Skip to comments.How FDR's New Deal Harmed Millions of Poor People
Posted on 12/29/2003 9:55:56 AM PST by Stew Padasso
December 29, 2003
How FDR's New Deal Harmed Millions of Poor People by By Jim Powell
Jim Powell, senior fellow at the Cato Institute, is author of FDR's Folly, How Roosevelt and His New Deal Prolonged the Great Depression (Crown Forum, 2003).
Democratic presidential candidates as well as some conservative intellectuals, are suggesting that Franklin Delano Roosevelt's New Deal is a good model for government policy today.
Mounting evidence, however, makes clear that poor people were principal victims of the New Deal. The evidence has been developed by dozens of economists -- including two Nobel Prize winners -- at Brown, Columbia, Princeton, Johns Hopkins, the University of California (Berkeley) and University of Chicago, among other universities.
New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and so-called "excess profits" taxes all went up.
The most important source of New Deal revenue were excise taxes levied on alcoholic beverages, cigarettes, matches, candy, chewing gum, margarine, fruit juice, soft drinks, cars, tires (including tires on wheelchairs), telephone calls, movie tickets, playing cards, electricity, radios -- these and many other everyday things were subject to New Deal excise taxes, which meant that the New Deal was substantially financed by the middle class and poor people. Yes, to hear FDR's "Fireside Chats," one had to pay FDR excise taxes for a radio and electricity! A Treasury Department report acknowledged that excise taxes "often fell disproportionately on the less affluent."
Until 1937, New Deal revenue from excise taxes exceeded the combined revenue from both personal income taxes and corporate income taxes. It wasn't until 1942, in the midst of World War II, that income taxes exceeded excise taxes for the first time under FDR. Consumers had less money to spend, and employers had less money for growth and jobs.
New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring.
Other New Deal programs destroyed jobs, too. For example, the National Industrial Recovery Act (1933) cut back production and forced wages above market levels, making it more expensive for employers to hire people - blacks alone were estimated to have lost some 500,000 jobs because of the National Industrial Recovery Act. The Agricultural Adjustment Act (1933) cut back farm production and devastated black tenant farmers who needed work. The National Labor Relations Act (1935) gave unions monopoly bargaining power in workplaces and led to violent strikes and compulsory unionization of mass production industries. Unions secured above-market wages, triggering big layoffs and helping to usher in the depression of 1938.
What about the good supposedly done by New Deal spending programs? These didn't increase the number of jobs in the economy, because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen -- we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing.
For defenders of the New Deal, perhaps the most embarrassing revelation about New Deal spending programs is they channeled money AWAY from the South, the poorest region in the United States. The largest share of New Deal spending and loan programs went to political "swing" states in the West and East - where incomes were at least 60% higher than in the South. As an incumbent, FDR didn't see any point giving much money to the South where voters were already overwhelmingly on his side.
Americans needed bargains, but FDR hammered consumers -- and millions had little money. His National Industrial Recovery Act forced consumers to pay above-market prices for goods and services, and the Agricultural Adjustment Act forced Americans to pay more for food. Moreover, FDR banned discounting by signing the Anti-Chain Store Act (1936) and the Retail Price Maintenance Act (1937).
Poor people suffered from other high-minded New Deal policies like the Tennessee Valley Authority monopoly. Its dams flooded an estimated 750,000 acres, an area about the size of Rhode Island, and TVA agents dispossessed thousands of people. Poor black sharecroppers, who didn't own property, got no compensation.
FDR might not have intended to harm millions of poor people, but that's what happened. We should evaluate government policies according to their actual consequences, not their good intentions.
Thanks for the post. I am often needing ammo to shoot at the Rat FDR worhsippers.
The erroneous notion that the New Deal was good for America has become an urban legend. It will take a hundred years before enough study and facts emerge to even begin to dispel the myth of the New Deal and give it its rightful description of a "Raw Deal". Much of it perpetrated on Americans by the communists/socialists in FDR's administration.
I just love reading and saving articles like this. You cannot tax the people into prosperity. Our elected officials refuse to acknowledge this fact. Billy Clintoon is 100% disingenuous when he says his tax increase helped the soaring economy when he was in office. It's disgusting to note, that with all those taxes coming in during those 8 years, the skunk gutted the military at the same time and did it with a smile.
Exactly.....the unseen consequences described very well by Hazlitt. He uses the example of the broken window where people will say that it will stimulate business because a glassmaker will have some work to do. What you don't see is the business suit, food, or other items the window owner will now NOT BUY in order to pay for the window repair.
There is no increase in business....the money just got spent in different way.
I may be wrong...seems to me I heard it somewhere?
Calling Ann Coulter. Maybe this book will be like the information learned from the Venona decrypts that in effect exonerated Joe McCarthy; that is, the Rosenbergs were really, really guilty, there were traitors in the government. First, academics establish the basic facts. That won't stop liberals from spewing the lies. The Treason model is Ann Coulter nukes their lies with an entertaining polemical history.
There still are traitors in government.
|FDR's Raw Deal Exposed ^
|Posted by Cathryn Crawford
On News/Activism ^ 08/30/2003 1:59:46 PM CDT with 369 comments
Chicago Sun-Times ^ | 9.30.03 | Thomas Roeser
FDR's Raw Deal Exposed August 30, 2003 BY THOMAS ROESER For 70 years there has been a holy creed--spread by academia until accepted by media and most Americans--that Franklin D. Roosevelt cured the Great Depression. That belief spurred the growth of modern liberalism; conservatives are still on the defensive where modern historians are concerned. Not so anymore when the facts are considered. Now a scholar at the libertarian Cato Institute has demonstrated that (a) not only did Roosevelt not end the Depression, but (b) by incompetent measures, he prolonged it. But FDR's myth has sold. Roosevelt, the master of the...
|Great myths about the great depression [Thomas Sowell] ^
|Posted by aculeus
On News/Activism ^ 10/09/2003 8:22:38 AM CDT with 83 comments
townhall.com ^ | October 9, 2003 | Thomas Sowell
They say "truth will out" but sometimes it takes a long time. For more than half a century, it has been a "well-known fact" that President Franklin D. Roosevelt got us out of the Great Depression of the 1930s. That view 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. Only now has a book been written in language that non-economists can understand which argues persuasively that the policies of the Roosevelt administration actually prolonged the depression and made it worse. That book is...
. FDR's administration (Brain Trust) was filled with utopian social-ites, such as his chief economic advisor (Rexford Tugwell) who openly praised communism for being "able to produce goods in greater quantities than capitalism, so as to spread such prosperity as there is over wider areas of the population."
Interesting. I have often thought that FDR brought his Wash DC administration from his governor's administration in Albany. Among these were the finest group of socialists, socialite fashionable communists and more insidious, communist agents loyal only to Moscow. That certainly was a bullet America dodged by virtue of the US (and USSR) having to deal with the belligerents in Berlin and Tokyo. As for socialism's ability to produce prosperity, nothing could be further from the facts as was revealed when the Soviet Union collapsed. The real, "Dirty Little Secret" of socialism, is that it always produces a shortage of necessities.
I am glad that Hayek lived long enough to see Margaret Thatcher and Ronald Reagan embraced the lessons learned from this book and caused the great economic boom of the 1980's in the UK and USA, respectively.
Yes, Churchill and his Conservative Party was voyed out. Britain's slide into socialism was presided over by a new, Labour Party, socialist government
"The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of sound policy. It is in violation of the traditions of America. Work must be found for able-bodied but destitute workers. The federal government must and shall quit this business of relief."
Hint: It wasn't Ronald Reagan, it was none other than FDR himself.
More great and important work from the Cato Institute.
Another one of the big legacies was income tax witholding, i.e. right out of the paycheck before even being paid. The effects of this cannot be over-emphasized. Citizens paying their taxes voluntarily, after-the-fact, gave a level of control that was lost forever. "Tax revolts" (of which I am not advocating, mind you) were no longer possible.
Incidentally, revenues were far, far higher than anticipated, simply because so many citizens had previously declined to report all of their income, and of course it was impractical to audit millions, of course. Income tax witholding set the course for a lot of things that people take for granted to day.
If you think FDR's "New Deal" was raw, just wait until you have to live under "The New World Order!"
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