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Saturday, October 22, 2016

FDR placed the needs of the American people above petty budgetary concerns, but today’s leaders lack his courage and vision.

In 1933 we reversed the policy of the previous Administration. For the first time since the depression you had a Congress and an Administration in Washington which had the courage to provide the necessary resources which private interests no longer had or no longer dared to risk.

This cost money. We knew, and you knew, in March, 1933, that it would cost money. We knew, and you knew, that it would cost money for several years to come. The people understood that in 1933. They understood it in 1934, when they gave the Administration a full endorsement of its policy. They knew in 1935, and they know in 1936, that the plan is working.—FDR, 1936

Eighty years ago this month, at the height of the worst economic crisis in our nation’s history, Franklin D. Roosevelt delivered on his promise to launch a New Deal for the American people. Not wedded to any one program, idea, or ideology, the New Deal was founded on the very simple premise that when the free market failed to provide basic economic security for the average American, government had a responsibility to provide that security. In Roosevelt’s day, this meant imposing the first-ever meaningful regulation of the stock market, shoring up the nation’s financial system by guaranteeing private deposits and separating commercial from investment banking, and providing jobs to the millions of unemployed through government expenditures on infrastructure. The Roosevelt administration also launched the country’s first nationwide program of unemployment insurance to help the unemployed bridge the gap between jobs as well as Social Security to ensure that the elderly, after years of work and toil, would not suddenly find themselves utterly destitute.

Conservative critics of FDR’s polices say that these programs did not work—that unemployment remained high throughout the 1930s and that it was only World War II that brought us out of the Great Depression. As such, these same critics continually argue that the deficit spending that fueled the New Deal was the root cause of its inability to bring the unemployment rate down to acceptable levels. In short, they argue that government spending and government programs do not work, and that only the free market can provide the economic stimulus necessary to get the economy back on its feet again.

But as is the case today with the naysayers on climate change, the empirical evidence suggests that nothing could be further from the truth. During FDR’s first term, for example, the average annual growth rate for the U.S. economy was 11 percent. Compare that to the paltry 0.8 percent we witnessed in the first term of the Obama administration. The nationwide unemployment rate also fell, from its all-time high of 25 percent in 1933 to 14 percent by 1935, which at the time represented the largest and fastest drop in unemployment in our nation’s history.

But far more damning to the conservative critique is the argument that tries to invalidate the New Deal by positing that it was World War II and not the relief programs of the 1930s that brought us out of the Great Depression. Conservatives love to trumpet this fact and often use it as part of their argument against deficit spending, never stopping for a moment to consider that government expenditures—and deficits—in World War II made the New Deal look like small potatoes. In fact, deficit spending in the New Deal never topped 6 percent of GNP, while in World War II it ran as high as 28 percent. In other words, World War II was the New Deal on steroids. Viewed from this perspective, it is FDR’s critics on the left—not the right—who possess the stronger argument. The problem with the New Deal was that it did not go far enough. In other words, the government should have spent more money, not less, if it was going to be successful in bringing the economic crisis to an end.

All this is not to say that free enterprise is incapable of producing economic growth—it most certainly is. But there are times when capitalism, left to its own devices, can fail. Franklin Roosevelt was willing to acknowledge this, and he spent the better part of his tenure in office trying to put in place programs that would make capitalism work for the average American, not just those at the top. Hence, his agenda was not to subvert or destroy the free market system, but rather to save it.

It took vision and courage to launch the New Deal—the vision to understand that when the free market systems falls short or fails, government has a responsibility to take direct measures to get the economy moving again, and the courage to engage in deficit spending at a time when orthodox economic theory argued that the only proper response to an economic recession or depression was to slash government spending and balance the budget.

Unfortunately, the leadership we possess in Washington today lacks the vision and the courage to follow FDR’s example and put in place the sort of common-sense programs that would stimulate the economy and put people back to work. Instead of providing jobs for millions by spending money on our failing infrastructure—now ranked 24th in the world—or investing in programs that would reverse the falling education rates of our children, or providing greater federal support for the basic scientific research that may unlock untold benefits for future generations, we instead speak of nothing but the deficit and the sequester, as if cutting spending in the midst of recession is the magic bullet that will lead us out of our economic malaise.

Franklin Roosevelt faced similar critics, who, much like today’s deficit hawks, insisted that he must cut spending and balance the budget no matter what the consequences for the average American. But FDR would have none of this. “To balance our budget in 1933 or 1934 or 1935,” he said,

would have been a crime against the American people. To do so we should either have had to make a capital levy that would have been confiscatory, or we should have had to set our face against human suffering with callous indifference. When Americans suffered, we refused to pass by on the other side. Humanity came first.

As it turns out, FDR’s decision to put “humanity first” was not only the right moral decision, it was also the right economic decision. For the deficit spending that he finally unleashed in World War II, coupled with the social and economic reforms put in place during the New Deal, led to one of the longest periods of economic prosperity in America’s history and the birth of the modern American middle class.

Sadly, all of the evidence to date suggests that our leaders in Washington are quite happy “to pass by on the other side” and let the sequester proceed without so much as a fight. With roughly 16 million people across the country still unemployed, this is surely “a crime against the American people.”

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

Cross-posted From The Roosevelt Institute’s Next New Deal Blog

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

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  • charleo1

    It has become a popular diversion amongst the Right Wing, to attempt to rewrite the history
    surrounding the Great Depression. And true to form, it is not enough to opine Roosevelt’s
    policies were ineffective. After all, this is the evil government we’re talking about. So, the
    story goes, not only were his policies ineffective, they made things worse! Sound familiar?
    Well, it should. To listen to the rhetoric coming from the Republican Party, today, one might
    conclude they haven’t changed a bit in at least 90 years! I think perhaps the strongest case
    aganist Conservatives, is to point out where we as a people would be, if all the policies of
    FDR’s New Deal, had never been implemented.

    • FDR policies may be ineffective in the eyes of the GOP morons determined to destroy our economy and way of life. His policies were the difference between having a job, supporting our families, and restoring hope for those who lived through those harrowing days. In my book, FDR is second only to Abe Lincoln as the best President this country ever had.
      The best thing our revisionists could do, if they truly believe there are better ways to strengthen our economy, stimulate growth, and lower unemployment than what FDR did 8 decades ago, all they have to do is to show us the money!

      • charleo1

        Amen to that! For years they claimed, the more we cut taxes, the more the economy grows.
        So when Bush’s enormous tax cuts were enacted in 2001, and 2003, with the top heavy
        cuts, skewed predominately in favor of the wealthy. I think many Republicans expected a huge burst of growth. They had been pushing this provably untrue, fallacy for so long,
        when the economy literally fell apart on the eve of the election, they had no answer.
        If things had held together for another couple of months, and Obama was going to win
        the election. Of course, they would have blamed Obama, and the Democrats. And kept
        the lie alive. And they have glommed onto this debt, and deficit issue. Never mind that
        near collapses in one’s Country, tends to increase the debt by a lot. But as to economic policy, the only one they had had for the last hundred years, died in mid- September, 2008.
        And, I don’t believe, at this point they have any idea of what they are supposed to be doing.

        • They know what they should do, but their love of more riches for them, their friends and rich donors are more important than doing what is best for the Country and its citizens. When I was growing up my mother always said when we had a Republican President we will have a trouble because of money woes that they have created. I actually realized what she meant years later, she meant everytime we have a Republican President there is either a recession or depression while they are in office or just before they leave office. My mom also refused to vote, she said if a person wasn’t already crooked before they took office they always were by the time they left office, and she wasn’t going to vote because they were all crooks. My dad did vote but his thoughts about all politicans from both parties were the same as mama’s. They both grew up during depression, the South was in depression long before the rest of the Country according to them and both had lost on parent by the age of 7(daddy) and 10(mama) and they were poorer than others around. Both of them always told their children if the FDR hadn’t done what he did, there wil not have been a USA after 1940, we would have been speaking German instead of English. So the Republicans were wrong about what it took for the country to recover from a Republican caused depression then and they are wrong today about what takes to recover from a bad recession caused by their economic policies now. I think that they are trying to destroy the Country as it is and set up a dicatorship (spell check not working) where they will have all the power to make laws and tax or not tax people, they will tax everyone to death and they and the rest of the rich will not pay taxes.

          • charleo1

            When you said, your Mother wouldn’t vote, it reminded me of a
            Jeff Greenfield book entitled, “Stop Voting, It Only Encourages
            Them.” Now, It’s a fact, regardless of what Republicans claim,
            their tendency to always side with the wealthy, who already have
            an advantage, often at the expense of labor, tends to constrict the
            economies where these, all pro management, all the time, policies are applied. Just look at the South, as an excellent example. These
            States, red for decades, all are aggregate receivers of Federal funds.
            Wages are lower, the numbers of uninsured are greater, their
            educational systems are usually under funded, produce fewer
            H.S. graduates, and fewer attend college, or remain in the State,
            once receiving their degree. There is no question, the poverty rates
            are higher, and addressed very poorly, if at all. So, it follows these
            States have higher crime rates, a larger percentage of their populations in prison, or living under State supervision. With
            onerous probation, and parole requirements, often enacted at the
            behest of for profit incarceration Corps. This increases prison
            populations, and results in creating an under class of citizens who often cannot hold a professional license, vote, and affect minorities at twice the rate of the State’s Whiter, or wealthier, population.
            There is no mystery here. When the government of your State,
            constantly works aganist the majority’s best interests, what you
            would expect to see, is exactly what you get.

  • Inthenameofliberty

    I have seen statistics that the sequester cuts involve about 1/2 of 1% of the yearly operating Federal Budget. Seriously – the country is going to go to hell because of that? I have an idea – why don’t we stop giving weapons and tanks to foreign countries? [Mr Kerry just pledged $60 million – YEP – 60 – to a foreign country for war supplies and American Aid. Way to go, bud.] Why don’t we stop building bigger and better warplanes to the tune of billions of dollars? [The most current one is in danger of never coming to fruition, yet SOMEONE is getting rich on the American dollar]. And stop building embassies in other countries to the tune of billions of dollars? Obama was supposed to be DIFFERENT from the previous presidents who watched these types of frivolous expenditures occur! Why doesn’t President Obama stand up in front of the American People and call out the government officials who are causing the CURRENT spending problems? Notice – I said CURRENT. I am tired of obsessing over what has come before that was done very wrong. I want to focus on NOW.
    Any answers forthcoming?
    And do please correct me about my understanding of the sequester. There is much out there contradictory.

    • charleo1

      In answer to your question of why President Obama doesn’t stand before the American
      public, and call out the officials who are causing the current spending problems. I think
      he has. The spending problem is the 85 billion that will be cut across the board in the
      least effective way. The spending problem is, the elected officials in the House of Non-
      Representatives, that are hell bent to cause another recession, by pulling money out
      of a demand weak economy, that will cost an estimated 750,000 jobs over the next 7
      months. And, they are doing this because, A, they’re too stupid to learn basic economics?
      Or, B, are they doing this because they are too stupid to listen to the American People?
      Actually, it doesn’t matter. Because if they couldn’t F. something up now, they will get
      another chance to F it up next month, where they are planning to subject the Country
      to another round of their particular brand of stupidity, by threatening to shut down the
      government, again! And, if by some miracle, that don’t F up second quarter profits. There’s
      always the debt ceiling to hold over the heads of rich, and poor alike, Again! That last time
      cost the economy 18 billion in lost sales, and potential investment. Not bad for a bunch of
      hicks, just getting started, as it were.

    • Don’t be fooled by the ‘its only 2%’ of the total Federal Budget narrative. The cuts are not being spread out over the entire budget at a flat 2% for all programs. If that was the case this would be a different story. First off you have to take into consideration the Fed Budget consists of three parts. Mandatory spending is approx 56%, Discretionary spending is approx 38%, and the third is Debt interest spending at 6% of the total Fed Budget. The sequestion, with a very small exception, is coming from the Discretionary portion of the budget. Take note that a full 53% of the Discretionary budget is the Pentagon’s. Portions of the military budget will have cuts of up to 13% and the rest of the programs in Discretionary spending up to 7%. That includes science, labor, transporation, veterans benefits, education, energy/environment, food/agriculture, some health spending and international affairs. All but the military are already in single digits as a portion of spending. The cuts are deep for many and real pain will be the result…over time. I hope this information is helpful.

      • Inthenameofliberty

        Interesting to know. But then I ask – since our budget is 1.6 trillion a year (give or take) and that is roughly 999,999 billion dollars X a factor of 2 (of course, a bit less) then who in our government has decided that the cuts to the tune of a ‘mere’ 85 billion (yes, 85 out of 999,999 times roughly a factor of 2, to be VERY simplistic) is coming out of the people who it will hurt the most? Does it ever bother you that our country needs to borrow 40 cents out of every dollar just to survive? Forget Bush for a moment. Let’s just look at the fact that NO president wants to cut the spending. Democrats tell me that Clinton had a surplus, Republicans say he raided Social Security so he could look good – the truth lies somewhere in the middle. So if all of our most recent presidents think that spending out of control is the answer – who is going to stop them? The cuts HAVE to be deep. The cuts HAVE to hurt because the madness must stop. WAR MUST STOP. Our CURRENT government wants to create 6 drone sites on US SOIL!! Seriously – are you up in arms about the BILLIONS that will be spent on that? What are we thinking as a country? Military spending is utterly over the top – do you not agree? Are you ok with our current administration? The cost to build 1 drone when googled on the internet is 12.5 MILLION dollars – and they want to build and fly them here and continue to fly them overseas! We can’t feed our hungry and THAT is what the government wants to spend money on?! To what end, flying these machines in the USA? To WHAT END? The internet sites tell me that the USA has 7,00o of these things (So let’s do the math, shall we: 87,500,000,000 !!!!) and that the fiscal year 2012 budget included nearly $5 billion for drone research, development and procurement. Riddle me this – still feeling all warm and fuzzy about the folks in charge? And let’s not forget the other BILLIONS of dollars you can research on the net that have been spent in developing other flying weapons that are still currently useless because the fighter planes still are in development / can’t be flown due to mechanical flaws and failures.
        We are a VERY sad and out of touch country. And the fact that we are tolerating the last 20 years of being robbed of wealth by a government and military industrial complex hell-bent at keeping us at war…..well, I am not sure that we will wake up before it is too late.

        Oh, and please correct me if my zeros were not correct with my math. I am so incensed right now at the tactics of those we elected into office………..

        • The latest figure from the CBO that I seen states that in 2013 the amount needed borrowing is .24 cents for each dollar. The amount has been going down each year with little or no help from Congress. The President is not in charge of raising revenue or the spending of that revenue. It is spelled out in the Constitution that the power of the purse is with Congress. It would be nice if they would start to work for the good of the country instead of the various parties.

          • Inthenameofliberty

            I can not argue with the last point. You are correct.
            But – if we stop the ‘drone wars’, we could pay for the sequester.
            Our president has the power to step on toes and sway the people in that direction.
            Yet, none of them [the past presidents] do.
            What do they know that we don’t know?

        • I have found no proof that Clinton raided SS but I found proof that Bush 2 raided it at least twice and then used it as colleral( spellcheck still not working) when he borrowed money from China to fund his two unfinanced wars. There was an article written in the Baltimore Sun and a book written by a man whose last name was Thomas, (lost his first name and name of book when my computercrashed and died last yr.) in middle of 2006 reporting that Bush had taken money from SS two times that they could prove and it could have been possibly more times but they had proof of twice.
          Since they had proof of Bush 2 raiding SS twice, that proof should have been used to arrest Bush 2 for theft from the fund. Bush Sr working with Tip O’Neil in 1990 got Congress to pass a law that said SS funds could be used only for Social Security and to do otherwise was theft and a theft punishable by jail. Reagan had taken SS funds out of it’s own bank account and put it in the general funds accounts to make it look like his trickle down economic was working better than it was when he was President. Bush Sr returned SS back to it’s own bank account in 1990 then he and Tip O’Neil got working together the law passed in Congress and Bush 1 signed it into law.. If the law was repealed or changed in any way, there is nothing about it on the internet that I can find and nor have I a found a repeal in any book in my local public library.

          • Inthenameofliberty

            Interesting points. I have been reading quite a bit on many websites. Politicians sure know how to make things look good. Check out Politifact – interesting stuff there, too. They say Clinton paying down the debt is only half true. You’ll have to read the explanation – it is way too complex. A really nifty blurb about factcheck comes up on quaap when you google the question about the Clinton surplus.

            All of it seems to stem from the point that the politicians did not consider a debt to itself to be included – that there is a difference between public debt and intra-government debt.

            That’s splitting hairs, if you ask me. If the government owes a debt to itself, why is that taken out of contention?????

    • nanc35

      A very good point. I, too, was dismayed when I read that Kerry had just made that pledge. So why isn’t the GOP demanding these kind of cuts that truly will cause no direct harm to our own people? Is it because their austerity demands are a screen for another agenda entirely?

      • Inthenameofliberty

        I don’t know. What I do know is that I am sick and tired of most of them, and how they cause people like you and me to pit ourselves against each other, with both of us believing that we are the right one, the other is at fault.
        I am so very tired of all of it.

    • ralphkr

      Well, Inthenameofliberty, we must keep on giving tanks & other war materials to countries to maintain our position as the greatest weapons merchant of all time and, much more importantly, keep the cash flowing to the military contractors who do such a great job getting the politicians re-elected.

      Why will the sequester hurt the people we know? Because the Feds and every other level of government instinctively know how best to handle cutbacks in spending. They understand that it is best to make the cuts where people shall see them and be most bothered by such cuts such as by cutting back libraries, schools, firefighters, EMTs, mass transit, parks, maintenance of public space. That is why the Feds are cutting air traffic controllers, terminal security personnel (must space flights further apart thereby fewer flights and make the wait to clear security at least 3 hours), closing national parks/monuments X days a week, cutting back clerks so it takes much longer to get a passport, Social Security, Medicare… You get the idea. By the way, you did not mention the hundreds of military bases we have all over the world that serve no purpose other than to make the local people hate America (of course, they shall hate us even more if we close the base and their business goes bankrupt).

      The major damage to the economy shall be from the comparatively small potato cuts (small compared to military largess) to meals on wheels, school, health care, and other programs that directly impinge upon the poorer segment of our population.

      • Inthenameofliberty

        A million likes.

    • Sand_Cat

      Can’t disagree with most of what you said, except – believe it or not – foreign aid is a tiny part of the budget, almost as small as your post says the sequester is (I’m not disputing your figure; I don’t know the details about the sequester). Cutting it altogether wouldn’t amount to much savings, and it might actually further harm our oversees interests. Don’t know if they manage to smuggle the military aid to often undeserving – even criminal – regimes into some other part of the budget, but that part should definitely be cut.

  • docb

    Republicans but HUMANITY LAST and have for decades…62% DISAPPROVALS and rising for the repub baggers..Not a pretty future in store for them..They are catching HELL in their districts…but you can call them yourselves..Small twisted republican minds and perverted non-existent humanity..if any from the right!

    If it were their 3% that was being cut they would be squealing like stuck hogs..not that they are not trying to blame the President for their BLACKMAIL on the debt ceiling and threat of gov’t shutdown !

    No wonder the Gop DISAPPROVALS ARE AT 62% and rising!

  • clarenceswinney

    We must rebuild the middle class with decent paying jobs.
    We needed more public investment not less.
    The debt ration declines when the economy recovers.
    Wall Street and the top 1% have had a big recovery but not wages and jobs.
    Sequester or fiscal contraction slows recovery.
    We need public investment to use education and infrastructure to rebuild our middle class.
    Government agencies are delaying spending in fear of the single fiscal year sequester cuts in budgets.
    The Defense Department deferred spending by 22% in the last quarter of 2012.
    Jobs-Decent Wage=economic growth

  • I Am not a politicion,but our congress in both parties are out of touch with reality.Any body thaths a congress or house member AND MORE THAN 4 YEARS IN POWER HAS TO GET VOTED OUT,PERIOD;’! Most of them are capitalists and have no idea how to run a business.Unemploiment is a result of sucsesfull greedy people that have forgoten that hoo got them there are workers that helped make hisor her fortune. I Have to sae ,it borders at stupidity not to employ people to repair the infrastructur ,tey would be paying taxes instad colecting unemployment com.How ignorant can you be not to enderstand this consept oh I Am SORRY I FORGAT THEY ARE OUR GONGRESS OF BOTH PARTIES OR IN GENERAL , WITH THE EXEPTION OF THE PRESIDEN HE DOING A GREAT JOB ! But what can you do when you have to deal whith ignorant people.