Conservative Fiction: The New Deal Sucked!

As we are facing the biggest economic crisis since the Great Depression as a result of conservative deregulation, it's only logical that we would look to how we successfully dealt with the last major economic crisis -- the progressive principles that shaped President Franklin Delano Roosevelt's "New Deal."

The conservative response? Pretend that the New Deal sucked.

Last month Jonah Goldberg wrote on the National Review blog The Corner that the New Deal is to blame for making it a "Great" depression:

...we shouldn't let invocation of the Great Depression -- and our fear of it -- justify all of this New Deal talk. Say it with me: The New Deal prolonged the Great Depression. In fact, if anything it was the New Deal itself that made the Great Depression "Great." By 1938 one in six Americans were still without jobs. It wasn't until WWII, when FDR started describing himself as "Dr. Win the War" instead of "Dr. New Deal" that America finally started to lift itself out of its state-imposed economic stupor.

Yesterday, the Heritage Foundation's Conn Carroll claimed that the New Deal created a wholly separate Depression:

One of the great untold stories about the Depression is that there were really two of them. By the mid-1930's the U.S. economy was well along the road to recovery with the number of unemployed dropping from 13 million in 1933 to 7.6 million in 1936. The the Supreme Court, bowing to the court packing pressure of FDR, approved the Wagner Act and the economy tanked again.

The Wagner Act is that awful, awful law that gave workers the right to join unions, which in ConservativeWorld, ruined everything.

Carroll backs up his post with a Wall Street Journal opinion piece from Mark Mix of the anti-union National Right To Work Committee titled, "Labor Unions Prolonged the Depression."

By the mid-1930s, the U.S. economy appeared to be climbing out of the Great Depression. The Dow Jones Industrial Average (DJIA), which had bottomed out at 41 in 1932, was advancing. It increased 73% from the beginning of 1935 through the end of 1936, when it hit 180. The number of unemployed, 13 million in 1933, dropped to 9.5 million in 1935 and 7.6 million in 1936.

Then, in 1937, the DJIA plunged 33% in what is often called "a depression within a depression." Joblessness skyrocketed.

A principal factor in the meltdown that year was the U.S. Supreme Court's surprise 5-4 decision in early April to uphold the constitutionality of the Wagner Act, which had passed two years earlier...

What do all three of these conservative attacks have in common?

They all base their claims on last year's book, The Forgotten Man: A New History of the Great Depression, written by Amity Shlaes a former member of the conservative Wall Street Journal editorial board, and found to have used misleading numbers.

UC-Davis history professor Eric Rauchway exposed the dubious underpinnings of the book in Slate last year. When the actual economic statistics didn't support her anti-New Deal claim, she used estimates that explicitly disregarded government jobs created by the New Deal. Rauchway writes (emphasis added):

The greatest knock on the New Deal is it did not end the Great Depression. The war did that. Open the authoritative reference work Historical Statistics of the United States and you will find that the unemployment rate did not return to its 1929 level until 1943.

But if the New Deal did not end the Great Depression, was it doing some good? Historical Statistics of the United States says yes: Except in the 1937-38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt's first term and, after the 1937-38 dip, around 11 percent.

So on the numbers, the U.S. economy improved briskly during the New Deal. Things that are moving quickly and in the right direction, but still haven't reached their destination after a while, are things that have a long way to go -- which is true of the U.S. economy recovering from 1932. Historians disagree on which part of the New Deal most encouraged economic growth, but at the least the New Deal did not prevent this recovery.

Shlaes makes a different argument about numbers, because she uses different numbers. She starts each chapter with a rat-a-tat of just-the-facts, but instead of GDP, which represents the overall economy, she quotes the Dow Jones Industrial Average, which represents the maybe 10 percent of Americans who owned stock. And though she quotes an unemployment number, she doesn't quote the figures I've just mentioned. Instead she chooses different estimates of unemployment that (she acknowledges) show a much larger share of Americans out of work during the New Deal.

If you want to know how the New Deal treated ordinary Americans, this choice really matters. Let's look at a figure Shlaes gives twice in her book and again in her Wall Street Journal editorial: She has unemployment at 20 percent in the 1937-38 recession. That's appalling--almost as bad as 23 percent in 1932. Based on such a statistic, you could think the New Deal wasn't alleviating the Great Depression. But that number hides something: A third of the people Shlaes counts as unemployed had a job that the New Deal gave them through its relief programs.

Now, you may say, wait: Those people really shouldn't count as employed--we're not interested in government make-work, we're interested in the real economy. Fair enough--and if you look again at Historical Statistics of the United States, you'll see another measure of unemployment--private, nonfarm unemployment--measuring the real, industrial economy. And on that measure, unemployment again runs markedly lower under Roosevelt than under Hoover. John Maynard Keynes might have explained that the New Deal wasn't just offering make-work, it was stimulating the economy--and Shlaes in fact at one point says the same: "[I]t functioned as Keynes ... hoped it would." Yet of all the possible ways to measure unemployment, Shlaes chooses the only way that hides the effect of New Deal relief programs and makes it look as though the economy performed as poorly under Roosevelt as under Hoover.

Economic journalist David Warsh slammed the book in his economicprincipals.com weekly column, via Economist's View (emphasis added):

The result is a book just as fanciful, but much less convincing than Kenneth Roberts' account of Oliver Wiswell's long career as a critic of the first American Revolution. For Roberts never argued that the colonies' War for Independence was a mistake -- rather he showed that it was a very painful ordeal, with good arguments on both sides of the issues. Safely ensconced in Nova Scotia at the very end of the book, Wiswell allows, "Perhaps something great will come even to that rabble... that drove us from our homes."

Shlaes, on the other hand, seems to argue that we would be better off if John Maynard Keynes had never written what she describes as a "license for perpetual experimentation" with macroeconomic policies, if the extension of rights and responsibilities summarized by the phrase "the New Deal" had never occurred. But what about the enormous growth of the American economy since 1946? What about the seventy five years that have passed without another depression?

And New York Times economic journalist David Leonhardt also found Shlaes' argument wanting in his book review (emphasis added):

The great challenge for his critics has always been to come up with an alternate vision that might plausibly be said to have done more good with fewer downsides. Shlaes likes the model offered by Willkie, the Republicans' 1940 presidential nominee, in which the New Deal would have been scaled back and business would have filled the void. She builds her case mostly by implication, through a series of sketches of self-starters who embodied what the free market could have accomplished. There is Bill Wilson, for example, the stock trader who founded Alcoholics Anonymous and in the process "taught Americans that the solution to their troubles lay not with a federal program but within a new sort of entity -- the self-help community," as Shlaes puts it. Mellon shows the power of charity by donating his unrivaled art collection to the country, thereby creating the National Gallery. Even the Good Housekeeping Seal of Approval has a role to play, as an example of how the private sector once took care of quality control. Roosevelt, however, preferred government institutions like the Food and Drug Administration.

In a way, Shlaes's book has come just a little after its time. In the early years of George W. Bush's presidency, conservative critiques of the New Deal served a larger political purpose, as a rationale for the administration's attempts to remake Social Security. Those plans failed, of course, mostly because they found little support among voters.

There is a historical parallel here. Roosevelt may be an icon now, but he faced enormous opposition when he was president. Americans at the time heard the arguments that he was insufficiently capitalist. They saw his missteps and, above all, they lived through the long Depression. Yet in four separate elections, when given a choice between his ideas and those of his critics, they overwhelmingly chose his. Based on what followed -- the great economic boom of the postwar years -- it is hard to doubt their decision now. They understood that the Good Housekeeping Seal of Approval wasn't quite up to defeating the Great Depression.

On the verge of a resounding call for a New "New Deal" -- to right the derailed economy with robust public investment in clean energy, infrastructure and education; stronger worker protections; new rules of the road for corporations and a guarantee of health care coverage for all -- conservatives could choose to debate those ideas with their own new ideas that learn lessons from their failed ideas of the recent past.

Instead, they are stuck in their default position, preferring fictional history to actual history. Refusing to acknowledge what clearly has worked, and what clearly hasn't, in the past. Desperately trying to malign a president widely considered one of America's greatest presidents along with Washington and Lincoln.

If they want to stop a New New Deal, repeating the mistakes that led to one of the worst presidencies in American history is not the way to do it.

UPDATE: The Wonk Room's Brad Johnson flags a real doozy from the Heritage Foundation: drawing parallels between the New Deal and "collectivism in the Soviet Union and Nazi Germany."

UPDATE 2: The National Review's Michael Barone also trots out Shlaes today in his attack on the New Deal.

Originally posted at OurFuture.org

Follow Bill Scher on Twitter: www.twitter.com/billscher

Comments

[constitutionman]

So you are argueing over what figures you each are using for unemployment. The question should be was the New Deal good for Americans? I see this all the time, we need to look at the result of government programs and not there intent. What results are ever good? I could never understand why people would want give up liberties for more government. If you poeple want to learn something about ecomomics you should visit Walter Williams website.

[Heavhauler]

The consistent ( and amuseing ) statement I find in all articles on this subject is "The WPA didn't end the depression the war did". When are people going to wake up to the fact that war is the biggest goverment make work project of all !
That being said, I think that some of the greatest things about the state I live in, Oregon, were put here by the WPA and WWII was an unfortunate nessesity.

[research]

BS the FDR NEW DEAL ended the depression by 1934.

Please read up on the Great Depression with this useful time line:
http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html

Deregulation and Low taxes CAUSED the bubbles, then the crash.

We thrived with lot of regulations and a 74-92% top income tax rate from 1934 to 1962.

Government Public Works deficit spending is what ended the Depression.

I would not raise Capitol Gains or corporate tax very much. Nor should we impose large tariffs.

[RoloTomassi]

The Republican­s/NeoConse­rvatives/C­orporatist­s have effectively suppressed worker rights and advances, and have put in place mechanisms for controlling public protests and displays of opposition over the last three decades. In doing so they have become complacent in their belief that a disgruntled populace cannot possibly rise up in any serious form of opposition to their methods of domination. Even the unformed potential of resurgence is enough to inspire sudden mental illness in such Feudalists, and the symptoms of that illness are what we are seeing in the expressions of low-information rightwing voters and the melodramatic machinations of thuggish Republican operatives.

[And then we have Delay spouting hate on HARDBALL and accusing the Left of hate-mongering in the same breath.]

I think we will see some turmoil in the coming years, but it is turmoil that needs to occur; we are on the cusp of great opportunities, but the negating mantra of "insufficient political will" must be replaced by real feet on the street in unified protest if we want to create a society where economic equality isn't a convoluted false notion tied to the failed policies of free market fundamentalism.

I have heard and read a lot about the dire future we've wrought for our children...and I have come to the conclusion that our singular chance at redemption is to collectively rise up at this opportunity and put an end to Free Market Feudalism in this country.

[000Jade000]

I'm convinced that the GOP just wants to watch the country burn. Lord knows it would make the theocrats among them all warm and fuzzy about the Rapture.

[degenerate1991]

Democrat fiction: Herbert Hoover supported Laissez-Faire economics.

As a matter of fact Hoover supported government intervention and protectionism (i.e. the Smoot-Hawley tariff). Said government intervention backfired tremendously. As a matter of fact, during the 1932 presidential campaign, Roosevelt's vice-presidential candidate accused Hoover of being a socialist. Many of Roosevelt's new deal programs drew from Hoover's proposals. (Hoover did, however, oppose the TVA)

[Grannyover70]

I was there! Young at the time, but I remember a lot and my Dad told me what I did not remember. These Republicans cannot help but lie! Yes, Herbert Hoover did support these things but he could not bring them to fruition. I imagine it was because of his own party. They sure fought Roosevelt tooth and nail the whole 16 years. The economy deepened each year until Roosevelt was able to start the programs. You cannot imagine how bad it was. The economy DID NOT begin to get better on its own. That is the lie of the century. Eleanor Roosevelt was a great lady, also. She went all over the country speaking to people and coming back with ideas and to his credit, Franklin listened to her and used her ideas.

I do not wish a repeat of those times on anyone.

[apingebrig]

Thanks for the updates on the article. Gotta love how how the Republicans recycle incorrect information until it becomes a reality. Pretty soon, someone will quote that National Review article in their arguments, and lost is the fact that the original source was incorrect. I see this reasoning all the time, Republicans explaining their stance by quoting from sources, that quote from other sources, that lead back to the original, poor excuse of a source.

[BethStuart]

It was telling that Buckley's son walked away from the National Review. There is good reason to believe that Buckley Sr. would be walking away as well if he were still alive.

[degenerate1991]

National Review got taken over by the neocons; there's nothing "conservative" about it anymore.

[BethStuart]

Shlaes is a revisionist writer who has tried to rewrite history. The New Deal may have been imperfect but compared to the do-nothing "prosperity is just around the corner" conservative stratgey, it was the right strategy for the times.

[OkieIntellectual]

I really hope articles like this open some eyes that were otherwise closed to the insidious and Machiavellian machinations of the Republican party and the conservative movement in general.

Anyone who hasn't read it should go find a copy of The Prince, and see for yourself how its practically a step-by-step guide to how Republicans conduct their politics.

[StephenDedalus82]

There is no philosophy here. There is no ethic. There is only the greed of the plutocrats. They just need some flimsy philosophical excuse to rape and pillage the country. They've done it before in other countries, and under Bush they have been intent on turning America into their very own home-grown banana republic. Republicans use government to launder money directly to their friends and corporate puppet masters. It's so base it doesn't even consider the long-term, since long-term having no middle class means nobody is around to buy the plutocrats' products. I really think they long for the day when a Vanderbilt can have a dining room the size of an olympic swimming pool and a staff of 300. They just want more, and they want it now. No considerations other than that seem to be at play.

[butcherslam]

Shlaes lost me when she used Alcoholics Anonymous as an example. AA didn't really get going until they recieved good press from government agencies.This example is specious at best.

[realpolitic]

It is strange that conservatives are still arguing for a "Good Housekeeping Seal of Approval" when Alan Greenspan was just testifying days ago that his idea of letting the financial sector regulate itself was an abysmal failure. It is typical of Republicans that they try to measure a general well-being during the Great Depression using the stock market as an indicator,. They tried to use the stock market as an indicator of success during the early years of the Bush presidency when explaining that his policies actually worked. They ignored the fact that income inequality ws widening and poverty was increasing. Eventually unemployment rose and the stock market has just cratered.

Why can't conservatives ever accept an honest debate? Even their so-called scholarship is tainted. When trying to prove their contrarian points they use phony nmbers. Are their policy ideas so flimsy that they can not ever be honest? And after the big lie, then the conservative chorus of Goldberg and other sychopahnts keep repeating the lie about Roosevelt's policies delaying a recovery until it becomes true. Well, I think people are tired and fed up with their disinformation camapigns. We want an honest debate and that is why we will elect Obama. Let the conservatives circulate their dishonest papes among themselves in a self-congratulatory circle of cynicism.

[paulfree17]

A financial depression often becomes a polarizing force. It is almost always preceded by a concentration of large amounts of wealth in a small percentage of the population.

Then a New Deal comes along that attempts to level the playing field which yields greater prosperity, job growth, innovation etc. Then unfortunately the cycle repeats as those who have reaped the benefits find the need to develop a new underclass of immigrants.

Politically too the cycle repeats as the pendulum swings left and right. The devisiveness we are seeing today can easily be seen in any recap of the McCarthy era which followed the end of the New Deal and the return to the right that took place after Truman.

The comments of Sarah Palin, the congresswoman from Minnesota and others can only illicit the famous response. "Have you no shame?"

[JohnPaulJones]

The point about Nazi collectivism and The New Deal is valid, but not from an economic perspective: it's about consolidated, centralized power. It's safe to say every President since FDR has fought to expand the powers of the Executive Branch to greater roles than those ennumerated in the constitution. The economic legacy of The New Deal can be debated ad nauseum, but the political legacy is something we'll struggle with forever.

Can someone please show me where Obama has said anything about:

a) repealing the Patriot Act
b) disbanding the Department of HOmeland Security
c) promising not to use Executive Signing Statements to circumvent Congress

[Pdubya]

well said! or FISA, challenging the Fed, or returning to non-intervention foreign policy!

Its a New World Order plutocracy.

When Nader, Baldwin, Barr, and McKinney can come together in a National Press Club conference under Ron Paul's leadership and agree on the four below American principles, you know the country is messed up by these corporate fascists.

1. non-intervention foreign policy
2. end the fed, return to sound money
3. process change and opening the debates
4. restoration of civil liberties

www.campaignforliberty.com come join us, we need you!

[LeftRight]

Actually, every President has tried to increase the power of the President. EVERY. ONE. Until around the time of Teddy Roosevelt they were stymied in this (with varying levels of success) by the Congress trying to increase ITS power. The only reason that it looks like they've done more now is because they haven't had Congress standing up to them for the last century or so!

[Pdubya]

read it and bleat:

http://www.youtube.com/watch?v=TP_aJ7LcAAA

http://www.youtube.com/watch?v=coaI3d89kuA

[Stephen]

John Updike, who with his family, lived through and remembers the Great Depression also dissected Schlaes' fanciful rewrite of history in The New Yorker. He counters some of her specious arguments and entire thesis with the emotiional aspect factored in. Notable was Herbert Hoover pointing out that a man reduced to selling apples on the street to support his family was evidence of American entrepeneurship! Sound familiar?

Bill Scher's article is important because as Kristol and other neo-cons have proved Philosophy is important. Crap ideas need to be countered at every turn.

[Bill Scher - Huffpost Blogger]

Here's that Updike article: http://www.newyorker.com/arts/critics/books/2007/07/02/070702crbo_books_updike

Thanks (to all on this thread) for the kind words!