For those who don’t care for FDR’s economic policies, I have four words for you: Savings and Loan Scandal. No other country, no other people on Earth can absorb over $500 billion in bank losses in one period. USA did, thanks to policies set in FDR’s time.
Here is a link to a book about Roosevelt, you can read it online and save a couple of bucks:
http://www.rooseveltmyth.com/book/hbzfrm.htm
It is correct that before FDR the US went through various other depressions and boom and bust cycles. The difference between the previous depressions and busts which typically lasted a year or two was the leadership. First you had Hoover and his high taxes, high tariffs, and wasteful spending on public works and welfare. Then with FDR it went from bad to worse. Every time the economy tried to get going, there was FDR throwing another refrigerator on its back. More high taxes, more wasteful spending, more stupid labor laws, more fascist agencies, more attacks on business all this led to 8 years or depression after FDR came to power. Hoover’s and FDR’s incompetence transformed what would have been a run of the mill recession into the Great Depression, impoverishing millions of people along the way.
As for what the alternative actions should have been. Repeal the Hawley-Smoot and previous tariffs, rescind Hoover’s huge tax increases, install some people on the Federal Reserve who knew what they were doing, pass some simple banking reforms, and some temporary relief for the unemployed. If he had done this and in two years the economy would have been humming along just as it had before Hoover took over. Alternatively he could have done nothing and it would have been better than the harmful policies he did enact.
FDR was like the 18th century doctors who would take a sick patient and through steady regime of bleeding and snake oil kill him.
puddleglum, could you stop making conclusory statements and kindly back up the things you’ve already written? As I’m an egotist, I’d appreciate it if you would start with my three questions for you.
Thanks,
Sua
Government spending is bad because it leads to high taxes and high taxes are what hurt the economy. The top tax rate under Hoover went from 25% to 63%. This was a 150% increase was what hurt the economy, the government spending caused this increase in taxes. To increase tax rates in peacetime will always hurt the economy and an economy already in recession is especially hurtful.
FDR said in 1932:
“Taxes are paid in the sweat of evrey man who labors because they are a burden on production and are paid through production. If those taxes are excessive, they are reflected in idle factories, in tax sold farms, and in hordes of hungry people, tramping the streets,and seeeking jobs in vain.
Our workers may never see a tax bill, but they pay. They pay in deductions from wages, in increased cost of what they buy, or -as now- in broad unemployment throughout the land. There is not an unemployed man, there is not a struggling farmer, whose interest in this subject is not direct and vital. It comes home to every one of us!”
If he had listened to whoever was writing his speeches in 1932 he could have saved our country instead of almost ruining it. He raised the top rate to 79% in 1935 just as the economy was showing signs of improvement.
So the problem was not the massive spending increases themselves but the tax increases that accompanied them.
puddleglum, the top rate in 1945 was 91%. The top tax rate from 1945-1963 did not drop below 88% (it went to 70% in 1963). That era witnessed the largest growth in U.S. GDP ever.
Ergo, you haven’t made your point. The top marginal rate by itself does not provide much information on the total tax burden. At what income level was the 79% tax rate imposed? What percentage of the population paid that rate, and on what percentage of their income?
And the real question is - what was the total take of taxes under FDR as a percentage of GDP? Was that percentage higher or lower then under Eisenhower? Under Reagan? Under Clinton? You get the idea.
And again, the worst part of the Great Depression under FDR - the “Roosevelt Depression” - came in 1937-38, after FDR severely cut government spending.
Sua
I’ve said before and I’ll repeat it now, our economic recessions since the Roosevelt era have been shorter and more mild than those that came before. The recession of the late 1890’s didn’t last one or two years, it lasted four or five, depending on how you define the term recession. Furthermore, in those days, it was expected that unemployment would rise to at least ten percent at an economic trough, whereas it hasn’t gotten above six percent during our current recession. However, there’s a major problem with the argument that Roosevelt should have just treated the situation in 1933 like an ordinary recession: it wasn’t an ordinary recession. In 1933, unemployment was above twenty-five percent, GDP and consumption were sinking for the fourth consecutive year, and there weren’t any real signs of a recovery. Roosevelt was not elected on a promise to bury his head in the sand and pretend that the nation was doing just fine. He was elected on a promise to take positive action to fix the economy, because people (including most of the era’s leading economists and businessmen) knew that it wasn’t going to recover on its own. Roosevelt faced an unprecedented crisis, and it called for unprecedented action.
Here’s one cite
http://www.sjsu.edu/faculty/watkins/depression.htm
The rest of my assertions would be backed up by any decent macroeconomics textbook.
High taxes are one thing that can hurt the economy, but they’re far from the only thing. The economy had already been going down the tubes for almost three years before Hoover’s take hike in 1932. Another thing that can hurt the economy is a tremendous Federal debt, and unfortunately, taxes are sometimes needed to reduce the deficit. A third thing that can hurt the economy is unrestrained growth that’s partly based on a mountain of bad investments. If growth eventually outpaces the increases in production, you get a crash, as happened in 1929. We’ve avoided repeating such devastating busts thanks to Roosevelt’s reform of the banking system and also the passage of the Securities and Exchange Act in 1934.
People who claim this seem to me to be ignoring the evidence.
For most of Clinton’s two (I love to stress that because it sends certain people up the wall) administrations we had a great economy and what some people claimed were high income taxes.
So GW promised an income tax cut and got one. The news is that the first quarter was pretty good in economic growth, and that might indicate the start of a recovery from the recent dip.
I’m sure that if this holds true there will be a lot of babble by Republicans that the income tax cut did it. If the presumed recovery holds coupled with the good times with “Clinton taxes,” wouldn’t it be evidence that, over quite a wide range, income taxes really don’t make that much difference?
i am neither an FDR lover or hater. all this stuff happened before i was born so a partly regard it as ancient history. but i developed a serious interest in economics in 1976 and you can’t actually seperate economics from history.
most history books don’t tell you that Henry Ford supplied money to the NAZI party during the 20’s and Henry gat an award from the german government in 1938.
Keynes and the Depression are strong intellectual and psychological influences to this day. as to what might have been done then or done now:
what about making ACCOUNTING and ECONOMICS mandatory in highschool?
according to Robert Kiyosaki accounting is 5th grade arithmetic. our politicians constantly talk about education but i haven’t heard any suggest that. maybe those in power want the masses to be properly ignorant and that is always true.
Dal Timgar
Wasn’t raising the federal insurance rate on S&Ls in 1980 the cause of the scandal?
The three sides of the S&L scandal were all tied to de-regulation.
The S&L’s were allowed to insure accounts to $100,000 (from the previous $10,000).
The S&L’s were permitted to compete with commercial banks in ventures previously denied them (so many jumped in without the expertise to understand what they needed to do).
The agency that administered the FSLIC did not maintain the same controls over their clients that the administrators of the FDIC maintained over theirs.
When the regulators saw how far beyond their reserves the S&Ls had extended themselves, they began calling for immediate pullbacks. Since much of the money was in extended service for real estate speculation, the call for tighter controls actually exacerbated the situation by casting doubt on many of the projects (some undetermined number of which were not actually boondoggles) and dried up the funds needed to complete them. (There were, of course, ample boondogles.)
The scandal resulted to changes to the FDR-era rules. We survived it because we were able to go to the FDIC (still run under the FDR-era rules) to get sufficient funds to keep both systems from collapsing as we dismaltled the S&L system and placed it under the control of the commercial banking oversight group.
It is time to elect the world leader, and your vote will decide the outcome. Here are the facts about the three leading candidates:
Candidate A: Associates with crooked politicians, communists and known gangsters, and consults with astrologists. He’s had two mistresses, one was his wife’s private secretary that he also cheated on. He also chain smokes and drinks 8 to 10 martinis a day, often starting before breakfast.
Candidate B: He was kicked out of office twice, smokes cigars, sleeps until noon, was a racist and a white supremacist and believed that no country could ever be led by a nonwhite because of their obvious inferiority, used opium in college and drinks a quart of whisky every evening.
Candidate C: He is a decorated war hero. He’s a vegetarian, doesn’t smoke, drinks an occasional beer and hasn’t had any extramarital affairs. He is an avid patron of the arts, a gifted writer and speaker and Great Britain’s backing was instrumental to his early political success. He is an avowed anti-Communist. Which of these candidates would be your choice?
A: Franklin Delano Roosevelt
B: Winston Leonard Spencer Churchill
C: Adolph Hitler
And this proves what?
ITC Champion made some great points about what FDR did, and how he recognized the difference.
One poster (sorry forgot who for credit) said economics and accounting should be required in high school. I agree particularly with respect to accounting. Introductions to these subjects would be very practical. I don’t think that they are as important as algebra and geometry, which teach how to think in general.
ITR - The great situation in 1933 was very dire but not unprecedented. During the depression of 1921 the unemployment rate was 20%. Smart policy ended that depression and led to the roaring 20’s prosperity. Smart policy could have done the same thing in the 1930’s. Fiscal policy is definetly not the only thing that can hurt the economy. there was also very bad monetary policy from 1929-1933 which crippled the economy. Also high tariffs such as Hawley Smoot and bad labor laws such as the Wagner Act.
D Simmons- The tax rates were not that high during the Clinton era, he really only managed to increase taxes once in 1993 and that was not a very big increase proportionate to the economy. After the health care debacle he was never in a position to raise tax again. When the Republicans gained control of Congress in 1994 they passed a tax reduction as part of the Contract With America, after this the economy really took off. Even though it is simpler to identify presidents with laws it is really the congress and the president who are responsible.
::sigh::
This is really getting nowhere. As regards your last post, puddleglum:
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Do you know what caused the recession of the early 20’s? BTW, it was the the “depression of 1921” - the U.S. was in a severe recession from 1919-1921. The answer: the steep drop in federal government spending after the end of WWI. It took some time for the economy to adjust to the end of wartime spending and revamp for domestic production.
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Have you taken into account the fact that the Great Depression was a worldwide event? That, for example, made it different from the 1919-1921 recession, where exporting our way out of the recession was an (eagerly seized) option.
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If you wish to give credit or blame for the 1990s economy to taxation, have you considered that the late 90s, when the economy “really took off” according to you (and for which you give credit to the Republican’s tax cut) was, in actuality, simply an asset-price bubble that has since been (partially) pricked? It wasn’t growth; it was excess.
In any event, a cogent argument exists that FDR adopted the wrong policies during the Great Depression. You haven’t come close to making it yet - you are taking bits and pieces of facts and drawing conclusions from them without doing anything to connect A to B.
Sua
I suspect that this claim can be made in retrospect about any action at any time by anyone.
The difficulty with such post hoc analysis of socio-economic events that the interconnections are difficult to account for. Any action in the economic sphere leads to a reaction in social, economic and political areas and you don’t know with any degree of precision what they will be.
Roosevelt’s approach was to try something. Maybe partly this policy was to restore confidence that someone was trying to get out of our difficulties and confidence has a lot to do with the economy.
The advantage that proposed, and untried, solutions have is that the proposer has control of the scenario and can make the response of the hypothetical system to his hypothetical input agree with his claims.
David
My statement that a “cogent” argument exists does not necessarily mean that a correct argument exists. Even if ultimately failed arguments are cogently made, they aid the process of Truth by forcing an exploration and refinement of the countervailing argument.
Sua
How about the National Recovery Administration?
Representatives of industry and labor sitting down and setting “fair practice” codes for most every industry, with the express purpose of fixing prices and eliminating “wasteful competition”. But it seems that almost all competition was considered “wasteful” in the panicked “do anything!” sentiment of the Depression. The regulation that was being challenged in the Supreme Court case that ended the NRA was a rule requiring chicken slaughterers in New York City to buy live chickens from wholesalers in “take it or leave it” lots; picking and choosing chickens was against the rule. :rolleyes:
Note that this wasn’t price fixing for one or two industries, like railroads (the Interstate Commerce Act from the 19th Century) or farming (Agricultural Adjustment Administration and some other New Deal agencies), but detailed price controls and anti-competitive regulations for a vast range of industries across the nation. With the regulations being drafted by representatives of the industry being regulated, and some labor representation, but no direct consumer representation as such IIRC.
The “fair practice” codes had the force of the government behind them, IMHO a violation of the spirit of the anti-trust laws, though not contrary to the letter of those laws BECAUSE it was done with government imprimatur.
Mind you, the National Industrial Recovery Act did have some good provisions on labor relations. And when the NIRA was struck down, these provisions were readopted by themselves and were upheld as constitutional.
That said, I shiver at the thought of what would have happened if the NIRA hadn’t been invalidated by the Supreme Court. Yes, it was adopted as an emergency measure, and perhaps its proponents including FDR didn’t intend it to be a permanent model for the (micro)management of the economy. But the NRA’s anticompetitive power gave industry a strong interest in the NRA’s continuation. Industry could have extended labor enough concessions to get them to also lobby hard for the NIRA’s repeated readoption, and the specter of labor relations without the NIRA’s protections could have been raised as further persuasion. The NRA could have survived to today :eek: or at least (easily!) have lasted a couple of decades or more with such a combination of vested interests behind it.
John Bredin makes a great point, most people don’t understand what the NRA was. It was government sponsored and controlled cartels. There is a technical term for this type of economic system-fascism. That is what I meant when I said that Roosevelt had contempt for the constitution. We can all be glad that the founding fathers designed the constitution to be strong enough to stand up to assaults like Roosevelt’s and we should all be grateful to those Senators and congressman who stood up to the court packing scheme.
“There is a technical term for this type of economic system-fascism.”
Correct, but I was reluctant to use that term, because support for an economic policy shared with the Fascists doesn’t mean that FDR was a fascist in other ways. To put it another way, J. Edgar Hoover under FDR didn’t go out and buy gallons of castor oil. 
“That is what I meant when I said that Roosevelt had contempt for the constitution.”
But FDR creating the NRA isn’t really evidence of that.
(1) All sorts of economic regulation is possible under the Constitution. Indeed, the government could nationalize entire industries, so long as adequate compensation were paid to the owners as required by the 5th Amendment. What FDR did with the NRA was IMHO stupid economic policy, but stupid economic policy isn’t forbidden by the Constitution.
(2) The excessive delegation of power to business owners & labor WAS unconstitutional, but it doesn’t strike me as malicious. FDR believed in trying SOMETHING to resolve the Depression, and there was a lot of feeling in the country at the time against competitive markets and in favor of cooperation. Ideas not fully thought through don’t equal an intentional trampling of the Constitution.