NCPA - National Center for Policy Analysis


February 2, 2009

Some seem to believe Barack Obama is the second coming of Franklin Delano Roosevelt.  And there could indeed be some parallels between the two, so it's only natural that Obama's advisers are reading up on FDR's first 100 days while his media cheerleaders call for an equally revolutionary progressive agenda.  Yet, before we embrace on a "new" New Deal, its worth revisiting the alleged success of the old one, says economic historian Burton Folsom Jr., in his new book, "New Deal or Raw Deal?" 

According to Folsom, FDR is remembered for his economic populism and campaigns against business leaders and "economic royalists."  Less known is how heavily his policies weighed on the poor and the working class:

  • Despite his best efforts to soak the rich and impose near-confiscatory tax rates on high earners, the early New Deal relied upon heavily regressive excise taxes.
  • From 1933-1936, federal revenues from excise taxes were greater than those from personal and corporate income taxes combined.
  • Despite the enactment of many new federal programs, there was little positive result; by 1939 Roosevelt's treasury secretary, Henry Morgenthau, was forced to admit that "we are spending more than we have ever spent before and it does not work."
  • While unemployment dropped during Roosevelt's first term, it crept back up between 1936 and 1939, and stock values plummet from 1937-1939, causing some to call the late 1930s a depression within the Depression.
  • Moreover, the U.S. underperformed other industrialized nations during the 1930s.

Even accounting for differences in how economic indicators were calculated in various nations, Folsom notes, "the U.S. economy under Roosevelt did poorly not only in an absolute sense, but in a relative sense as well."  More recent economic research, confirms Folsom's claim that the New Deal did more to extend the Depression than to end it.

Source: Jonathan H. Adler, "FDR Reconsidered," National Review, January 26, 2009; based upon: Burton Folsom, Jr., "New Deal or Raw Deal?" Threshold Editions, November 4, 2008.


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