Monday, December 20, 2010

New Deal or Raw Deal by Burton Folsom, Jr.

New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America
I learned a heck of a lot that I must have missed in school about the Great Depression and Roosevelt's New Deal in this book. Folsom doesn't paint a very rosy picture of the president and his cabinet, who implemented some of the greatest social and political changes ever to hit the United States.

He goes into Roosevelt's personal history before he entered politics. Roosevelt had not had much success in his business ventures, seeming to always back the wrong horse. "...he assumed airplanes were only a passing fad, and he invested in a line of airships, called dirigibles, to fly from New York to Chicago." I can sympathize, I couldn't figure out why anyone in their right mind would want to buy a cell phone, back when they first came out.

Roosevelt surrounded himself with academics, with little practical economic or business experience. "Roosevelt regularly hosted a group of professors from Columbia University - they became his 'Brain Trust' - and they presented Roosevelt with a variety of ideas fashionable in academic circles."

There apparently were some very corrupt practices during that time period (as opposed to now?). When Hoover supported the Reconstruction Finance Corporation in distributing over 1.5 billion dollars to failing banks and industries, the businesses close to the Hoover administration were often the first to get the federal dollars.

The Agricultural Adjustment Act came about at this time. It paid subsidies to farmers who would agree NOT to grow certain crops - even as people in the country were standing in bread and soup lines, in order to bolster the price of exports. Farmers gamed the system, by leaving the required amount of acreage fallow, choosing the acreage that produced poorly anyway. Of if a particular crop was controlled, they'd produce excessively in another crop, which would then end up on the subsidy list the following year. In 1935, the United States ended up for nearly the first time in its histroy as a net food-importing nation.

Some of the first minimum wage laws were definitely the result of political corruption. The textile industry in the South produced a high quality product at a low cost due to low wages in the area. Northern politicians in Massachusetts led the fight in Congress to establish a minimum wage that would destroy the southern mills' competitive edge. Some of the rhetoric seems familiar, "...Congress couldn't make a man worth a certain amount by making it illegal to pay him any less. Instead, the man would end up unemployed." Interestingly enough, passage of minimum wage laws in Washington DC in 1938 resulted in massive layoffs of maids and unskilled workers by local hotels. But the politicians pressed on.

Roosevelt railed against "big business" and instituted confiscatory tax policies against the wealthy. In 1941, in addition to the already high tax rates in place from the New Deal, he proposed a 99.5% tax rate on all income over $100,000. When his budget director wondered why, Roosevelt said, "Why not? None of us is ever going to make $100,000 a year." Does this way of thinking sound at all familiar?

Roosevelt used the IRS as a  personal weapon against those who opposed him. I thought Tricky Dick Nixon had started that, but obviously not. He had political opponents, such as Huey Long (a corrupt politician himself) investigated for tax evasion after Long opposed his New Deal programs. Long said of the NRA, "Every fault of socialism is found in this bill, without one of its virtues." He refused money from the Public Works Administration for his state, which actually turned out for the best for the poeple of Lousiana, as the states that did benefit from PWA actually saw less economic development during that time than states that hadn't. Roosevelt also went after William Randolph Hearst and his newspapers, but was unable to find any evidence against him. He had Father Charles Couglin investigated, as well, for denouncing Roosevelt and his policies. Other political enemies also felt the might of the IRS.

Roosevelt in 1944 created an Economic Bill of Rights (I think our politicians today somehow mistake it for the original Bill) that included, "the right to a useful and remunerative job...the right of every family to a decent home...the right to a good education." Wow! The mind boggles at the programs our government has put in place over the years to enforce these "rights."

So, what are the lasting effects of the New Deal, eighty years later? Minimum wage laws were first passed in the New Deal Years. Social security started. The Wagner Act created the labor unions' devastating hold on many industries. Farm subsidies came into play, and are still being paid today. Aid to Families with Dependent Children was a welfare program that had its roots in that era, and grew throughout the years until 1996, when it was reformed, somewhat. The Smoot Hawley tariff worsened our trade relations, and we're still fighting those effects with new treaties, such as NAFTA. The Federal Reserve took us off the gold standard and sent us on a number of inflative spirals. The FDIC put taxpayers on the hook for banks' foolish behaviors. Income taxes became more progressive under FDR, and have been a bone of contention between the major parties ever since.

An informative, interesting, very readable book.

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