollars, he said:
“I noticed, too, that the highly organized lobbies in
Washington for special industries were producing
results: loans were being granted to their special
interests. . . . Personal lobbying paid, regardless of the
justice or injustice of their demand.”
Thus, as money became available, those with effective political lobbies won the subsidies and others, who
sometimes had more just causes and greater need, received little or nothing. In the case of the veterans, in 1936,
they won a $2 billion federal bonus — a sum exceeding six percent of the entire national debt at the time.
Teachers, by contrast, were less effective lobbyists and won almost no federal subsidies. Silver miners, led by
Senator Key Pittman of Nevada, won a silver subsidy that paid almost $300,000 a day each day for 14 years, but
coal miners were left out.
In another example, under Presidents Hoover and Roosevelt, Illinois lobbied effectively and won $55,443,721 under
the first federal welfare grant, while Massachusetts received zero federal dollars. Without federal money for
welfare needs, Massachusetts valiantly raised its own funds to secure what Illinois extracted from Washington.
The Boston Civic Symphony repeatedly gave concerts to benefit the jobless. City officials and teachers raised
money and took pay cuts. Massachusetts Governor Joseph Ely believed that no state should receive federal aid
and that private charity was the best charity; that federal relief ruined both taxpayers and those in need. “Whatever
the justification for relief,” Ely said, “the fact remains that the way in which it has been used makes it the greatest
political asset on the practical side of party politics ever held by an administration.” Ely added that “millions of men
and women . . . have come to believe almost that there is no hope for them, except upon a government payroll.”
Federal dollars always become political dollars, and the Democrats moved to use federal money to gain votes at
election time. In Pennsylvania, Joseph Guffey, the successful Democratic candidate for the U.S. Senate in 1934, ran
a campaign ad that said, “Compare this $297,942,173 contributed by Pennsylvania to the U.S. U.S. Treasury with the
cash and credit of $678,074,195 contributed to Pennsylvania by the Roosevelt Democratic administration.” Vote
Democrat, Guffey and others proclaimed, and the federal faucet will keep running. James Doherty, a New Hampshire
Democrat, said, “It is my personal belief that to the victor belong the spoils and that Democrats should be holding
most of these [WPA] positions so that we might strengthen our fences for the 1940 election.” One WPA director in
New Jersey — a corrupt but candid man — answered his office phone, “Democratic Headquarters.”
If history is a guide, we have every reason to believe that, if President Obama institutes a New New Deal, then
universal health care, federal bailouts, and jobs stimulus programs will be costly, will be politicized, and will fail.
Reprinted by Permission from Imprimis,
A Publication of Hillsdale College, Hillsdale, Michigan.
LINKS TO RELATED TOPICS:
Political Economy -- Philosophies, Systems, & Public Policies:
Government, the Economy, & Economic Prosperity
The American Political & Cultural Left:
Liberals, Statists, Socialists, Marxists, & Other Leftists:
The Democratic Party, Academia, & the Mainstream Media
A Ph.D. in History from the University of Pittsburgh (1976), Burton W. Folsom, Jr., is Professor of American History at
Hillsdale College, holding the position of Charles F. Kline Chair in History and Management. Dr. Folsom is author of
New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America (2008); Empire Builders: How
Michigan Entrepreneurs Helped Make America Great (1997); The Myth of the Robber Barons: A New Look at the
Rise of Big Business in America (1987 & 1991); and Urban Capitalists: Entrepreneurs and City Growth in
Pennsylvania's Lackawanna and Lehigh Regions, 1800-1920 (1981). Dr. Folsom is Editor of the anthology of essays on
economic history and free market capitalism, Spirit of Freedom: Essays in American History (1994).
In The Myth of the Robber Barons and some of his other books, Dr. Folsom revises commonly held views about
the role of capitalism in the social developments of the Industrial Revolution and the Gilded Age. He describes "robber
barons" as constructive visionaries who benefited American consumers and played an integral part in the
industrialization of the U.S.A.
Formerly, Dr. Folsom was associated with the free-market think tanks, the Free Enterprise Institute and the Mackinac
Center for Public Policy, and was a frequent guest of the Libertarian group, the Foundation for Economic Education.
The foregoing article by Dr.Folsom was adapted from a speech delivered by him on January 9, 2009, in Washington,
D.C., at a seminar sponsored by the Hillsdale College Allan P. Kirby, Jr. Center for Constitutional Studies and
Citizenship. The article first appeared in Imprimis, January, 2009 (Volume 38, Number 1).
Return to Top of Page
Go to the WEBSITE INDEX
Return to Beginning of
THE PROGRESSIVE CONSERVATIVE, USA,
Public Issues & Political Controversies
Return to Beginning of
THE PROGRESSIVE CONSERVATIVE, USA
Most Recent Articles
Return to Beginning of
THE PROGRESSIVE CONSERVATIVE, USA,
Volume XI, 2009
Return to Beginning of
THE PROGRESSIVE CONSERVATIVE, USA,
Subject Matter Highlights
Return to POLITICAL EDUCATION Homepage
CONTACT & ACCESS INFORMATION
This is not a commercial website. The sole purpose of the website is to share with interested persons information regarding civics,
civic and social education, political science, government, politics, law, constitutional law and history, public policy, and political
philosophy and history, as well as current and recent political developments, public issues, and political controversies.
POLITICAL EDUCATION, CONSERVATIVE ANALYSIS
POLITICS, SOCIETY, & THE SOVEREIGN STATE
Website of Dr. Almon Leroy Way, Jr.
Government, Politics, Public Policy, Legal Issues, Constitutional Law, Government & the Economy, Cultural Values, Foreign Affairs,
International Relations, Military Defense & National Security, Geopolitics, Terrorism & Homeland Security, American National Interests,
Political Systems & Processes, Political Institutions, Political Ideologies, & Political Philosophy
INDEX FOR THE ENTIRE WEBSITE
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Dr. Almon Leroy Way, Jr., Editor
Conservative & Free-Market Analysis of Government, Politics & Public Policy, Covering Political, Legal, Constitutional, Economic,
Cultural, Military, International, Strategic, & Geopolitical Issues
Conservative Government Ensures a Nation's Strength, Progress, & Prosperity