Fresh Debate About FDR’s New Deal

December 2, 2003 • Commentary

It has been 70 years since Franklin Delano Roosevelt launched his New Deal in an effort to banish the Great Depression of the 1930s — perhaps the most important economic event in American history. The New Deal was controversial then, and it’s still controversial, because it failed to resolve the most important problem of the era: chronic unemployment that averaged 17 percent.

Newsweek columnist Robert Samuelson acknowledged that if World War II hadn’t come along, America might have stumbled through many more years of double‐​digit unemployment. Samuelson, however, is among those who give FDR high marks for handling the political crisis of the 1930s, the worst political crisis this country has faced since the Civil War.

But the political crisis was caused by the double‐​digit unemployment, and in my new book, FDR’s Folly, How Roosevelt and His New Deal Prolonged the Great Depression (Crown Forum, 2003), I report mounting evidence developed by dozens of economists, at Princeton, Brown, Columbia, Stanford, the University of Chicago, University of Virginia, University of California (Berkeley) and other universities, that double‐​digit unemployment was prolonged by FDR’s own New Deal policies.

How can that be? Consider just a few of FDR’s policies. The New Deal tripled federal taxes between 1933 and 1940 — excise taxes, personal income taxes, inheritance taxes, corporate income taxes, dividend taxes, excess profits taxes all went up, and FDR introduced an undistributed profits tax. A number of New Deal laws, including some 700 industrial cartel codes, made it more expensive for employers to hire people, and this discouraged hiring.

Frequent changes in the tax laws plus FDR’s anti‐​business rhetoric (“economic royalists”) discouraged people from making investments essential for growth and jobs. New Deal securities laws made it harder for employers to raise capital. FDR issued antitrust lawsuits against some 150 employers and companies, making it harder for them to focus on business. FDR signed a law ordering the break‐​up of America’s strongest banks, with the lowest failure rates. New Deal farm policies destroyed food — 10 million acres of crops and 6 million farm animals — thereby wiping out farm jobs and forcing food prices above market levels for 100 million American consumers. FDR’s Folly spells out much more in startling, sometimes hilarious detail.

Robert Bartley, who edited the Wall Street Journal for three decades and is now a commentator, called for a fresh debate about the New Deal. Newspaper publisher Conrad Black, author of Franklin Delano Roosevelt, Champion of Freedom, responded by claiming that if “workfare” recipients were included among the “employed,” then New Deal unemployment rates were lower than the U.S. Department of Labor has reported for decades. Those tempted to agree with Black might listen to jazz great Louis Armstrong’s 1940 tune “The WPA” — referring to FDR’s biggest “workfare” program, the Works Progress Administration. Among the memorable lines: “Sleep while you work, rest while you play, lean on your shovel to pass the time away, at the WPA.”

There’s a fascinating split between economists and political historians about the New Deal. The idea that FDR cured double‐​digit unemployment, wrote author and commentator Thomas Sowell in a recent column, “was never pervasive among economists, and even J.M. Keynes — a liberal icon — criticized some of FDR’s policies as hindering recovery from the depression.”

Meanwhile, pro‐​FDR political historians such as James MacGregor Burns, Arthur M. Schlesinger, Jr., Frank Freidel, William Leuchtenburg, and Kenneth S. Davis, have focused on the personalities, elections, speeches, “Fireside Chats” and other aspects of the New Deal’s political story, disregarding evidence about the economic consequences of New Deal policies. This continues to be the case with younger political historians like Alan Brinkley, author of The End of Reform: New Deal Liberalism in Recession and War, who called the New Deal “a bright moment.” Disregarding the economic consequences, too, are children’s book authors like Joy Hakim, whose recent bestseller Freedom: A History of US includes a glowing account of New Deal heroics.

Aside from FDR’s Folly, the only major work mentioning evidence about the economic consequences of the New Deal is by Stanford University political historian David M. Kennedy: his 1999 book Freedom from Fear, winner of a Pulitzer Prize. “Whatever it was,” he wrote, the New Deal “was not a recovery program.” The New Deal might be gone, but the debate goes on.

About the Author