Dan Mitchell ”President Franklin Roosevelt’s economic policies in the 1930s were misguided!”

Harding vs. FDR

I’ve written about President Warren Harding’s under-appreciated economic policies.

He restored economic prosperity in the 1920sby slashing tax rates and reducing the burden of government spending.

I’ve also written many times about how President Franklin Roosevelt’s economic policies in the 1930s were misguided.

And that’s being charitable. For all intents and purposes, he doubled down on the bad policies of Herbert Hoover. As a result, what should have been a typical recession wound up becoming the Great Depression.

But I’ve never directly compared Harding and FDR.

Ryan Walters, who teaches history to students at Collins College, has undertaken that task. In a piece for the Foundation for Economic Education, he explains how Harding and Roosevelt took opposite paths when facing similar situations.

Both men came into office with an economy in tatters and both men instituted ambitious agendas to correct the respective downturns.Yet their policies were the polar opposite of one another and, as a result, had the opposite effect. In short, Harding used laissez faire-style capitalism and the economy boomed; FDR intervened and things went from bad to worse. …Unlike FDR, who was no better than a “C” student in economics at Harvard, Harding understood that the old method of laissez faire was the best prescription for a sick economy.

Here’s some of what he wrote about Harding’s successful policies.

America in 1920, the year Harding was elected, fell into a serious economic slide called by some “the forgotten depression.” …The depression lasted about 18 months, from January 1920 to July 1921. During that time, the conditions for average Americans steadily deteriorated. Industrial production fell by a third, stocks dropped nearly 50 percent, corporate profits were down more than 90 percent.Unemployment rose from 4 percent to 12, putting nearly 5 million Americans out of work. …Harding campaigned on exactly what he wanted to do for the economy – retrenchment. He would slash taxes, cut government spending, and roll back the progressive tide. …Under Harding and his successor, Calvin Coolidge, and with the leadership of Andrew Mellon at Treasury, taxes were slashed from more than 70 percent to 25 percent. Government spending was cut in half. Regulations were reduced. The result was an economic boom. Growth averaged 7 percent per year, unemployment fell to less than 2 percent, and revenue to the government increased, generating a budget surplus every year, enough to reduce the national debt by a third. Wages rose for every class of American worker.

And here’s what happened under FDR.

Basically the opposite path, with horrible consequences.

FDR certainly inherited a bad economy, like Harding, yet he made it worse, not better, prolonging it for nearly a decade. With the stock market crash in October 1929, the American economy slid into a steep recession, which Herbert Hoover…proceeded to make worse by intervening with activist government policies – increased spending, reversing the Harding-Coolidge tax cuts, and imposing the Smoot-Hawley tariff. …once in office FDR set in motion a massive government economic intervention called the New Deal. …under FDR taxes were tripled and new taxes, like Social Security, were added, taking more money out of the pockets of ordinary Americans and businesses alike. Between 1933 and 1936, FDR’s first term, government expenditures rose by more than 83 percent. Federal debt skyrocketed by 73 percent. In all, spending shot up from $4.5 billion in 1933 to $9.4 billion in 1940. …The results were disastrous. …Unemployment under Roosevelt averaged a little more than 17 percent and never fell below 14 percent at any time. And, to make matters worse, there was a second crash in 1937. From August 1937 to March 1938, the stock market fell 50 percent.

At the risk of understatement, amen, amen, and amen.

Sadly, very few people understand this economic history.

This is mostly because they get spoon fed inaccurate information in their history classes and now think that laissez-faire capitalism somehow failed in the 1930s.

And they know nothing about what happened under Harding.

P.S. What happened in the 1920s and 1930s also is very instructive when thinking about the growth-vs-equality debate.

P.P.S. Shifting back to people not learning history (or learning bad history), it would be helpful if there was more understanding of how supporters of Keynesian economics were completely wrong about what happened after World War II.

Which Presidents Are Right about Government, George Washington and Thomas Jefferson or Woodrow Wilson and Barack Obama?

When I was became interested in public policy, I thought Jimmy Carter was the epitome of a bad President. But as I began to learn economics, I realized that Richard Nixon and Lyndon Johnson also were terrible and belong in the Hall of Fame of bad Presidents.

Presidential Hall of ShameAnd the more I studied economics and public policy, I learned that Herbert Hoover and Franklin Roosevelt were two peas in a failed big-government pod and deserve membership in that Hall of Fame.

Or I guess we should call it a Hall of Shame (you can click on the image to see my selections).

Whatever we call it, I’m now at the point where I realize that Woodrow Wilson and Teddy Roosevelt are the charter members. Why? Well, because they were the first Presidents to reflect the progressive ideology.

More specifically, they shared the ideology of the progressive movement, which saw a powerful and activist central government as a force for good – a radical departure from the views of America’s Founding Fathers, who hoped that the Constitution would protect people by keeping government very small.

Not surprisingly, Barack Obama is in that “progressive” tradition, even to the point of attacking the views of the Founding Fathers in a recent speech at Ohio State University.

I commented on this issue in this Fox News segment.

That short clip only scratches the surface.

For more detail, here are some excerpts from a column by Andrew Napolitano. Like me, he isn’t impressed by the President’s statolatry.

It should come as no surprise that President Obama told Ohio State students at graduation ceremonies last week that they should not question authority… And he blasted those who incessantly warn of government tyranny. Yet, mistrust of government is as old as America itself. America was born out of mistrust of government. …Thomas Jefferson…warned that it is the nature of government over time to increase and of liberty to decrease. And that’s why we should not trust government. In the same era, James Madison himself agreed when he wrote, “All men having power should be distrusted to a certain degree.” …The reason Obama likes government and the reason it is “a dangerous fire,” as George Washington warned, and the reason I have been warning against government tyranny in my public work is all the same: The government rejects the natural law because it is an obstacle to its control over us. …Because the tyranny of the majority can be as dangerous to freedom as the tyranny of a madman, all use of governmental power should be challenged and questioned. Government is essentially the negation of liberty.

Napolitano also warns against majoritarianism in his column, which is music to my ears.

Though I’m not sure our battle today is with majoritarianism or the progressive ideology.

Our real challenge is redistributionism. Far too many people think it is okay to use the coercive power of government to obtain unearned benefits. And that’s true whether the benefits are food stamps or bailouts.

Welfare State Wagon CartoonsAnd as we travel farther and farther down this path, it leads to ever-greater levels of dependency and ever-higher levels of taxation. But that simply means more people decide it makes more sense to ride in the wagon rather than pull the wagon.

Somehow, we have to reverse this downward spiral.

Unless we want America to become Greece or France, at which point productive people may be forced to emigrate – assuming there are still some sensible nations left in the world.

Crimes and Misdemeanors (1989)
Crimes and Misdemeanors (1989)

Roger Ebert called this flick one of Allen’s best. The director, pictured with cinematographer Sven Nykvist on set, was nominated for three Academy Awards, including best director and writing. “Who else but Woody Allen could make a movie in which virtue is punished, evildoing is rewarded and there is a lot of laughter – even subversive laughter at the most shocking times?” wrote the famous reviewer.

_____________

The founding fathers believed that it benefitted the government for it’s leaders to believe in God and with that would come the view that evil will be punished and good will be rewarded in the afterlife. John Quincy Adams said: There are three points of doctrine the belief of which forms the foundation of all morality. The first is the existence of God; the second is the immortality of the human soul; and the third is a future state of rewards and punishments. Suppose it possible for a man to disbelieve either of these three articles of faith and that man will have no conscience,

This point of view is not held by many today. I noticed in Woody Allen’s film “Crimes and Misdemeanors” you can see how Allen’s agnostic worldview permits him to allow the lead character to have his mistress killed when she threatens to call the cops. Judah noted, “God is a luxery I can not afford.” Earlier in the film Judah is terrified when he thinks there is a living God that will punish him in an afterlife, but only after he convinces himself there is no God is he at peace with his decision to have this troublesome lady killed. Check out this movie on Netflix and you will see what I mean about this potential moral problem that atheists can not answer. (I have looked this question many times in my previous posts.)

David Barton is a Christian historian and he has quoted many of the founders concerning their views of the afterlife and how their views impact what is done while leading the nation:

James Iredell, a ratifier of the Constitution and a U. S. Supreme Court justice appointed by George Washington, also confirmed:

According to the modern definition [1788] of an oath, it is considered a “solemn appeal to the Supreme Being for the truth of what is said by a person who believes in the existence of a Supreme Being and in a future state of rewards and punishments according to that form which would bind his conscience most.” 9

David Barton noted in his article, “Importance of Morality and Religion in Government,”:

01/2000

John Quincy Adams

Sixth President of the United States

There are three points of doctrine the belief of which forms the foundation of all morality. The first is the existence of God; the second is the immortality of the human soul; and the third is a future state of rewards and punishments. Suppose it possible for a man to disbelieve either of these three articles of faith and that man will have no conscience, he will have no other law than that of the tiger or the shark. The laws of man may bind him in chains or may put him to death, but they never can make him wise, virtuous, or happy.

(Source: John Quincy Adams, Letters of John Quincy Adams to His Son on the Bible and Its Teachings (Auburn: James M. Alden, 1850), pp. 22-23.)

Charles Carroll of Carrollton

Signer of the Declaration of Independence

Without morals a republic cannot subsist any length of time; they therefore who are decrying the Christian religion, whose morality is so sublime & pure, [and] which denounces against the wicked eternal misery, and [which] insured to the good eternal happiness, are undermining the solid foundation of morals, the best security for the duration of free governments.

(Source: Bernard C. Steiner, The Life and Correspondence of James McHenry (Cleveland: The Burrows Brothers, 1907), p. 475. In a letter from Charles Carroll to James McHenry of November 4, 1800.)

James McHenry

Signer of the Constitution

[P]ublic utility pleads most forcibly for the general distribution of the Holy Scriptures. The doctrine they preach, the obligations they impose, the punishment they threaten, the rewards they promise, the stamp and image of divinity they bear, which produces a conviction of their truths, can alone secure to society, order and peace, and to our courts of justice and constitutions of government, purity, stability and usefulness. In vain, without the Bible, we increase penal laws and draw entrenchments around our institutions. Bibles are strong entrenchments. Where they abound, men cannot pursue wicked courses, and at the same time enjoy quiet conscience.

(Source: Bernard C. Steiner, One Hundred and Ten Years of Bible Society Work in Maryland, 1810-1920 (Maryland Bible Society, 1921), p. 14.)

Benjamin Rush

Signer of the Declaration of Independence

Remember that national crimes require national punishments, and without declaring what punishment awaits this evil, you may venture to assure them that it cannot pass with impunity, unless God shall cease to be just or merciful.

(Source: Benjamin Rush, An Address to the Inhabitants of the British Settlements in America Upon Slave-Keeping (Boston: John Boyles, 1773), p. 30.)

Joseph Story

Supreme Court Justice

Indeed, the right of a society or government to [participate] in matters of religion will hardly be contested by any persons who believe that piety, religion, and morality are intimately connected with the well being of the state and indispensable to the administrations of civil justice. The promulgation of the great doctrines of religion—the being, and attributes, and providence of one Almighty God; the responsibility to Him for all our actions, founded upon moral accountability; a future state of rewards and punishments; the cultivation of all the personal, social, and benevolent virtues—these never can be a matter of indifference in any well-ordered community. It is, indeed, difficult to conceive how any civilized society can well exist without them.

(Source: Joseph Story, A Familiar Exposition of the Constitution of the United States (New York: Harper & Brothers, 1847), p. 260, §442.)

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