Fox News: "Historians Pretty Much Agree" That FDR Prolonged the Great Depression

I appeared on Fox News yesterday to discuss both the Blagojevich flap and the imminent economic recovery package from the Obama administration. You can watch the clip here. As you'll see, on that latter issue, Fox News is starting its campaign to stop Obama's big spending plan by stating - as assumed fact - that "historians pretty much agree" that Franklin Roosevelt prolonged the Great Depression, and that therefore, Obama shouldn't try another New Deal.

When I say Fox News' assertion about historians is patently false, they literally laugh at me as if I've said something so clearly untrue, something Americans supposedly assume is so obviously stupid, that it's worthy of ridicule.

The Depression issue was brought up by conservative pundit Monica Crowley - not surprising since this is the conservative talking point du jour ever since the "center-right nation" meme started looking idiotic and ever since fringe-right-wing bloviator Amity Shlaes published her since-discredited book claiming FDR essentially created the Great Depression. Crowley supported her the "FDR ruined the country" meme with the very authoritative-sounding statement that "based on all kinds of studies and academic work done on the great depression" she knows that the New Deal's "massive government intervention prolonged the Great Depression."

Of course, she doesn't offer up a single study or "academic work" as any kind of proof, and yet, when I say her assertion is absurd, Fox News anchor Greg Jarrett starts laughing at me - as if my assertion that FDR's New Deal helped end the Great Depression is so fantastical as to prompt guffawing. Jarrett proceeds to state that historians "pretty much agree" that FDR prolonged the Great Depression, and resorts to insisting that he knows that's true because "it's in the books" - whatever the hell that means. Indeed, Fox wants us to believe that what was only very recently the deranged propaganda of a handful of conservative political pundits is now such a consensus opinion among historians that to say otherwise is to evoke laughter.

Now, it's true - back in 2004, two UCLA professors published a little-noticed report claiming the New Deal's government intervention prolonged the Great Depression. But that assertion has been subsequently eviscerated by, ya know, actual data.

Here's University of California historian Eric Rauchway:

For a start, New Deal intervention saved the banks. During Hoover's presidency, around 20 percent of American banks failed, and, without deposit insurance, one collapse prompted another as savers pulled their money out of the shaky system. When Roosevelt came into office, he ordered the banks closed and audited. A week later, authorities began reopening banks, and deposits returned to vaults.

Congress also established the Federal Deposit Insurance Corporation, which, as economists Milton Friedman and Anna Jacobson Schwartz wrote, was "the structural change most conducive to monetary stability since ... the Civil War." After the creation of the FDIC, bank failures almost entirely disappeared. New Dealers also recapitalized banks by buying about a billion dollars of preferred stock...

The most important thing to know about Roosevelt's economics is that, despite claims to the contrary, the economy recovered during the New Deal. During Roosevelt's first two terms, the U.S. economy grew at average annual growth rates of 9 percent to 10 percent, with the exception of the recession year of 1937-1938...

Excepting 1937-1938, unemployment fell each year of Roosevelt's first two terms. In part, the jobs came from Washington, which directly employed as many as 3.6 million people to build roads, bridges, ports, airports, stadiums, and schools -- as well as, of course, to paint murals and stage plays. But new jobs also came from the private sector, where manufacturing work increased apace.

This basic fact is clear -- unless you quote only the unemployment rate for the recession year 1938 and count government employees hired under the New Deal as unemployed, which conservative commenters have taken to doing.

So, as Rauchway says, the hard data about bank closures, job creation and overall economic growth rates proves the regulations and spending of the New Deal helped end the Great Depression. In fact, Rauchway notes that the data actually suggests that the major, data-driven criticism of the New Deal is that it didn't spend enough money fast enough.

But, OK - let's say you want to cherry pick the unemployment numbers like a right-wing pundit. Let's say that, as Rauchway notes, you are a conservative dittohead totally comfortable dishonestly "quot[ing] only the unemployment rate for the recession year 1938 and count[ing] government employees hired under the New Deal as unemployed." Shouldn't you be blaming conservative ideology, and not New Deal-ism, for those numbers? After all, as Paul Krugman recently explained to a stunningly ignorant George Will on ABC News, 1937-1938 was the period Roosevelt dialed back the New Deal in the name of conservative demands that he stop spending:

By 1937 things were a lot better than they were in 1933. Then [FDR] was persuaded to balance the budget or try to and he raised taxes and cut spending and the economy went back down again and then it took an enormous public works program known as World War II to bring the economy out of the depression.

So with all of that data, let's go back to Fox News' main assertion: Is it really true that "historians pretty much agree" that the New Deal's government intervention prolonged the Great Depression? Of course not, as New York Times economics writer Daniel Gross says:

It was only with the passage of New Deal efforts--the SEC, the FDIC, the FSLIC--that the mechanisms of private capital began to kick back into gear. Don't take it from me. Take it from Federal Reserve Chairman Ben Bernanke, who wrote the following in Essays on the Great Depression: "Only with the New Deal's rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression."...

The argument that the New Deal's efforts "perhaps had prolonged, the Depression," is a canard. One would be very hard-pressed to find a serious professional historian--I mean a serious historian, not a think-tank wanker, not an economist, not a journalist--who believes that the New Deal prolonged the Depression. (emphasis added)

In other words, it's the opposite of what Fox News says. "Historians pretty much agree" on one thing when it comes to Roosevelt: The New Deal helped end the Great Depression. But I would go even further than that, and agree with economist Brad DeLong who said that whether you are a historian or not - to argue what Jarrett and Crowley argued yesterday is to publicly declare oneself as divorced from the facts as the most ridiculed conspiracy theorists. As DeLong says, "A normal person would not argue that the New Deal prolonged the Great Depression."

But, then, these are not "normal people" - those making these arguments are right-wing automatons whose claim that we shouldn't look at actual data, we should simply accept the truth of their claims because they insist "it's in the books!" or they've supposedly seen "all kinds of studies and academic work" that proves their hysteria true.

Of course, the good news is what I said on Fox News before they cut me off: While the right's historical revisionism is dishonest, it's doing progressives a big favor.

If the right wants to try to stop a serious economic recovery package and financial regulations by trying to vilify one of the most popular presidents and popular policy programs in American history, then I'll say what George Bush once said: Bring it on. Every high school civics class teaches the broad truth about Roosevelt, the New Deal and how it helped end the Great Depression, and if the conservative movement has gone so off the deep end that they want to make crazy-sounding arguments that even high schoolers know are silly, then the progressive movement is in an even better position than we may have thought.

Comments

[darrenlobo]

Please read:

An Economy On Life Support Is Not Recovering
http://www.nolanchart.com/article5841.html

for a rebuttal.

[flossophy]

I'm no historian... but a quick run thru wikipedia gives me some basic information:

FDR 1932 = 8 years de-pression and only pulled out of it because of WW2, over 14% unem-ployment throughout, packing the Su-preme C-ourt with poli-tically mo-tivated jurors, mass-ive expansion of gover-nment wor-kers, indoc-trination of generations of schoolchildren in New Deal propa-ganda, and cementing a dependent class (voting bloc) that lasts to this day.

Reagan 1980 = 2 years recession, 20 million new jobs, across the board tax cuts of 25% (lowering the highest rate from 70% to 28%), and an economic expansion that lasted 25 years (highest sustained growth in the history of human-beans), and helped to nudge-over the Ber-lin Wall.

I know Pro-gressives pride themselves on being smarter than the Neander-thugs... but one would have to twist and contort themselves intel-lectually to say the New De-al was a success... it was a po-litical success, but by no means an economic one.

[XME]

Fox can try to sell it all they want, but MOST Americans simply want the government to DO SOMETHING, and feel that it's worth trying, and better than doing nothing, which seems to be the Republican answer.

I think most would also agree at least Obama's stimulus plan isn't to just throw money at people, like the TARP and Bush's stimulus. Even if it doesn't fix the problem ASAP, at least Obama's plan would go to creating some jobs, helping to advance green tech, and fixing ailing road, etc. Sure beats throwing money at banks, no strings attached!

[whitewaterwillie]

The next breaking news from Faux....

"Historians Pretty Much Agree" That GWB is the greatest president ever!

[ron ray]

Republicans have been trying to rewrite this bit of history ever since Reagan came to power. luckily for me, my parents lived through this period and know better. They wouldn't vote repuiblican with a gun to their head.

the economy not only greatly improved during this period, but major parts of our country were built, and the institutions were put in place that stopped what had been 50 years of lesser depressions and busts.

We on the left need to be just as aggressive in writing the history of the conservative revolution reagan started. surging deficits and debt except for the brief years Clinton was in charge. a return to robber baron capitalist policies that enrich the few and impoverish the rest. banking fiascos from the savings and loan collapse to the current bubble economy.

Reagan was lucky enough to hand his collapse over to the first president bush, but the fact is that a 12-year and an 8 year span of GOP rule both ended with disastrous consequence for all but a few.

[mari2JJ]

Ir is even more than that. It is a set up to try to rehabilitate the Bush regime and his fiddling rather than a commitment to handling of the financial collapse of our financial system. I am 75 and I lived in the depression as a very young child. My father had been injured on his job and was disabled so I can remember being hungry much of my 4th and 5th year of life. What finally broke the cycle of abject poverty and malnutrition for our family was my mother's work at a WPA sewing room where she was paid in fresh fruits and vegetables. Although I have never outgrown the problems of those early years of malnutrition and no medical care resulting in my suffering a hot case of rheumatic fever that, untreated due to no financial help, ruined two valves in my heart. But as the WPA and other Roosevelt programs for revitalizing our economy came on line, our life improved. We never got a hand out. My mother worked in a WPA program as well as all of my siblings picked fruit and worked in the fields. Before too long, our life began to improve, we were able to get some property where we raised fruits and vegetables, had cows for milk, all with the help of recovery programs. It is a bold faced lie that Roosevelt's programs were not able to change the direction of this entire country. Sounds like total Republican revisionist CRAP!!!!

[BCubedReg]

My favorite phrase from 2008 has to be "intellectual violence".

The right wing pundits and Fox continue to institute intellectual violence on the masses by assaulting facts and truths with lies, innuendo and disinformation.

I will never watch Fox.

[DuganS1]

"I say after eight years of this administration we have just as much unemployment as when we started," lamented Henry Morgenthau, FDR's Treasury secretary. Unemployment declined when America began selling materials to nations engaged in a war America would soon join."

"During his eleven years as Treasury Secretary, Morgenthau stabilized the U.S. dollar, helped finance the "New Deal," prepared the U.S. economy for war, and financed the war effort through the sale of war bonds. Although he opposed Keynesian economics (a theory, associated with the British economist John Maynard Keynes, that government spending could end the depression) and disagreed with certain aspects of Roosevelt's "New Deal," he was extremely loyal to Roosevelt.

"Roosevelt rejected the advice of Morgenthau to cut spending and decided big business was trying to ruin the New Deal by causing another depression that voters would react against by voting Republican.[38] It was a "capital strike" said Roosevelt, and he ordered the FBI to look for a criminal conspiracy (they found none).[38] Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis.[38] Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the superrich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States."

[IndianaJohn]

Federal spending was cut in 1937 and 1938. In 1938, the budget was as close to balanced as it had been since 1930, and the economy tanked in response. Roosevelt returned to fiscal stimulus in 1939 and the economy improved.

Thanks for making our point for us.

[ente]

A lot of these comments miss the point.In a recession you don't fixate on balancing budgets especially through raising taxes.So in that sense Republican economic theory circa 1938 was idiotic.But it does not follow that therefore Roosevelt was doing a great job!His policies were very damaging to certain segments of society and that is not an exclusively right wing theory.Some of you seem completely unaware that there were also left wing critiques of the Roosevelt years.I don't get the impression that Amity Shales is on the political fringe.Could she simply be wrong?Why should one always assume that someone one disagrees with is inevitably an evil nut job?

[gabemill]

Not to jump to conclusions or cast aspersions, but I am reminded of this quote from John Stuart Mill (1806-1873), a British philosopher, economist and member of Parliament, who said more than a century ago that:

"Although it is not true that all conservatives are stupid people, it is true that most stupid people are conservative."

When seeking a culprit, this would seem to be a likely lot to start with, IMHO.

[fishgirl26]

Saying that FDR prolonged the depression with the New Deal is like saying that GWB is a Teddy Roosevelt republican!!! Someday those jokers over at Fox News might have to hire a fact checker or two!

[DuganS1]

"FDR and Congress, especially during the congressional sessions of 1933 and 1935, embraced interventionist policies on a wide front. With its bewildering, incoherent mass of new expenditures, taxes, subsidies, regulations, and direct government participation in productive activities, the New Deal created so much confusion, fear, uncertainty, and hostility among businessmen and investors that private investment, and hence overall private economic activity, never recovered enough to restore the high levels of production and employment enjoyed in the 1920s.

In the face of the interventionist onslaught, the American economy between 1930 and 1940 failed to add anything to its capital stock: net private investment for that eleven-year period totaled minus $3.1 billion.[2] Without capital accumulation, no economy can grow. Between 1929 and 1939 the economy sacrificed an entire decade of normal economic growth, which would have increased the national income 30 to 40 percent.

The government"s own greatly enlarged economic activity did not compensate for the private shortfall."

[IndianaJohn]

"Entirely due to Hoover's incompetence from 1929 to 1932."

[roald]

DuganS1...From where did the quote come? Need to have this information to consider the author's biases, if any, and to ensure the quote is taken in context. Much of it appears to be opinions.

[Erdgeist]

Republicans don't read U.S. economic history -- let alone American history. What really triggered the panic was the failure of the huge bank, Bank of United States on December 11, 1930. Wall Street had stupidly refused a 30 million dollar loan to the bank.

It was in 1931 that the recession became the Great Depression. Previously, in 1930 the unemployment was 9 percent. Then in 1931, Credit Ansalt, an Austrian bank, failed. It was far larger than Bank of the United States. Again, the German bank, Danat Bank failed. Europe was in a financial meltdown. The British economy also collapsed (no thanks to many years of free-trade running a huge deficit).

America, not far behind, did the unthinkable stupid: It defended the dollar and tried to maintain the gold standard. This RASIED interest rates thereby cutting the money supply which was under severe deflation already. The next year all went to hell in a hand basket.

[DuganS1]

The cause of the Great Depression is not what is being discussed, but rather the duration.

[Pdubya]

ok defenders of "stimulus"....here is a progressive awakening to financial terrorism. Naomi Wolf:

http://www.lewrockwell.com/podcast/download.php?filename=2008-10-30_058_americas_slow_motion_fascist_coup.mp3

[Badger84]

Fox is laying the foundation for a strategy of obstructionism in the upcoming session of Congress. More people in the business community, however, are recognizing that they can't regulate themselves and that greater government oversight is needed.

[overcat]

There's an ancedote about Truman Capote that goes something like this: Mr. Capote says something patently false about someone to an acquaintance, who says "But you know that's not true". To which he replies "When I'm finished no one else will though".

There's Faux News strategy in a nutshell.

[indy100]

Exactly right. FAUX News spews outright lies and gossip as though they were fact and the idiots watching at home not only buy right into it, but spread it. Amazing and disgusting!

[Heady]

Sounding like you know what you're talking about is often more convincing than actually knowing what you're talking about.

[johninoregon]

What gets lost in the statistics is the fact that FDR restored hope and put food on the table for millions of Americans who would otherwise have been in dire straits. Many of the young men who served in the Civilian Conservation Corps, for example, described it as the greatest experience of their lives. And who knows how many of them---exposed to new experiences and a broader sense of their own potential---went on to contribute more to society than hey otherwise would have.

Furthermore, where I live, so-called "make work" New Deal projects still stand, providing benefits to people born generations after their construction.

[DuganS1]

Doing pretend work is not the key to economic prosperity, but rather a form of welfare. Much of that work had to be subsidized for decades in the future and was thus a long term economic drain. I'm hoping this doesn't happen with the Obama infrastructure plan with a large number of politically motivated pet projects (like repaving tennis courts and improving parks and such).

[Badger84]

Our infrastructure is in a state of decline. Have you been following the news? It's not "pretend" work. All assertions to the contrary, the business community benefits from maintaining it. The primary purpose behind creating our interstate highway system was not travel; it was facilitating commerce.

[indy100]

Pretend work?? Repaving tennis courts?? Where are you getting your "news"???

[fishgirl26]

Pretend work??? Yeah, improving where people live and work is pretend work. Seriously??? In the late 1970's my dad worked building missle silos for minuteman missles. The missles have never been used but the silos and the infrastructure to support that project was financed by the government. Was that pretend work too???? So if the government funds the project it's pretend work. If private industry does it it's not???

[bayside]

And some say Fox news is a right wing propaganda, misinformation channel..

[DuganS1]

Industrial prod for Sep
1919 5.92
1921 4.5 (bad recession)
1923 6.8 (recovery, above prior peak)
1924 6.4 (minor recession)
1925 7.03
1926 7.81
1927 7.51 (minor recession)
1928 8.14
1929 8.98 (peak of late 20s boom)
1931 5.74
1932 4.72 (trough of depression, Sep 32 Hoover admin)
1933 6.25 (recovery early in FDR admin, too early for new spending programs to matter)
1934 5.62 (worse than year before)
1935 7.05 (massive deficit spending over 2x budget revenues)
1936 8.56
1937 9.18 (exceeded '29 peak for a few months after massive govt spending,still extremely high unemployment, weakest econ recovery in history before or since)
1938 7.57 (big drop, unemployment over 20%, production lower than in 1926)
1939 8.98 (right back at 1929 levels after 10 years, massive govt deficit spending, and population growth) The recovery is a failure.
1946 14.63 (economy switches over from war production to civilian production, many fear depression, govt cuts spending)
1947 16.62 (private investment huge, govt cuts spending dramatically)
1948 16.6 (continued private investment, govt cutting spending dramatically, unemployment rate only 3.8% vs 15-25% unemployment during Depression)
1950 19.11
1955 23.59 (continued strong growth)
1960 26.14
1965 36.27 (explosive growth)
1970 47.89 (over-heating, inflation)
Massive govt spending in FDRs first eight years didn't get country out of depression, far from.

[IndianaJohn]

If our current recession turns as bad as many people think it can, we will see unemployment as high as 10% and a peak decline of GDP of as much as 6%. While Hoover was in office, GDP fell by over 40% and unemployment rose to 25%. Considering the magnitude of the problem left to him by Hoover, Roosevelt's stimulus spending is more appropriately described as "inadequate" rather than "massive".

[DuganS1]

Hoover increased govt spending from $3.32 billion for 1930 to $4.66 billion in 1932 and the economy got worse. FDR increased govt spending from $4.6 billion in 1933 to $6.64 billion in 1934 and industrial production was down by Sept year over year. Government spending went dramatically down from 1945 to 1946, 1947, 1948, and 1949 and industrial production went dramatically up. The nominal increase in industrial production from 1946 to 1949 was greater than from 1933 to 1939, in a much shorter period of time.

[aforesti]

Thanks for illustrating Sirota's points with facts. It'd be nice to cite your sources, but if your "industrial prod" numbers are right, you get this:

1932 4.72 (trough of depression, Sep 32 Hoover admin)
1937 9.18 (exceeded '29 peak for a few months after massive govt spending,still extremely high unemployment, weakest econ recovery in history before or since)

so massive spending did provide remarkable recovery in just 5 years

and:
1938 7.57 (big drop, unemployment over 20%, production lower than in 1926)

this illustrates how FDR's efforts were hurt by the conservative push to balance the budget regardless of economic realities on the ground

[DuganS1]

The numbers show that recovery began before FDR took office and certainly before any of his increased spending plans took hold. The numbers also show a weak recovery relative to what happened in the late 40s when business boomed while government spending went dramatically down and the Taft-Hartley Act restricted the power of the unions.

[Pdubya]

keep in mind we were still a strong manufacturing and export nation with sound money (backed by gold and silver). we don't have any one of those three legs of the stool now.

credit comes from savings, not more credit.

[DuganS1]

Exports were a small part of the economy back then and mostly involved the agricultural sector, which was ravaged by the Smoot-Hawley tariffs. Exports had continued to increase substantially from the NBER determined beginning of the recession in Dec 2007 until August 2008. FDR took us off the gold standard right after being elected by the way. And currently manufacturing is still significant in our economy, but just not nearly as high as a percentage of GDP compared to back then.