FDR’s New Deal and Sanders’ 3.5 Trillion Spending Spree

Your thoughts?

According to Washington Post today, “Bernie Sanders is on the cusp of leaving an indelible mark on the federal government, having shepherded a $3.5 trillion spending blueprint through the Senate this week. The legislation, backed by President Biden and Democratic congressional leaders, sets the stage for the most significant expansion of the federal social safety net in generations and the largest government response to climate change ever mounted. Senate Minority Leader Mitch McConnell (R-Ky.) called the pending legislation – which could include free community college, paid family and medical leave, universal pre-K, vast clean energy investments, and the largest-ever proposed expansion of Medicare – a reckless taxing-and-spending spree that was authored by our self-described socialist colleague.”

Senator Schumer said, “The Democratic budget will be the most significant legislation for American families since the era of the New Deal and the Great Society. It is big, bold change — the kind of change America thirsts for.”

I’m afraid I have to disagree with Senator Schumer. It will bankrupt the country and burden the future generation with huge taxes and insurmountable national debt. Do we want that for our children and grandchildren?

The American people should go back in history and learn about FDR and the New Deal, which created the Great Depression. Are we going back to the same worst era of our history?

In 1932 Democrat Franklin Delano Roosevelt defeated Hoover in a landslide. Along with Washington and Lincoln, FDR is routinely listed in polls as among the “great” presidents. Many Americans believe his New Deal programs rescued the country from the grips of the Depression. In fact, under FDR, unemployment averaged a whopping 18 percent from 1933 to 1940.

One biographer said that there was no one more ignorant of economics than FDR. It showed. FDR knew nothing about how wealth was created. The legislation he called for was a patchwork of absurdities, sometimes at odds with each other and sometimes even at odds with themselves.

The National Industrial Recovery Act (NRA), which established the National Recovery Administration, was an enormous contradiction. On the one hand, it sought to keep wage rates high to give the consumer greater “purchasing power.” On the other hand, it established hundreds of legally sanctioned, industry-wide cartels that were allowed to establish standard wages, hours of operation, and minimum prices. The minimum prices meant businesses would be prevented mainly from underselling each other; everyone’s price had to be at least the prescribed minimum. The artificially high wages meant continuing unemployment, and the high prices meant hardship for nearly all Americans.

FDR’s agricultural policies were in a class of genius all their own. Not content with setting high prices for other goods, FDR moved on to food. He proposed to pay farmers for cutting back on production or producing nothing at all. The decrease in supply, he believed, would raise farm prices. But in the meantime, he had to deal with the existing bounty. The administration decided to destroy much of what had already been produced to create a shortage and thereby raise farm prices. Six million pigs were slaughtered, and ten million acres of cotton were destroyed.

The New Deal labor laws and the increased labor cost associated with Social Security further contributed to the unemployment problem to the tune of an additional 1.2 million unemployed by 1938, according to economists Richard Vedder and Lowell Gallaway. Unsure of what the federal government would do next and what other punitive measures would be imposed on them, businessmen and investors stopped investing. Businessmen took seriously the various ravings of the anti-business zealots who occupied the White House. Sounds familiar?

FDR gave a tremendous boost to organized labor with the National Labor Relations Act, better known as the Wagner Act of 1935. The standard textbook takes for granted that what is good for unions is good for workers (even though the whole purpose of a modern union is to exclude people from a trade in order to raise the wages of union workers). The fact says otherwise. The ways in which labor unions impoverish the society are legion, from distortions in the labor market to work rules that discourage efficiency and innovation.

The New Deal’s admirers assure us that FDR’s massive spending projects provided jobs and economic stimulus. But such jobs are funded by taking money from some people (taxpayers) and giving it to others, so there is no net stimulus. In fact, such programs are positively bad in that they divert capital from the private sector and inhibit healthy job creation. The various public works programs that FDR established and the billions of dollars he devoted to them only dried up capital in favor of government projects that were inherently wasteful since they lack the kind of profit-and-loss test that guides entrepreneurs in their investment decision.

FDR’s public-works projects were rife with corruption. Economic historians have been at pains to account for the distribution of these projects around the country – why, for example, did the South, where people were the poorest, receive the least assistance from FDR’s Works Progress Administration (WPA)? Several scholars, noting the rather curious preponderance of WPA projects in western states where FDR’s electoral margin had been thin in 1932, believe political considerations played an important role in how these projects were distributed. In other words, FDR was buying votes with make-work jobs.

WPA workers were often pressured to support FDR’s favored candidates, change their party affiliations, or “contribute” to FDRs’re-election campaign to remain employed. Registered Republicans on relief rolls were demanded to register as Democrats in order to keep their jobs.

This was by no means the only example of political intimidation that occurred during the FDR years. The standard textbook provides all the details of Watergate and Richard Nixon’s abuse of power (as indeed it should) but not a word about FDR as the pioneer of this activity.

“Why do the Democrats get away with anything?” one might ask. It is time we educate ourselves and voice our opinion to members of Congress.


Washington Post article – Aug. 12, 2021

The Politically Incorrect Guide to American History – Thomas E. Woods, Jr. Ph.D.