If there is to be a war on drugs, government funding of education and health care, government welfare programs, government grants and subsidies, discrimination laws, gambling laws, and a minimum wage, then these things must be instituted at the state level. This, of course, does not mean that they are desirable, and, in fact, all of them are antithetical to the principles of liberty, even at the state level.
With the coming of the COVID- 19 pandemic in 2020, the 50 states reasserted themselves as problem solvers, but not in a good way. Governors, mayors, county commissioners, and city councilmen enacted draconian lockdowns, quarantines, face mask requirements, the closure of “unessential” businesses, bans on indoor dining, the closing of schools, stay-at-home orders, contract tracing, curfews, capacity limits on stores and restaurants, the canceling of concerts and sporting events, social distancing requirements, prohibitions on weddings and funerals, vaccine mandates, and the closure of bars, churches, theaters, amusement parks, and casinos.
Compared to the actions of the states, the federal government’s role at the beginning of the pandemic almost seems benign. The federal government initially did what it does best: hand out money. The Coronavirus Aid, Relief, and Economic Security (CARES) Act gave $1,200 to each adult, plus an additional rebate of $500 per qualifying child. The Tax Relief Act gave every adult $600, plus another $600 per qualifying child. The third COVID-19 stimulus package passed by the U.S. Congress was the American Rescue Plan Act (ARPA). It provided adults with a maximum “recovery rebate” of $1,400 per eligible individual, plus an additional $1,400 per qualifying child.
But, of course, the federal government did not stop there. President Biden repeatedly promised on the campaign trail that he was going to “shut down the virus.” Soon after Biden took office, on January 29, 2021, the Centers for Disease Control and Prevention (CDC) instituted a face mask mandate for all people while on public transportation (airplanes, trains, subways, buses, taxis, ride-shares, maritime transportation, trolleys, cable cars) or at transportation hubs (commercial airports, bus terminals, commercial vessel terminals, train and subway stations, seaports, U.S. ports of entry, dedicated ride-share pick-up locations).
Throughout 2021, the federal government did everything it could to promote and mandate the COVID-19 vaccine. Biden’s “Path out of the Pandemic,” issued on September 9, maintained that his administration would “continue to use every tool necessary to protect the American people from COVID-19.” Additional actions were announced in December “to combat COVID- 19 as the United States headed into the winter months.
Biden’s statements
But then Biden made two brief statements that seemed to negate everything that the federal government was doing. In late December, Biden spoke with state governors on a call regarding potential strategies to manage the continued impact of COVID-19. After White House COVID coordinator Jeff Zients cleared the press from the room, Biden took questions from several governors. Arkansas governor Asa Hutchinson, a Republican, chairman of the National Governors Association, spoke about challenges his state was experiencing in responding to the pandemic: “And so one word of concern or encouragement for your team is that as you look towards federal solutions that will help alleviate the challenge, make sure that we do not let federal solutions stand in the way of state solutions.” Biden then surprisingly said that “there is no federal solution” to the COVID-19 pandemic and declared that it “gets solved at the state level,” before he boarded a helicopter and departed for his home state of Delaware.
During the 1920s, the emerging individualists and libertarians — the Menckens, the Nocks, the Villards, and their followers — were generally considered Men of the Left; like the Left generally, they bitterly opposed the emergence of Big Government in twentieth-century America, a government allied with Big Business in a network of special privilege, a government dictating the personal drinking habits of the citizenry and repressing civil liberties, a government that had enlisted as a junior partner to British imperialism to push around nations across the globe. The individualists were opposed to this burgeoning of State monopoly, opposed to imperialism and militarism and foreign wars, opposed to the Western-imposed Versailles Treaty and League of Nations, and they were generally allied with socialists and progressives in this opposition.
All this changed, and changed drastically, however, with the advent of the New Deal. For the individualists saw the New Deal quite clearly as merely the logical extension of Hooverism and World War I: as the imposition of a fascistic government upon the economy and society, with a Bigness far worse than Theodore Roosevelt (“Roosevelt I” in Mencken’s label) or Wilson or Hoover had ever been able to achieve. The New Deal, with its burgeoning corporate state, run by Big Business and Big Unions as its junior partner, allied with corporate liberal intellectuals and using welfarist rhetoric, was perceived by these libertarians as fascism come to America. And so their astonishment and bitterness were great when they discovered that their former, and supposedly knowledgeable, allies, the socialists and progressives, instead of joining in with this insight, had rushed to embrace and even deify the New Deal, and to form its vanguard of intellectual apologists. This embrace by the Left was rapidly made unanimous when the Communist Party and its allies joined the parade with the advent of the Popular Front in 1935. And the younger generation of intellectuals, many of whom had been followers of Mencken and Villard, cast aside their individualism to join the “working class” and to take their part as Brain Trusters and planners of the seemingly new Utopia taking shape in America. The spirit of technocratic dictation over the American citizen was best expressed in the famous poem of Rex Tugwell, whose words were to be engraved in horror on all “right-wing” hearts throughout the country:
I have gathered my tools and my charts,
My plans are finished and practical.
I shall roll up my sleeves — make America over.
Only the few laissez-faire liberals saw the direct filiation between Hoover’s cartelist program and the fascistic cartelization imposed by the New Deal’s NRA and AAA, and few realized that the origin of these programs was specifically such Big Business collectivist plans as the famous Swope Plan, spawned by Gerard Swope, head of General Electric in late 1931, and adopted by most big business groups in the following year. It was, in fact, when Hoover refused to go this far, denouncing the plan as “fascism” even though he had himself been tending in that direction for years, that Henry I. Harriman, head of the US Chamber of Commerce, warned Hoover that Big Business would throw its weight to Roosevelt, who had agreed to enact the plan, and indeed was to carry out his agreement. Swope himself, Harriman, and their powerful mentor, the financier Bernard M. Baruch, were indeed heavily involved both in drafting and administering the NRA and AAA.1
What did the elites gathered around FDR demand? Higher prices (of course), uniform industrial codes on labor and prices, production controls, an end to competition from below, security for labor unions, guaranteed credits, import tariffs — and also the police power they needed to enforce all this. The model here was Mussolini’s Italy, which was regarded at the time as an ideal system of industrial management. Of course, antitrust laws were shelved as the government itself set out to create as many trusts as possible.
The ghost of FDR is everywhere, haunting both Washington and New York. The terrible trouble is that the minds in power have confused an economic wrecker with an angel of mercy. They are following his confusions and prescriptions day to day in an attempted repeat of the longest economic calamity in modern American history.
They have looked at the history of the New Deal and completely misunderstood it, believing the civics-book claptrap about how FDR saved us from the Depression, whereas the fact is that FDR’s theories and policies lengthened and deepened it to the point that the only way out that the Roosevelt administration saw was war.
The great theoretical error of the New Dealers was to confuse the symptom of low prices with the causes of the economic downturn. The real problem was that prices were massively inflated before the stock-market crash of 1929. The correction had to occur and would have occurred peacefully, if not wholly painlessly, had the government not intervened.
No government in all of human history that has waged war on prices has won.
The Great Depression is exhibit A.
First there was Hoover with his attack on the “bitter-end liquidationists,” whose advice he summarily rejected. Instead he increased taxes, regulated against short selling, attempted to expand liquidity and the money supply, attempted to maintain existing wage rates, extended loans via government, and bailed out debtors with bankruptcy laws. For more on Hoover’s antimarket program, see Rothbard’s America’s Great Depression.
Roosevelt took office and extended this program, while rhetorically claiming that it was the free-market policy of the Hoover administration that failed. Today we see Bush’s attack on speculators and the mediawide attempt to claim that the meltdown is caused by unregulated markets run amok. No doubt the next president, whoever he may be, will continue this crusade against markets, pretending as if the Fed and the Bush administration haven’t been trying antimarket means of rescue for fully two years, with each attempt backfiring.
But now let’s look forward to the next step in the war on falling prices in the 1930s. FDR took office under the promise that he would curb the big spending of the Hoover administration. The tune changed once he took office. Like Hoover before him, he denounced the rich and powerful speculators, bankers, and corporations he blamed for bad economic times. Even as he was saying these things, he called together the people he regarded as the most powerful and important corporate, banking, and labor interests — together with a gaggle of professors from Columbia — and essentially asked them what they wanted to get the economy going again.
This was the Brain Trust that set the pattern for all of Washington’s activities from then to the present day. John T. Flynn, in his masterful book The Roosevelt Myth, described the first round of the New Deal as
that vast hippodrome, that hectic, whirling, dizzy three-ring circus with the NRA in one ring, the AAA in another, the Relief Act in another, with General Johnson, Henry Wallace and Harry Hopkins popping the whips, while all around under the vast tent a whole drove of clowns and dervishes — the Henry Morgenthaus and Huey Longs and Dr. Townsends and Upton Sinclairs and a host of crackpots of every variety — leaped and danced and tumbled about and shouted in a great harlequinade of government, until the tent came tumbling down upon the heads of the cheering audience and the prancing buffoons.
What did the elites gathered around FDR demand? Higher prices (of course), uniform industrial codes on labor and prices, production controls, an end to competition from below, security for labor unions, guaranteed credits, import tariffs — and also the police power they needed to enforce all this. The model here was Mussolini’s Italy, which was regarded at the time as an ideal system of industrial management. Of course, antitrust laws were shelved as the government itself set out to create as many trusts as possible.
What came out of these meetings was the all-around industrial planning fiasco called the National Industrial Recovery Act, which created the National Recovery Administration. The head was former draft administrator General Hugh Johnson, who brought to the effort every propaganda trick he had learned from his kidnapping years. He began with a central plan of wages, working hours, prices, and production quotas. He went on the air, to the papers, to billboards, movies, and everything else to whip up a frenzy.
There was a symbol of compliance: The Blue Eagle. FDR said on the radio that “soldiers wear a bright badge to be sure that comrades do not fire on comrades. Those who cooperate in this program must know each other at a glance. That bright badge is the Blue Eagle.” And, added Johnson, may “God have mercy on anyone who attempts to trifle with that bird.”
And you know what? It is a complete disgrace that business supported it all — for a while.
Flynn tells of police raids of factories, as workers were lined up and interrogated to make sure that they weren’t working overtime and weren’t accepting less than the government-approved minimum. Consumers were arrested for paying less than the approved minimum prices. A tailor named Jack Magid in New Jersey was arrested and jailed for charging 35 cents instead of 40 cents to press a pair of pants. In time, the NRA became unenforceable, as black markets sprung up in every industry. The crackdown became worse, with nighttime raids on factories, and bureaucrats chopping down doors with axes to make sure that no one was sewing clothes. The NRA staff ballooned from 60 employees to 6,000 at the national level.
The entire thing became a war on production to benefit a handful of elites, all in the name of keeping prices up, all on the profound misunderstanding that boosting prices would boost production, whereas the opposite was true. Finally the Supreme Court came to the rescue and declared the whole Soviet-like scheme unconstitutional, but, by that time, it was clear that it was unworkable and doomed to failure.
At the very same time, other sectors such as banking and agriculture were being administered by other destructive schemes, all based on economic error. The result was fantastic waste, disastrous attacks on freedom and productivity, a regimentation of the entire country under a dictator, and a prolongation of the Depression, which went on and on.
No matter how many disasters FDR created — and it was nonstop — and no matter how much his ridiculous “rabbits from the hat” were exposed as economically harebrained, with every new bureau, every new law, every new initiative, the economy continued to sink.
The New Deal is a paradigmatic case of how to turn a downturn into a depression. That US leaders regard this as a model to follow does not speak very well of their economic literacy, and it doesn’t bode well for our future.
On the other hand, if you want to see how to handle a crisis, consider the Panic of 1819. Never heard of it? That’s because it came and went, and that’s because the government did nothing about it.
Today, no part of the economy is left untouched by the President’s budget and the swarm of regulatory agencies. Buttressed by most of the economics profession, the regulatory state today rules and ruins America. Communism lost, but social democracy won.
The planned economy was all the rage in 1937, when Prentice-Hall published a 1,000-page tome on The Planned Society: Yesterday, Today, Tomorrow: A Symposium by Thirty-Five Economists, Sociologists, and Statesmen. The “question that confronts us today is not if we shall plan, but how we shall plan,” wrote Lewis Mumford in the Foreword. All the contributors—Keynesian, socialist, communist, and fascist—agreed with that point, including such luminaries as Sidney Hook, Benito Mussolini, and Joseph Stalin.
But the book was honest. It linked Stalin and Keynes, fascism and the New Deal. The plans were not identical, of course, but all agreed on government “rationality” as versus the “chaos” of the free market.
Most of the authors advocated the “mixed economy,” Mises’s name for an admixture of capitalism and socialism. Such a combination, he showed, is necessarily unstable, and our own mixed economy is tilting towards statism, with such regulatory disasters in the last few years as the Clean Air Act, the Americans With Disabilities Act, and the Civil Rights Act.
Today, no part of the economy is left untouched by the President’s budget and the swarm of regulatory agencies. Buttressed by most of the economics profession, the regulatory state today rules and ruins America. Communism lost, but social democracy won.
In the American mixed economy, it is the job of the planner to: ensure “full employment” (as federal policies create joblessness); encourage technological innovation (not through markets, but through subsidies); ensure a “fair” distribution of wealth (rewarding parasites and punishing the productive); manage international trade (though it needs no more management than domestic trade); and keep “public goods” out of private hands (even though public ownership must always be less efficient than private).
The planner has taboos as well. He must never mention private property, praise the coordinative function of prices, criticize pressure groups unless they’re anti-big-government, be cynical about the uses of power, call for a tax cut, or identify the real source of prosperity as the free market.
Charles Schultze, President Carter’s chairman of the Council of Economic Advisers, adheres to these rules and taboos in his book and “guide to macroeconomics” Memos to the President. He sets out these rules for every policymaker to follow in the future.
In the entire work, he has not one good word to say about the market, private property, or the price system. His central assumption is that the government must manage the economy to prosperity. According to Schultze, we should believe that: the Federal Reserve protects the dollar, when our money has lost 94% of its value since the Fed was established;
A 2013 Inspector General report confirmed that IRS employees had devoted far more scrutiny to nonprofit applications that used the terms “tea party” or “patriot” or that criticized government spending or federal deficits. In 2017, the IRS formally apologized to scores of conservative groups that it had wrongfully targeted in tax audits.
The power to tax has long conferred the power to destroy political opponents. But in the glorious era of President Joe Biden, all previous cases of government abuse of power are being expunged, at least by the media and Biden supporters. That is why it is supposedly safe to vastly increase the power of perhaps the most feared federal agency, the Internal Revenue Service.
After announcing his endless wish list for new federal spending, Biden told Congress last week: “I’ve made clear that we can do it without increasing deficits.” Biden believes he has found a goose that will lay golden eggs for federal revenue — a new army of IRS agents to hound Americans and corporations to pay far more taxes.
But the agency Biden seeks to expand and unleash has an appalling record. As author David Burnham noted in “A Law Unto Itself: The IRS and the Abuse of Power” (1990), “In almost every administration since the IRS’s inception the information and power of the tax agency have been mobilized for explicitly political purposes.”
President Franklin Roosevelt used the IRS to harass newspaper publishers who were opposed to the New Deal, including William Randolph Hearst. FDR also dropped the IRS hammer on political rivals such as the populist firebrand Huey Long and radio agitator Father Coughlin, and prominent Republicans such as former Treasury Secretary Andrew Mellon. President John F. Kennedy spurred the IRS to launch the Ideological Organizations Audit Project, which targeted right-leaning groups, including the Christian Anti-Communist Crusade, the American Enterprise Institute and the Foundation for Economic Education. Nixon Administration officials gave the IRS a list of official enemies to, in the words of presidential assistant John Dean, “use the available federal machinery to screw our political enemies.” Congress enacted legislation to severely restrict political contacts between the White House and the IRS.
But the power of IRS agents continued to increase decade by decade. In 1988, then-Sen. David Pryor, a moderate Democrat from Arkansas, warned that the IRS “operates a near totalitarian system.” Pryor complained that the IRS had encouraged a “bounty-hunter mentality among revenue officers” and called for reforms to assure that the IRS “operates on the basis of public respect rather than fear.” Congress enacted a so-called Taxpayer Bill of Rights but it failed to curb the revenuers.
The Clinton administration, like many of its predecessors, exploited the IRS to punish its political enemies. In 1995, the White House and the Democratic National Committee produced a 331-page report entitled “Communication Stream of Conspiracy Commerce” that attacked magazines, think tanks, and other entities and individuals who had criticized President Bill Clinton. In the subsequent years, many organizations mentioned in the White House report were hit by IRS audits. More than 20 conservative organizations — including the Heritage Foundation and the American Spectator magazine — and almost a dozen individual high-profile Clinton accusers, such as Paula Jones and Gennifer Flowers, were audited. (RELATED: GOP Lawmakers Call On Trump Admin To End Tax Breaks For Abortions)
Members of Congress also routinely exploited their power to send the secret financial police against their enemies. The Associated Press reported in 1999 that “members of both parties in Congress have prompted hundreds of audits of political opponents in the 1990s,” including “personal demands for audits from members of Congress.” Audit requests from congressmen were marked “expedite” or “hot politically” and IRS officials were obliged to respond within 15 days. Because the abuse was bipartisan, there was little enthusiasm on Capitol Hill for an investigation.
In the Obama era, the IRS again became a political hit squad. The IRS demanded donor lists from 24 conservative nonprofits and proceeded to audit 10% of their donors — an audit rate ten times higher than average for the country. A 2013 Inspector General report confirmed that IRS employees had devoted far more scrutiny to nonprofit applications that used the terms “tea party” or “patriot” or that criticized government spending or federal deficits. In 2017, the IRS formally apologized to scores of conservative groups that it had wrongfully targeted in tax audits.
Based on the Regnery Publishing book “The Politically Incorrect Guide to the Great Depression & the New Deal.” Get the book at: https://www.regnery.com/9781596980969… Use promo code PIG50 to receive 50% off any PIG book when you buy “The Politically Incorrect Guide to the Great Depression & the New Deal.” In the second episode of “The Politically Incorrect Guide” Tom Woods & Michael Malice demolish widespread myths about the Great Depression and the New Deal. Tom & Michael explain how the New Deal worsened the very problems it aimed to solve, that capitalism didn’t cause the Great Depression (the Federal Reserve did), and that World War II prolonged rather than ended the Great Depression. The first season of “The Politically Incorrect Guide” includes ten episodes and will release throughout 2021. Each covers the undiscussed facts and stories about history, culture, and social movements, purged from today’s mainstream education system. Tom Woods penned the very first book in the series, “The Politically Incorrect Guide to American History,” which was a New York Times bestseller.
Many volumes have been written about the Great Depression and its impact on the lives of millions of Americans. Historians, economists, and politicians have all combed the wreckage searching for the “black box” that will reveal the cause of this legendary tragedy. Sadly, all too many of them decide to abandon their search, finding it easier perhaps to circulate a host of false and harmful conclusions about the events that caused the Great Depression seven decades ago.
How bad was the Great Depression? Over the four years from 1929 to 1933, production at the nation’s factories, mines, and utilities fell by more than half. People’s real disposable incomes dropped 28 percent. Stock prices collapsed to one-tenth of their pre-crash height. The number of unemployed Americans rose from 1.6 million in 1929 to 12.8 million in 1933. One of every four workers was out of a job at the Depression’s nadir, and ugly rumors of revolt simmered for the first time since the Civil War.
Old myths never die; they just keep showing up in college economics and political science textbooks. Students today are frequently taught that unfettered free enterprise collapsed of its own weight in 1929, paving the way for a decade-long economic depression full of hardship and misery. President Herbert Hoover is presented as an advocate of “hands-off,” or laissez-faire, economic policy, while his successor, Franklin Roosevelt, is the economic savior whose policies brought us recovery. This popular account of the Depression belongs in a book of fairy tales and not in a serious discussion of economic history, as a review of the facts demonstrates.
The Great, Great, Great, Great Depression
To properly understand the events of the time, it is appropriate to view the Great Depression as not one, but four consecutive depressions rolled into one. Professor Hans Sennholz has labeled these four “phases” as follows: the business cycle; the disintegration of the world economy; the New Deal; and the Wagner Act.[1]
The first phase explains why the crash of 1929 happened in the first place; the other three show how government intervention kept the economy in a stupor for over a decade.
Phase I: The Business Cycle
The Great Depression was not the country’s first depression, though it proved to be the longest. The common thread woven through the several earlier debacles was disastrous manipulation of the money supply by government. For various reasons, government policies were adopted that ballooned the quantity of money and credit. A boom resulted, followed later by a painful day of reckoning. None of America’s depressions prior to 1929, however, lasted more than four years and most of them were over in two. The Great Depression lasted for a dozen years because the government compounded its monetary errors with a series of harmful interventions.
Most monetary economists, particularly those of the “Austrian school,” have observed the close relationship between money supply and economic activity. When government inflates the money and credit supply, interest rates at first fall. Businesses invest this “easy money” in new production projects and a boom takes place in capital goods. As the boom matures, business costs rise, interest rates readjust upward, and profits are squeezed. The easy-money effects thus wear off and the monetary authorities, fearing price inflation, slow the growth of or even contract the money supply. In either case, the manipulation is enough to knock out the shaky supports from underneath the economic house of cards.
One of the most thorough and meticulously documented accounts of the Fed’s inflationary actions prior to 1929 is America’s Great Depression by the late Murray Rothbard. Using a broad measure that includes currency, demand and time deposits, and other ingredients, Rothbard estimated that the Federal Reserve expanded the money supply by more than 60 percent from mid-1921 to mid-1929.[2] The flood of easy money drove interest rates down, pushed the stock market to dizzy heights, and gave birth to the “Roaring Twenties.”
By early 1929, the Federal Reserve was taking the punch away from the party. It choked off the money supply, raised interest rates, and for the next three years presided over a money supply that shrank by 30 percent. This deflation following the inflation wrenched the economy from tremendous boom to colossal bust.
The “smart” money—the Bernard Baruchs and the Joseph Kennedys who watched things like money supply—saw that the party was coming to an end before most other Americans did. Baruch actually began selling stocks and buying bonds and gold as early as 1928; Kennedy did likewise, commenting, “only a fool holds out for the top dollar.”[3]
When the masses of investors eventually sensed the change in Fed policy, the stampede was underway. The stock market, after nearly two months of moderate decline, plunged on “Black Thursday”—October 24, 1929—as the pessimistic view of large and knowledgeable investors spread.
The stock market crash was only a symptom—not the cause—of the Great Depression: the market rose and fell in near synchronization with what the Fed was doing.
Phase II: Disintegration of the World Economy
If this crash had been like previous ones, the subsequent hard times might have ended in a year or two. But unprecedented political bungling instead prolonged the misery for twelve long years.
Unemployment in 1930 averaged a mildly recessionary 8.9 percent, up from 3.2 percent in 1929. It shot up rapidly until peaking out at more than 25 percent in 1933. Until March 1933, these were the years of President Herbert Hoover—the man that anti-capitalists depict as a champion of noninterventionist, laissez-faire economics.
Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.”[4] Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.
The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war. Professor Barry Poulson notes that not only were 887 tariffs sharply increased, but the act broadened the list of dutiable commodities to 3,218 items as well.[5]
Officials in the administration and in Congress believed that raising trade barriers would force Americans to buy more goods made at home, which would solve the nagging unemployment problem. They ignored an important principle of international commerce: trade is ultimately a two-way street; if foreigners cannot sell their goods here, then they cannot earn the dollars they need to buy here.
Foreign companies and their workers were flattened by Smoot-Hawley’s steep tariff rates, and foreign governments soon retaliated with trade barriers of their own. With their ability to sell in the American market severely hampered, they curtailed their purchases of American goods. American agriculture was particularly hard hit. With a stroke of the presidential pen, farmers in this country lost nearly a third of their markets. Farm prices plummeted and tens of thousands of farmers went bankrupt. With the collapse of agriculture, rural banks failed in record numbers, dragging down hundreds of thousands of their customers.
Hoover dramatically increased government spending for subsidy and relief schemes. In the space of one year alone, from 1930 to 1931, the federal government’s share of GNP increased by about one-third.
Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets. His Reconstruction Finance Corporation ladled out billions more in business subsidies. Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”[6]
To compound the folly of high tariffs and huge subsidies, Congress then passed and Hoover signed the Revenue Act of 1932. It doubled the income tax for most Americans; the top bracket more than doubled, going from 24 percent to 63 percent. Exemptions were lowered; the earned income credit was abolished; corporate and estate taxes were raised; new gift, gasoline, and auto taxes were imposed; and postal rates were sharply hiked.
Can any serious scholar observe the Hoover administration’s massive economic intervention and, with a straight face, pronounce the inevitably deleterious effects as the fault of free markets?
Phase III: The New Deal
Franklin Delano Roosevelt won the 1932 presidential election in a landslide, collecting 472 electoral votes to just 59 for the incumbent Herbert Hoover. The platform of the Democratic Party whose ticket Roosevelt headed declared, “We believe that a party platform is a covenant with the people to be faithfully kept by the party entrusted with power.” It called for a 25 percent reduction in federal spending, a balanced federal budget, a sound gold currency “to be preserved at all hazards,” the removal of government from areas that belonged more appropriately to private enterprise, and an end to the “extravagance” of Hoover’s farm programs. This is what candidate Roosevelt promised, but it bears no resemblance to what President Roosevelt actually delivered.
In the first year of the New Deal, Roosevelt proposed spending $10 billion while revenues were only $3 billion. Between 1933 and 1936, government expenditures rose by more than 83 percent. Federal debt skyrocketed by 73 percent.
Roosevelt secured passage of the Agricultural Adjustment Act (AAA), which levied a new tax on agricultural processors and used the revenue to supervise the wholesale destruction of valuable crops and cattle. Federal agents oversaw the ugly spectacle of perfectly good fields of cotton, wheat, and corn being plowed under. Healthy cattle, sheep, and pigs by the millions were slaughtered and buried in mass graves.
Even if the AAA had helped farmers by curtailing supplies and raising prices, it could have done so only by hurting millions of others who had to pay those prices or make do with less to eat.
Perhaps the most radical aspect of the New Deal was the National Industrial Recovery Act (NIRA), passed in June 1933, which set up the National Recovery Administration (NRA). Under the NIRA, most manufacturing industries were suddenly forced into government-mandated cartels. Codes that regulated prices and terms of sale briefly transformed much of the American economy into a fascist-style arrangement, while the NRA was financed by new taxes on the very industries it controlled. Some economists have estimated that the NRA boosted the cost of doing business by an average of 40 percent—not something a depressed economy needed for recovery.
Like Hoover before him, Roosevelt signed into law steep income tax rate increases for the high brackets and introduced a 5 percent withholding tax on corporate dividends. In fact, tax hikes became a favorite policy of the president’s for the next ten years, culminating in a top income tax rate of 94 percent during the last year of World War II. His alphabet agency commissars spent the public’s tax money like it was so much bilge.
For example, Roosevelt’s public relief programs hired actors to give free shows and librarians to catalogue archives. The New Deal even paid researchers to study the history of the safety pin, hired 100 Washington workers to patrol the streets with balloons to frighten starlings away from public buildings, and put men on the public payroll to chase tumbleweeds on windy days.
Roosevelt created the Civil Works Administration in November 1933 and ended it in March 1934, though the unfinished projects were transferred to the Federal Emergency Relief Administration. Roosevelt had assured Congress in his State of the Union message that any new such program would be abolished within a year. “The federal government,” said the President, “must and shall quit this business of relief. I am not willing that the vitality of our people be further stopped by the giving of cash, of market baskets, of a few bits of weekly work cutting grass, raking leaves, or picking up papers in the public parks.”
But in 1935 the Works Progress Administration came along. It is known today as the very government program that gave rise to the new term, “boondoggle,” because it “produced” a lot more than the 77,000 bridges and 116,000 buildings to which its advocates loved to point as evidence of its efficacy.[7] The stupefying roster of wasteful spending generated by these jobs programs represented a diversion of valuable resources to politically motivated and economically counterproductive purposes.
The American economy was soon relieved of the burden of some of the New Deal’s excesses when the Supreme Court outlawed the NRA in 1935 and the AAA in 1936, earning Roosevelt’s eternal wrath and derision. Recognizing much of what Roosevelt did as unconstitutional, the “nine old men” of the Court also threw out other, more minor acts and programs which hindered recovery.
Freed from the worst of the New Deal, the economy showed some signs of life. Unemployment dropped to 18 percent in 1935, 14 percent in 1936, and even lower in 1937. But by 1938, it was back up to 20 percent as the economy slumped again. The stock market crashed nearly 50 percent between August 1937 and March 1938. The “economic stimulus” of Franklin Roosevelt’s New Deal had achieved a real “first”: a depression within a depression!
Phase IV: The Wagner Act
The stage was set for the 1937–38 collapse with the passage of the National Labor Relations Act in 1935—better known as the Wagner Act and organized labor’s “Magna Carta.” To quote Hans Sennholz again:
This law revolutionized American labor relations. It took labor disputes out of the courts of law and brought them under a newly created Federal agency, the National Labor Relations Board, which became prosecutor, judge, and jury, all in one. Labor union sympathizers on the Board further perverted this law, which already afforded legal immunities and privileges to labor unions. The U.S. thereby abandoned a great achievement of Western civilization, equality under the law.[8]
Armed with these sweeping new powers, labor unions went on a militant organizing frenzy. Threats, boycotts, strikes, seizures of plants, and widespread violence pushed productivity down sharply and unemployment up dramatically. Membership in the nation’s labor unions soared; by 1941 there were two and a half times as many Americans in unions as in 1935.
From the White House on the heels of the Wagner Act came a thunderous barrage of insults against business. Businessmen, Roosevelt fumed, were obstacles on the road to recovery. New strictures on the stock market were imposed. A tax on corporate retained earnings, called the “undistributed profits tax,” was levied. “These soak-the-rich efforts,” writes economist Robert Higgs, “left little doubt that the president and his administration intended to push through Congress everything they could to extract wealth from the high-income earners responsible for making the bulk of the nation’s decisions about private investment.”[9]
Higgs draws a close connection between the level of private investment and the course of the American economy in the 1930s. The relentless assaults of the Roosevelt administration—in both word and deed—against business, property, and free enterprise guaranteed that the capital needed to jumpstart the economy was either taxed away or forced into hiding. When Roosevelt took America to war in 1941, he eased up on his antibusiness agenda, but a great deal of the nation’s capital was diverted into the war effort instead of into plant expansion or consumer goods. Not until both Roosevelt and the war were gone did investors feel confident enough to “set in motion the postwar investment boom that powered the economy’s return to sustained prosperity.”[10]
Whither Free Enterprise?
On the eve of America’s entry into World War II and twelve years after the stock market crash of Black Thursday, ten million Americans were jobless. Roosevelt had pledged in 1932 to end the crisis, but it persisted two presidential terms and countless interventions later.
Along with the horror of World War II came a revival of trade with America’s allies. The war’s destruction of people and resources did not help the U.S. economy, but this renewed trade did. More important, the Truman administration that followed Roosevelt was decidedly less eager to berate and bludgeon private investors, and as a result, those investors came back into the economy to fuel a powerful postwar boom.
The genesis of the Great Depression lay in the inflationary monetary policies of the U.S. government in the 1920s. It was prolonged and exacerbated by a litany of political missteps: trade-crushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle, and coercive labor laws, to recount just a few. It was not the free market that produced twelve years of agony; rather, it was political bungling on a scale as grand as there ever was.
Notes
Hans F. Sennholz, “The Great Depression,” The Freeman, April 1975, p. 205.
Murray Rothbard, America’s Great Depression (Kansas City: Sheed and Ward, Inc., 1975), p. 89.
Lindley H. Clark, Jr., “After the Fall,” Wall Street Journal, October 26, 1979, p. 18.
“FDR’s Disputed Legacy,” Time, February 1, 1982, p. 23.
Barry W. Poulson, Economic History of the United States (New York: Macmillan Publishing Co., Inc., 1981), p. 508.
Paul Johnson, A History of the American People (New York: HarperCollins Publishers, 1997), p. 741.
Martin Morse Wooster, “Bring Back the WPA? It Also Had A Seamy Side,” Wall Street Journal, September 3, 1986, p. A26.
Sennholz, pp. 212–13.
Robert Higgs, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,” The Independent Review, Spring 1997, p. 573.
The utter and complete corruption of the Democratic Party is on full display as the DNC desperately maneuvers to derail the insurgent candidacy of Bernie Sandersby denying him a majority of delegates to the July convention in Minneapolis. Winning a mere plurality of votes in primary elections will deny Sanders a first ballot nomination and allow the DNC to use their super-delegates to support the conventional candidate, Joe Biden, on a second ballot.
Hillary Clinton and the DNC already conspired to successfully deny Sanders the nomination in 2016. The mere fact that the party installed super-delegates after the factious anti-war candidacy of George McGovern in 1972 should sufficiently illustrate the party hierarchy’s contempt for democracy.
The opposition of the political establishment to the Sanders’ campaign stems from its programmatic support for a rabid neoliberal agenda against the Senator’s proposed New Deal liberal reforms. The Democrats have been moving to the right in American politics for the past three decades and have no desire to reverse course.
Beginning with the Clinton presidency and continuing throughout the Obama regime, the Democratic Party initiated a new Cold War with Russia, imposed neoliberal economics globally, abandoned class politics for identity politics, deregulated the financial industry and the media, bailed out Wall Street at the expense of main street and presided along with the Republicans, over the greatest transfer of wealth to the top 1% of the population in American history.
Nevertheless, the Democratic Party is viewed by many of its supporters as a ‘lesser evil’ than the Republicans. Furthermore, in this election season, Trump and the Republicans are so terrible, the thinking goes, that anybody the Democrats nominate will be a better president than the orange billionaire.
Prior to evaluating these assumptions, a little lesson in political history is in order. To begin, it is important to identify the class nature of the Democratic Party and to illustrate its principal functions in American and international affairs.
The Democratic Party is one of the two partner parties of American capitalism. As with the Republicans, it is primarily financed by the corporate rich and represents their class interests. The policies it implements are cohered within a vast policy formulation network of foundations, think tanks and policy discussion groups that have been set up for the purpose of legitimizing the policy choices of the corporate community and its military industrial security complex.
Since the Great Depression, one of the major functions of the Democratic Party has been to diffuse popular discontent by advocating concessionary policies in times of social unrest.
Exaggerated wealth concentration and financial speculation during the 1920’s led straight away to the Great Depression of the 1930’s. Worker militancy, mass industry wide unionization, sit-down strikes, secondary boycotts, factory occupations and pitched battles with the police brought Franklin Roosevelt’s New Deal of 1935 along with the Wagner Act, the Magna Carta of the labor movement that same year.
Lyndon Johnson and Martin Luther King, Jr
Institutional racism, legal segregation, violent social repression, urban ghettoization and systemic police brutality resulted in the emergence of a civil rights movement and black liberation struggle that organized bus boycotts, sit-ins, civil disobedience, pickets, urban rebellions, armed self-defense and a mass march on Washington that produced Lyndon Johnson’s Great Society including the Civil Rights Act of 1964, Voting Rights Act of 1965, Fair Housing Act of 1968 and War on Poverty in 1965.
A genocidal war in Vietnam, a compulsory military draft and staggering American casualties in that war generated an anti-war movement whose tactics included the burning of draft cards, mass marches on the Pentagon, campus rebellion, student strikes and a radical resistance that involved the bombing of government targets undertaken in solidarity with the heroic struggle of the Vietnamese people. These struggles brought forth the anti-war candidacies of Senators Eugene McCarthy and Robert Kennedy. Their entry into the presidential race of 1968 led to the decision of the war’s chief proponent, Lyndon Johnson, not to seek a second term as president. Johnson’s decision signaled the beginning of the end of U.S. involvement in the war as his successor, Richard Nixon, was compelled to promise an end to the war so he could secure his election victory over Johnson’s Vice-President and war advocate, Hubert Humphrey. Nixon subsequently began troop withdraws and ‘Vietnamization” of a conflict that was subsequently abandoned along with the military draft in 1973.
In short, the Democrats operate as the shock absorber of American capitalism whose main function is to diffuse, absorb and co-opt social opposition and political dissent during times of upheaval caused by economic and social crisis.
A corollary function of the Democratic Party is to periodically impose domestic political repression on various sectors of the American population that refuse to be co-opted in defense of a persistently rapacious capitalistic and virulently racist social order. In this respect, the Democrats alternate with the Republicans when it becomes necessary to quash incipient rebellion.
Woodrow Wilson’s administration produced the Sedition Act of 1917, Espionage Act of 1918 and Palmer Raids of 1919, 1920 initiating the first Red Scare; Franklin D. Roosevelt initiated FBI investigations of the Communist Party for domestic subversion in 1936 and ordered the internment of Japanese Americans in 1942;
Harry Truman mandated loyalty oaths, signed the National Security Act creating the National Security Council and the CIA, signed the anti-labor Taft-Hartley Act and began the second Red Scare in 1947;
John Kennedy and Lyndon Johnson continued the murderous FBI COINTELPRO program begun in 1956 during their tenure in office from 1961-1968; Johnson declared a ‘War on Crime’ in 1965 integrating the federal government with local law enforcement;
Bill Clinton’s administration produced the Violent Crime Control and Law Enforcement Act of 1994 and the Anti-terrorism and Effective Death Penalty Act of 1996 resulting in the exponential growth of mass incarceration, a militarized police force, accelerated executions on death row and the evisceration of civil liberties;
Clinton’s Justice Department under Attorney General Janet Reno organized the deadly ATF/FBI/military raid on the compound of Branch Davidians in Waco, Texas in 1993;
Barak Obama signed the National Defense Authorization Act in 2012, section 1021 of which effectively terminated habeas corpus, defended the NSA’s Prism program of mass surveillance in 2013 and used the Espionage Act to indict whistleblowers from 2010-2012; the majority of Congressional Democrats supported the Patriot Act from 2001-2020 further eroding civil liberties.
Internationally, the Democrats along with their Republican cohorts have conducted wars, instigated covert interventions and imposed political repression in countries around the world as part of their defense of global capitalism and corporate hegemony under the pretexts of fighting communism, interdicting terrorism and making the world safe for democracy and human rights.
Wilson invaded Haiti in 1915 and brought the United States into World War I in 1916; FDR entered World War II in 1941;
Truman dropped Atomic bombs on Hiroshima and Nagasaki in 1945, intervened in Greece thus beginning the Cold War in 1947, recognized Israel in 1948 and started the Korean War in 1950;
Kennedy unleashed the CIA’s Bay of Pigs invasion and Operation Mongoose in Cuba along with implementing the doctrine of counter-insurgency in Asia and Latin America in 1961;
Johnson backed a coup d’état in Brazil in 1964, escalated the Vietnam War and invaded the Dominican Republic in 1965; Carter endorsed the CIA’s Operation Cyclone that armed the Islamic Mujahideen in Afghanistan in 1979 and supported repressive governments in Zaire, Angola, East Timor, Guatemala and El Salvador from 1977-1980;
Clinton enforced sanctions on Iraq from 1993-2001 killing one and a half million Iraqi civilians, bombed Iraq, Afghanistan and Sudan in 1998 and bombed Yugoslavia in 1999;
Obama presided over coup d’états in Honduras in 2009 and Ukraine in 2014, bombed Libya in 2011, waged proxy war in Syria in 2012, imposed sanctions on Russia in 2014 and conducted drone warfare across the Middle East and North Africa.
A cursory examination of the foregoing political history reveals that the Democratic Party, no less so than its Republican counterpart, represents the interests of the American corporate plutocracy not the American people.
The idea that the Democrats are a ‘lesser evil’ is pure fiction. The belief that a ‘political revolution’ can be waged from within the Democratic Party is an illusion.
The Democrats are a party of criminals. They are a war party. They serve Wall Street. A vote for the Democrats is a vote for American imperialism, an empire that has committed crimes against humanity too vast to comprehend.
Likewise for the Republicans. The American political class should not be supported or respected. It should be imprisoned. But that would take a genuine ‘political revolution’ to accomplish.
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The original source of this article is Global Research
A century later, 3 million were employed on farms, while the USDA employed 105,000 workers. This increase in agency size represents the Federal government’s increasingly regulatory stance in the US economy.
For decades, politicians and pundits in political media alike have said that the American farming and ranching industries are vital to our nation and must be protected from “unfair” competition and the threat of going out of business. This belief often materializes in the form of legislative or executive action undertaken by the government.
The federal government has long sought to promote the health of these industries, employing pro-farming policies since the days of FDR’s New Deal. These programs survive to this day, being expanded from their initial scope or their original sentiments reimposed through new acts of Congress. Strangely enough, this bureaucratic expansion occurs despite American agriculture output declining over the course of America’s existence.
Output Declines, Government Grows
Since 1900, the number of American farms in operation has fallen 63 percent. In 1930, agricultural GDP as a share of total GDP sat at a sizeable 7.7 percent — by 2002, agricultural GDP as a share of total GDP was a mere 0.7 percent. This 7 percent decrease signals the adoption of a new role in the world economy by the US.
The US now imports a large percentage of the fresh vegetables and produce it sells — while in 1975 the proportion of fresh fruit sold in the United States that was imported was 23 percent, it reached 51.3 percent in 2016.
Domestic vegetable and fruit producers are being supplanted in the market by producers from countries such as Argentina, Chile, and Mexico. The City University of New York’s Urban Food Policy Institute reports: “…since the NAFTA Trade Agreement in 1994, U.S. consumption of tomatoes, peppers, cucumbers, limes, berries, avocados and mangos imported from Mexico is way up and still rising.”
Clearly, increased trade is impacting America’s agriculture sector. Surely then, the government’s relationship with the industry must be changing as well. Logic would suggest that the USDA and its subordinate agencies are laying off employees and reducing their size and scope in response to the decline of America’s beloved industry.
In reality, this is not the case. In 1900, 11 million Americans were employed on farms and 2,900 employed by the USDA. A century later, 3 million were employed on farms, while the USDA employed 105,000 workers. This increase in agency size represents the Federal government’s increasingly regulatory stance in the US economy.
Agriculture’s Death is Good News
How could an industry’s death spell prosperity for a nation? While the number of people employed in farming and similar occupations dwindled from 11 million in 1900 to 2.6 million in 2017, employment in STEM (science, technology, engineer, and math) occupations has grown 79 percent between 1990 and 2016 — increasing from 9.7 million to 17.3 million. The US economy is transitioning away from producing in primary and secondary level industries like agriculture and related enterprises such as food processing and packaging.
The reduction in the number of people employed in agriculture and related jobs shows that America is actually abandoning low paying jobs. Compared to STEM jobs, occupations in the primary or secondary sectors of the economy tend to pay a very low wage. Farm hands and field laborers, who are often poor immigrants, are paid below minimum wage to perform tasks that take a significant toll on their bodies. Difficult manual labor poses both short-term and long-term risks to workers’ health, compared to the almost complete lack of health detriments presented by jobs in STEM fields. These agricultural jobs tend also to be seasonal. Workers will only have a secure source of income for between 3 and 6 months per year, depending on where they work, due to the fact that crops cannot be grown year round.
As the economy sheds the last remnants of its agricultural-centric past, new jobs are being created in new industries at a rapid pace. Occupations in the tertiary and quaternary sectors are far more beneficial to society and individuals, as they provide higher wages, a more stable source of income, and employment year round. In a bid to attract workers to fill positions, companies often offer benefits such as childcare and healthcare plans as part of an offer of employment. It is very obvious that we should seek to employ as many people as possible in tertiary and quaternary sector industries.
Primary and secondary products will never lose value. Humans will always have a need to consume agricultural products and build devices and structures from raw materials that are finished through secondary sector activities. As the US economy begins to be largely constructed of tertiary and quaternary economic activities, these lower-level processes will simply be outsourced to less developed countries.
Outsourcing: Oppression or Opportunity?
Since their ideology became a force in the mainstream a decade ago, the rallying cry of political leftists has been to stand for those being oppressed, exploited, or victimized by the status quo. The advancement of technology has meant that industrialization, combined with other factors, has left certain nations behind. Third world economies are not nearly as developed as their first world counterparts, with a bulk of their economic activity taking place in the primary and secondary sectors. These leftists take an anti-trade stance, positing that the outsourcing of production to less developed nations is capitalistic exploitation.
“Exploitation” Actually Benefits All Parties Involved
While it is true that a business owner may outsource simple manufacturing processes to countries where they may hire workers at cheaper wages, it is also true that the workers hired benefit from this self-interested move. The reason workers choose to work in these plants and industries is that they provide the best possible way to make money to the worker. If a corporation goes to a less developed nation and is able to hire 5,000 workers to work for them, it means that the firm is now offering the best employment opportunity in the country to 5,000 workers. Prior to the company’s arrival, laborers were likely making less money than they now do and working in worse conditions. Otherwise, why would they choose to work for the new company? Their condition has obviously been improved by the opening of a plant by a foreign capitalist…
I am currently reading “Salvos Against the New Deal” a collection of Garet Garrett’s Saturday Evening Post’s articles. Garrett was a staunch critic of the New deal. “A Washington Errand” relates to a number of our current issues. Big government, out of control spending and decimation of the Constitution. I quote:
With this natural law in mind, turn now and look at the principal governments of the world…
They are extending their powers to the utmost.
…they are limiting the areas of human freedom, for no government can in any way extend its powers over people but to limit freedom.
…they sweat with the conviction of doing to people what is best for them.
…they are pressing for sovereign power, above any law, beyond any restraint.
…they are amoral, which is to say, whatever they do is right.
…they claim the power to dispose of private wealth.
…but a government to extend itself, must command money-more and more money.
MCViewPoint 