Results tagged “FDR” from The Morning After

As more jobs are cut, more companies' profits decrease and more dreams are delayed, the American people demand to know: Why is all of this happening? What piece of the economy broke and has lightened our wallets and weighted our shoulders?

Too often, free-market capitalism has been the scapegoat of choice. President Barack Obama espoused this view in his inaugural address: "This crisis has reminded us that without a watchful eye, the market can spin out of control." Blogger Arianna Huffington declares it "time to drive the final nail into the coffin of laissez-faire capitalism."

But if we put hammer to nail as Huffington and surely others would like, if we let history show that capitalism was incurably ill and needed to die, we risk repeating history yet again as the real culprit -- government intervention in the economy -- skates by. 

You see, all this has happened before. There was a time in this nation's past when the going got really tough. Jobs weren't cut, they were slashed. Profits didn't decrease, they plunged. Dreams weren't delayed, they were crushed. Nothing in peace time has ever afflicted as many Americans as much as the Great Depression. Who was to blame then?

President Herbert Hoover and his laissez-faire policies were at fault. Hoover's failure ran so deep that it took his successor nearly a decade to sort it all out. Or so goes the story, as told by historians who surely were influenced by the Huffingtons of the time.

But Hoover was lucky if he knew how to pronounce "laissez-faire." Unemployment in 1930 was 8.9 percent. It skyrocketed from there to 25 percent by 1933, the year of President Franklin D. Roosevelt's inauguration. And what did Hoover do in that time? He certainly didn't keep his hands off the economy.

First and most notoriously, there was the Smoot-Hawley tariff in June 1930, a piece of legislation referred to by some as the most protectionist in national history. The act strangled international trade and was so vast in scope that even clocks and sauerkraut were not safe from the government's outstretched fist. This incited a tariff war with America's trading partners. Then with the Revenue Act of 1932, Hoover jacked taxes up through the roof for the top bracket from 24 percent to 63 percent (a number FDR would raise at one point to 95 percent).

Hoover's interventionist policies didn't expire with his presidency. FDR, although initially accusing his predecessor of steering the U.S. toward socialism, continued his policies and thus the Depression until the next decade. "We didn't admit it at the time," confessed FDR advisor Rexford Guy Tugwell decades later, "but practically the whole New Deal was extrapolated from programs that Hoover started."

Now historians are poised to credit former president George W. Bush too with the legacy of a staunch free market proponent, despite his astronomical spending on the economic stimulus plan, the bailout of the financial industry and more.

But from Toledo, Ohio's 1933 unemployment rate of 80 percent to the 425-person layoff at the Springettsbury Twp. Harley-Davidson plant last week, it's not too little government interference that has, does and will hurt the economy -- it's too much.

We've all heard the comparisons between John McCain and George W. Bush. "McBush." "McSame." "Bush 44." The list goes on. And despite key differences in opinion on government spending--McCain has vowed to veto all bills with earmarks--the senator's voting record in consistent alignment with the president makes the charge difficult to refute. (Besides, the short lifespan of campaign promises is no secret to voters.)

So if McCain will be Bush's third term, for which president does Barack Obama serve as a reincarnation? His supporters tend to point to JFK, citing the youth, the oratorical prowess and the ability to inspire with which both are credited. But those hoping for an Obama loss may suggest Jimmy Carter, whose perceived failures domestically and abroad led to an abysmal reelection attempt in which the incumbent only pocketed six states plus Washington, D.C. But another possible answer to this question, one most Americans should fear, would probably be mistaken by most for a compliment: the ill-revered Franklin Delano Roosevelt.

The 32^nd president's legacy among historians and the public alike stretches beyond impressive; neither senator in this race dare even dream of earning posthumous accolades akin to those Roosevelt earned, ranging from his likeness on a US coin to a Gallup poll naming him the sixth most admired person from the 20^th century. He won four elections by vast electoral margins, never yielding even 100 electoral votes to his opposition.

And yet the late president is the man responsible for the prolonging of one of the most formidable tragedies ever to hit the nation. Worse than the Vietnam War, worse than 9-11 and perhaps even worse than the Civil War, Roosevelt's greatest accomplishment--not in terms of virtuosity but rather in scale and depth--is turning the spark of the 1929 market crash and ensuing economic crisis into the inferno of the Great Depression.

No, Roosevelt didn't "fix" the Depression. In continuing the interference-based policies of President Hoover, whom Roosevelt handily defeated in 1932, FDR fostered the Depression's ongoing existence for a decade. His administration's antics were numerous and nearly uncontested by his yes-Congress. For years, one man functionally made up two-thirds of the federal government.

Unfortunately, he ignored how the market works. Roosevelt's schemes included ordering reduced production to raise prices in banking and agriculture (under the Agricultural Adjustment Act of 1933), giving the government the legal right to "confiscate"/steal privately owned gold (essentially a tax), a slew of regulations put in place by big businessmen hoping to squelch competition (under the National Industry Recovery Act of 1933) and a laundry list of other such acts.

Any serious student of the economy knows that nothing is healthier than high production, low taxes--keeping money in the people's pockets--and high competition. It should come as no surprise that, under policies in direct contradiction with the logical laissez-faire capitalism on which this country was founded, FDR managed to make a career out of "fixing" the economic crisis that he inherited, nurtured and grew.

So where does Obama fit in? Like Roosevelt did, he is poised to inherit an ailing economy. Like Roosevelt did, he is attempting to capitalize on voters' emptying pockets with promises of government handouts and redistribution of wealth (his $1,000 stimulus plan, his health care plan, his proposal for increased taxes on the rich).

And most gravely, like Roosevelt, his every response to economic disparity is more government interference. He wants to increase key taxes, most notably on capital gains, which will undoubtedly lead to significant decreases in investments--the worms hiding in that can are too numerous to count. He wants to enact a list of measures using the government's fist to give workers unfair advantages over their employers. He wants to enact measures stressing "fair trade" rather than free trade. Translation? Loads of economy-crippling government interference.

Come January, McCain or Obama may not be the next Bush or Roosevelt, respectively. But the stakes in this race are as high as ever. In the voting booth this fall, Americans need to know the severity of the threat and that not even our country, with its vast economy, is fully protected against another depression of untold proportions.