1929 was a devastating year. The October stock market crash erased more than people’s life savings; in many cases it also robbed them of hope as the
What is not commonly reported is Franklin Delano Roosevelt, the man often credited for his leadership during the Great Depression, and his New Deal policies prolonged the Depression by seven years, according to some economists.
Yet in 2008 the media, along with liberals from Rep. Barney Frank to filmmaker Michael Moore, have promoted a new, New Deal to rescue
One teaser on the cover of Time magazine Oct. 20 declared that, “Voters are more open to big government.” The corresponding article by liberal writer Joe Klein cited the “undermined and underfunded” Securities and Exchange Commission, which is supposed to limit [1]“rampaging free-market anarchists on Wall Street.”
Jeffrey Sachs, director of the Earth Institute at
Sachs was a favorite expert of CNN in October, appearing in the cable channel’s reports on 10 of the first 23 days of the month.
All year long, the media have whetted the public’s appetite for New Deal-like intervention in the markets with old photos of bread lines and FDR as well as hundreds of [2]comparisons of the economy to “Great Depression.” The three main networks ABC, CBS and NBC compared the current economy to the Depression 70 times in the first six months of 2008 and another 157 times since July 1. CNN has even asked who will be the country’s FDR to defeat this crisis.
Obama, the New FDR?
It is 2008, but the news media from Time magazine to [3]Bloomberg.com have been searching for a 1932 candidate: FDR. Some have indicated that Democratic presidential nominee Sen. Barack Obama would be that man.
Time magazine put FDR on its Oct 27. cover, along with Abraham Lincoln, Obama and his Republican presidential rival, Sen. John McCain.
On Oct. 10, CNN’s Wolf Blitzer asked on “The Situation Room,” “who’s gonna be FDR as opposed to Herbert Hoover?”
And the media have been promoting FDR as the nation’s economic savior despite the fact that his policies likely prolonged the suffering. On Oct. 14 and 15, Suzanne Malveaux gave FDR credit saying “he won [the election] based on bold experimentation.” But Malveaux didn’t mention that
Some members of the media, including ABC’s George Stephanopoulos, suggested if elected, Obama would take an FDR-like New Deal path of action.
“I would think that Barack Obama would want to do something like what FDR did in 1932.Yeah, they [Democrats in Congress] can talk about this stimulus package during, during the transition, but they better not pass it, they better wait, if he wins, until he’s president so he can have an accomplishment right off the bat,” Stephanopoulos said on “This Week” Oct. 19.
In a story entitled [4]“Who Will Save the Economy?” Andrew Leonard of the liberal publication Salon.com suggested a New Deal-like scenario of job creation through increased infrastructure spending and then tied it to Obama and Congressional Democrats. Leonard wrote:
How about some tried-and-true economic stimulus of the sort that doesn’t necessarily encourage consumers to take on more debt, but creates jobs by pumping money into national infrastructure? A new New Deal, as it were.
On Monday, Barack Obama proposed a wish list of initiatives aimed at addressing short-term pain that his advisors pegged at costing about $175 billion. But today, according to the Wall Street Journal, Senate and House Democrats are considering a much more aggressive $300 billion plan.
CNN’s Lou Dobbs was not enthusiastic about the prospect. He warned viewers of his Oct. 21 program to “get ready for the new, New Deal” if Obama become president in a tease for his radio program.
Robert McElvaine, a self-described “progressive” professor of history and New Deal expert, told the Business & Media Institute that “Obama may not be, on every point, in agreement with a New Deal approach, but he’s fairly close to it.”
[5]McElvaine, the Elizabeth Chisholm Professor of Arts &
McCain and his running mate Gov. Sarah Palin have criticized Obama’s desire to “spread the wealth,” by raising taxes on the top 5 percent of wage earners. Palin said Obama’s plan “reeks of socialism.” McCain does not support raising taxes on the rich or anyone else, but he has voiced his support for more regulation of Wall Street in the wake of the financial crisis.
With all the media support for government intervention in the financial crisis, it’s no surprise that important details were ignored – including economists who blame FDR’s policies for turning the Depression into the Great Depression.
The Unspoken Impact of the New Deal
Politicians and left-wing economists have promised to feed the public a new New Deal, but economists have found that FDR’s New Deal prevented economic recovery and actually made the Great Depression much worse that it would have been.
That’s one of the arguments put forth in economist Robert Higgs’ 2006 book, [6]“Depression, War, and Cold War: Studies in Political Economy.”
A Human Events review of the book said, “His findings, then, stand opposed to the received wisdom. For example he argues that President Franklin Roosevelt’s [7]New Deal policies prolonged the Great Depression by creating an oppressive climate that ‘threatened’ Big Business through hostile laws court decisions, regulations, and the obvious antipathy of the nomenclatura toward the ‘investor class,’ resulting in a climate of uncertainty toward the ‘future of property rights.’”
In fact the New Deal kept private investing so minimal that [8]“between 1929 and 1939 the economy sacrificed an entire decade of normal economic growth, which would have increased the national income 30 to 40 percent,” Higgs wrote in September 1998.
Higgs wasn’t alone in his assessment. Two UCLA economists announced in a study published in the August 2004 Journal of Political Economy that FDR’s New Deal policies restricted the economy’s ability to rebound from that crisis.
“[Roosevelt] came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces,” [9]Harold L. Cole and Lee E. Ohanian wrote.
“They economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies,” Cole said in an Aug. 10, 2004, press release.
“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15- year economic slump,” Ohanian said in the release. [10]“We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”
Specifically, the economists blamed
Tom Cooley, Dean of the NYU Stern School of Business, mentioned this point in an Oct. 13 Newsweek web exclusive. Cooley said, “[M]ost economists and economic historians now realize that FDR’s experimentation and interference with markets probably prolonged the depression considerably.”
So what would a new, New Deal do the current economy? Higgs told BMI he “cannot imagine a worse course of action, short of outright socialization of the entire economy. The measures comprised in a new New Deal will not hasten general economist recovery, but will only bulk up the power of government and transfer income to privileged interest groups at the expense of taxpayers and consumers.”