THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Volume XI, Issue # 40, February 1, 2009
Dr. Almon Leroy Way, Jr., Editor
Government Committed to & Acting in Accord with Conservative Principles
Ensures a Nation's Strength, Progress, & Prosperity
THE NEW BAD DEAL
By Alan Caruba
THE 1930S GREAT DEPRESSION & AMERICA'S STATIST RESPONSE TO THAT ECONOMIC CRISIS: WHAT CAUSED THE
GREAT DEPRESSION? THE NEW YORK STOCK MARKET CRASH OF 1929; THE SMOOT-HAWLEY TARIFF ACT OF 1930;
THE POOR PERFORMANCE OF THE U.S. FEDERAL RESERVE SYSTEM DURING 1928 & 1929 -- PRESIDENT FRANKLIN DELANO
ROOSEVELT'S "NEW DEAL" AS THE PUBLIC POLICY RESPONSE OF THE U.S. GOVERNMENT TO THE GREAT DEPRESSION:
WILL HISTORY REPEAT ITSELF, WITH PRESIDENT BARACK HUSSEIN OBAMA'S SOCALLED ECONOMIC "STIMULUS"
PROGRAMS BECOMING A SECOND NEW DEAL? THERE IS EVERY APPEARANCE THAT THE OBAMA PRESIDENCY & THE
DEMOCRATIC PARTY MAJORITY IN CONGRESS WILL REPEAT MANY OF THE MISTAKES MADE BY THE ORIGINAL NEW DEAL,
THEREBY EXACERBATING THE CURRENT ECONOMIC CRISIS
FULL STORY:
In 1939, ten years after the crash on Wall Street, the U.S. Secretary of the Treasury, Henry Morgenthau, Jr., told the
House Ways and Means Committee:
“We have tried spending money. We are spending more
than we have ever spent before and it does not work.
And I have just one interest, and if I am wrong …
somebody else can have my job. I want to see this
country prosperous. I want to see people get a job. I
want to see people get enough to eat. 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!”
Does history repeat itself? Yes, it does. And there is every appearance that the White House and the Congress intend
to repeat many of the errors of the last Depression that came to be known as Franklin Delano Roosevelt’s New Deal.
With exquisite timing, after ten years of research, Professor of History, Burton Folsom, Jr., has published New Deal
or Raw Deal? How FDR’s Economic Legacy has Damaged America ($27.00, Threshold Editions).
To get an idea of just how bad the U.S. economy was during the 1930s, Folsom notes that, even though the U.S.
government had budget surpluses in 1930 and 1931, government spending “ballooned and far outstripped revenue from
taxes.” It was the Wall Street Crash of 1929 that precipitated the Depression, but it was FDR’s “solutions” that deepened
and lengthened it, actually preventing any solution.
Initially voted into office in 1933, from 1937 to 1939 --
“.... the value of all stocks dropped almost in half… Car sales
plummeted one-third in those same years, and were lower in
1939 than in any of the last seven years of the 1920s.
Business failures jumped 50 percent from 1937 to 1939; patent
applications for inventions were lower in 1939 than for any
years of the 1920s. Real estate foreclosures, which did
decrease steadily in the 1930s, were still higher in 1939 than in
any years during the next two decades.”
FDR was an enormously popular President in his day. His photo could be found everywhere in people’s homes and
apartments, in barbershops, in businesses and just about anywhere people gathered, but he not only did not solve the
nation’s economic problems, he made them worse with the help of the U.S. Congress. By 1936, Congress was totally
dominated by the Democratic Party in ways that exceeded any previous party for 150 years.
Barack Obama’s youth and lack of experience to occupy the Oval Office should worry people. He arrived with a very
slim resume and not even a single completed term as a U.S. Senator. What he knows and believes about the conduct
of business in America is anyone’s guess, but it clearly reflects the bad economic policies of his party that have
gotten us to this point.
As Professor Folsom points out, “In part, his family’s wealth immunized him from having to learn how business
worked or how to earn money.” He had been a mediocre student, getting by with a C average. Though he did not
finish law school, he did pass the bar exam, but he showed little talent or interest in the practice of law.
Oliver Wendell Holmes observed of Roosevelt that he had “a second class intellect, but a first-class temperament.”
It was Roosevelt’s sunny and apparently endless optimism that buoyed up a nation that listened to his radio “fireside
chats” and speeches. He was always convinced that whatever new program the New Dealers tried was bound to turn
the economy around. Not only did they not achieve this, they saddled generations of Americans with a Ponzi scheme
called Social Security and poured money into states and areas for solely political, not economic, purposes.
FDR was Governor of New York when the Wall Street Crash precipitated the Depression. Professor Folsom identified
several factors that led up to it. The First World War (U.S. participation from 1917-1918) had been a financial and social
catastrophe that drove up the national debt from $1.3 to $24 billion in just three years. Ten billion loaned to European
nations during the war largely went unpaid after the conflict.
The Smoot-Hawley Tariff Act, debated and passed during 1929 and 1930, instituted the highest tariffs ever, intended to
protect U.S. industries by taxing 3,218 imported items. It enraged Europe, America’s greatest trading partner at the time.
“Our exports, therefore, dropped from $7 billion in 1929 to $2.5 billion in 1932” and, with them, went the jobs of
Americans.
“The third cause of the Great Depression,” writes Professor Folsom, “was the poor performance of the Federal Reserve
System."
"In practice, the Fed had raised interest rates four times,
from 3.5 to 6 percent, during 1928 and 1929. This made it
harder for businessmen to borrow money to invest,
which hindered economic growth.”
In addition, the Fed let hundreds of banks fail, rather than lend them money to enable them to continue operating.
In the same way President Obama spoke of “spreading the money around” as his economic plan to keep Americans
prosperous, FDR spoke of a “more equitable distribution of the national income.” Giving money to people who don’t
even pay taxes is an example of this.
Roosevelt and his “brain trust” of academics, most of whom had never met a payroll in their lives, really put the nation’s
economy on the skids with their National Industrial Recovery Act in 1933.
“It allowed American industrialists to collaborate to set
the prices of their products, and even the wages and
hours that went into making them.”
The competition in the marketplace ceased and one could actually be sent to jail for offering a product or service for
less than the fixed amount.
The NRA and the Agricultural Adjustment Act both had what are commonly called “unintended consequences,”
another way of saying that these laws were the worst possible solutions because they imposed a centralized planning
structure that involved the vast expansion of the U.S. national government to oversee their requirements. Paying
farmers not to plant crops, a practice that exists to this day, was one of the more idiotic aspects of the AAA.
If this current recession is ever to be ended, massive spending programs that are largely political in nature have to be
avoided. Isolating the bad debt acquired by banks, loan companies, and others like the insurance giant, AIG, has to be
the top priority.
It is not likely to happen. President Obama, combining the same charm and lack of business acumen as FDR, is likely to
pursue the same course of action as he did; he will use the present crisis to build up support for the Democratic Party
through various forms of patronage. Employment by various government agencies is likely to expand.
FDR’s popularity was conditional during his first two terms in office. The American public knew he and Congress were
not ending the Depression. Today, polls clearly indicate that the American public wants the economy strengthened.
The Pew Research Center for the People & the Press recently released the findings of a national survey that revealed
the economy and jobs are considered the top priority -- higher than at any point in the past decade.
Thus, spending millions or billions to construct “more than 3,000 miles of transmission lines to convey this (solar and
wind) new energy from coast to coast” repeats the errors of the past. Solar and wind represent barely one percent of
the electricity generated or needed nationwide. The solar and wind farms are always located far from the major urban
centers that require megawatts of electricity, currently provided primarily by coal and nuclear power. How much better
and wiser it would be to update the current electrical grid and to build plants closer to where they are needed than to
waste money on just this one project?
Politics, the pursuit of power, and the Liberal’s distrust of capitalism will likely force a new generation of Americans to
repeat what those in the 1930s experienced for no good reason.
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
Alan Caruba is a veteran business, science and political writer, a Public Relations Counselor, and Founder of the National
Anxiety Center, a clearinghouse for information about media-driven scare campaigns. Caruba writes a weekly commentary,
"Warning Signs," posted on the Internet website of the National Anxiety Center, which is located at
www.anxietycenter.com.
Caruba has a daily blog at http://factsnotfantasy.blogspot.com.
Caruba’s most recent book, Right Answers: Separating Fact from Fantasy, has been published by Merril Press. Books
previously authored by Caruba include A Pocket Guide to Militant Islam, The United Nations Versus the United States: The
UN's Plan to Control Planet Earth, and America: A Nation Without Borders -- A Pocket Guide to Immigration Issues.
© Alan Caruba 2009
Published with Permission of Alan Caruba
ACaruba@AOL.Com
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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,
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Conservative Government Ensures a Nation's Strength, Progress, & Prosperity