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As depicted by mainstream pundits, Franklin D. Roosevelt was a great president who transformed the U.S. government by enabling it to take an active role in providing for the welfare of the American people, thus uplifting the broad masses and mitigating the severity of the Great Depression. At one time liberals tended to assert that Roosevelt had brought the country out of the Depression, but today their position is that Roosevelt was unable to achieve that aim because of his failure to spend enough, as Keynesian economics prescribes. Meanwhile, a minority of critics — conservatives and libertarians — maintain that Roosevelt’s statist policies actually were counterproductive and prolonged the Depression.

But almost unknown to all but specialists of the period — and even many of them have downplayed it — is the fact that during Roosevelt’s 1932 presidential campaign and his famous First Hundred Days in office, some of his most significant positions were in line with economic austerity and small government — in line, that is, with the reactionary image of his predecessor, Herbert Hoover. In fact, Roosevelt adhered to positions of limited government and fiscal austerity that no leading right-wing Republican today, including Sen. Rand Paul, would dare to advocate, much less try to implement.

Those traditional economic verities loomed large in the Democratic Party platform of 1932, which advocated the “immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government.” In addition, the platform called upon “the Democratic Party in the states to make a zealous effort to achieve a proportionate result.”[1]Democratic Party Platform of 1932, June 27, 1932, Political Party Platforms, posted by Gerhard Peters and John T. Woolley, The American Presidency Project. Note that the Democrats called for reducing by a quarter not only federal spending but also government spending at the state and local levels. Moreover, they proposed that reduction of expenditures in the depths of the Great Depression, with unemployment exceeding 25 percent.

Now, one could argue that party platforms can be meaningless and that candidates often ignore much of their content. However, that was not the case with Roosevelt. In his acceptance speech, Roosevelt stated that he accepted the Democratic platform “100 percent.”[2]Franklin D. Roosevelt, Address Accepting the Presidential Nomination at the Democratic National Convention in Chicago, July 2, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project. And on the campaign trail he emphasized and expanded upon the key conservative aspects of the platform that pertained to economic austerity and limited government. He frequently quoted the platform, saying that it was a “promise binding on the party and its candidates.”[3]Franklin D. Roosevelt, Radio Address on the National Democratic Platform From Albany, New York, July 30, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

The mainstream regards Hoover — incorrectly — as the antithesis of Roosevelt and a defender of the “old order,” a phrase found in the title of the first volume of Arthur Schlesinger’s classic The Age of Roosevelt.[4]Arthur M. Schlesinger, Jr., The Age of Roosevelt. Vol. 1: The Crisis of the Old Order, 1919-1933 (Boston: Houghton Mifflin, 1957). Mainstreamers have traditionally claimed that the Hoover stage of the old order featured a devotion to small government, fiscal austerity, and laissez faire. Murray N. Rothbard writes: “The conventional wisdom, of historian and layman alike, pictures Herbert Hoover as the last stubborn guardian of laissez faire in America. The laissez-faire economy, so this wisdom runs, produced the Great Depression in 1929, and Hoover’s traditional, do-nothing policies could not stem the tide. Hence, Hoover and his hidebound policies were swept away, and Franklin Roosevelt entered to bring to America a New Deal, a new progressive economy of state regulation and intervention fit for the modern age.”[5]Murray N. Rothbard, “Herbert Hoover and the Myth of Laissez-Faire,” 1966, posted at The Internet Guy, December 15, 2008.

While the myth is not quite as strong as it was when Rothbard wrote his piece in 1966, it is still powerful.[6]William E. Leuchtenburg, The FDR Years: On Roosevelt and His Legacy (New York: Columbia University Press, 1997), pp. 212-213. Vestiges of it survive in the history profession. William Leuchtenburg, doyen of the living historians of Roosevelt’s New Deal, writes in a book published in 1997: “Almost every historian now recognizes that the image of Hoover as a ‘do-nothing’ president is inaccurate.” However, on the very next page he adds: “Yet in office he became the most extreme kind of advocate of laissez-faire.”[7]William E. Leuchtenburg, The FDR Years: On Roosevelt and His Legacy (New York: Columbia University Press, 1997), pp. 212-213. In his 2009 biography of Hoover, after emphasizing Hoover’s failure to spend federal funds to help needy people, Leuchtenburg writes: “Historians who later portrayed Hoover as a proto-New Dealer misconceived his point of view. Only unwittingly — by revealing the inadequacy of his voluntaristic approach — was Hoover the progenitor of FDR’s enlargement of federal authority.” Moreover, he adds that “[s]ingle-mindedly Hoover concentrated not on aid to the bereft but on balancing the budget.”[8]William E. Leuchtenburg, Herbert Hoover: The American Presidents Series: The 31st President, 1929-1933 (New York: Henry Holt and Co., 2009), pp. 133-35.

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If a leading historian of the period can still cultivate the myth, in a mildly diluted form, then one would assume that educated non-historians would be more extreme; and that is the case. For example, the well-known economist Lawrence Summers, who served as treasury secretary under Bill Clinton and director of the National Economic Council for the first two years of the Obama administration, stated: “It’s very tempting to always think that the government should just stand back and let the private sector sort these problems out. That’s the kind of thinking that made the Depression ‘Great.'”[9]Jonah Goldberg, “Dispelling The Herbert Hoover Myth,” CBS News / National Review Online, October 3, 2008. And Nobel Prize- winning economist Paul Krugman wrote: “Herbert Hoover didn’t have a problem making unpleasant decisions: he had the courage and toughness to slash spending and raise taxes in the face of the Great Depression. Unfortunately, that just made things worse.”[10]Paul Krugman, “Stuck in the Muddle,” New York Times, January 22, 2009. Krugman was right about the rise in taxation.

Popular liberal TV commentator Rachel Maddow, who has a Ph.D. in political science, went further than Krugman and recited the Hoover myth in unadulterated form:

Hoover is a political epithet in bad economic times because his response to the Depression was to first do nothing and then do stuff that made it worse. The country needed massive federal spending to stimulate demand and keep people working.Hoover cut spending. The government had an economic responsibility to borrow some money and get credit moving. Hoover picked that awesome time to balance the budget. Everything was going the wrong direction economically, so the government needed to make some big, bold moves in the opposite direction.[11]Jack Coleman, “Clownish Rachel Maddow Rewrites History of Great Depression, Reinforces Liberal Creation Myth,” MRC NewsBusters, December 15, 2008. The article includes video of Maddow’s presentation on MSNBC.

Adam Cohen, a journalist and former assistant editorial page editor of The New York Times, writes in his book Nothing to Fear: FDR’s Inner Circle and the Hundred Days that Created Modern America (2009) that “Hoover’s prescription for the Depression was a pair of conservative standbys: keeping federal spending in check; and remaining on the gold standard…. Even some conservatives worried that by sticking so strictly to free-market capitalism, Hoover was actually undermining it.”[12]Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), p. 30. For more information illustrating that the Hoover myth persists, see: David Boaz, “The Hoover Myth Marches On,” Cato at Liberty, October 15, 2011; and Steven Horwitz, “Herbert Hoover: Father of the New Deal,” Cato Institute Briefing Papers, September 29, 2011.
Seeing Hoover’s presidency quite differently, however, Roosevelt proclaimed in a campaign speech in Sioux City, Iowa, on September 29, 1932:

I accuse the present Administration of being the greatest spending Administration in peacetime in all American history — one which piled bureau on bureau, commission on commission, and has failed to anticipate the dire needs or reduced earning power of the people. Bureaus and bureaucrats have been retained at the expense of the taxpayer. We are spending altogether too much money for government services which are neither practical nor necessary. In addition to this, we are attempting too many functions and we need a simplification of what the Federal government is giving the people.

Roosevelt asked the American people “simply to assign to me the task of reducing the annual operating expenses of your national government.”[13]Franklin D. Roosevelt, Campaign Address on Agriculture and Tariffs at Sioux City, Iowa, September 29, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

In his study of Hoover, Rothbard largely agreed with Roosevelt’s view during the campaign that Hoover was, in fact, a big spender for his time and did bring about deficits, and thus was the originator of policies that would be hallmarks of Roosevelt’s New Deal.[14]Murray N. Rothbard, America’s Great Depression (PDF), fifth edition (Mises Institute, 2000), pp. 336. Rothbard summarizes Hoover’s record thus:

“Mr. Hoover met the challenge of the Great Depression by acting quickly and decisively, indeed almost continuously throughout his term of office, putting into effect ‘the greatest program of offense and defense’ against depression ever attempted in America. Bravely he used every modern economic ‘tool,’ every device of progressive and ‘enlightened’ economics, every facet of government planning, to combat the depression. For the first time, laissez-faire was boldly thrown overboard and every governmental weapon thrown into the breach. America had awakened, and was now ready to use the State to the hilt, unhampered by the supposed shibboleths of laissez-faire. President Hoover was a bold and audacious leader in this awakening. By every ‘progressive’ tenet of our day, he should have ended his term a conquering hero; instead he left America in utter and complete ruin — a ruin unprecedented in length and intensity.”
Actually, the most eminent newspaper columnist of the era, Walter Lippmann, recognized that, too, though in a more moderate form, writing in a 1935 newspaper column: “The policy initiated by President Hoover in the autumn of 1929 was utterly unprecedented in American history. The national government undertook to make the whole economic order operate prosperously…. The Roosevelt measures are a continuous evolution of the Hoover measures.”[15]Quoted in Thomas Sowell, The Housing Boom and Bust, revised edition (New York: Basic Books, 2010), p. 165.

During the 1932 presidential campaign, the “pre-evolved” Roosevelt was definitely a deficit hawk. In his radio address from Albany on July 30, 1932, he said: “Any government, like any family, can for a year spend a little more than it earns. But you and I know that a continuation of that habit means the poorhouse.” Roosevelt expressed abhorrence of the fact that “the true deficit as of June 30th next year will be over $1,600,000,000 — a deficit so great that it makes us catch our breath.”[16]Franklin D. Roosevelt, Radio Address on the National Democratic Platform from Albany, New York July 30, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

Quite unlike today’s liberal Democrats, Roosevelt did not hold that government deficits could simply be funded by higher taxes, especially higher taxes on the wealthy. Rather, like proponents of the free market, he held that such an approach would be counter-productive. In fact, Roosevelt’s position here was contrary to that of Hoover: the latter greatly increased taxes as a result of the falling revenue caused by the deepening depression. Rothbard writes:

If he wanted to balance the budget, Hoover had two choices open to him: to reduce expenditures, and thereby relieve the economy of some of the aggravated burden of government, or to increase that burden further by raising taxes. He chose the latter course. In his swan song as Secretary of Treasury, Andrew Mellon advocated, in December, 1931, drastic increases of taxes, including personal income taxes, estate taxes, sales taxes, and postal rates. Obedient to the lines charted by Mellon and Hoover, Congress passed, in the Revenue Act of 1932, one of the greatest increases in taxation ever enacted in the United States in peacetime.[17]Murray N. Rothbard, America’s Great Depression (PDF), fifth edition (Mises Institute, 2000), p. 286.

In proposing the tax increase, Hoover described it as a temporary measure “indispensable to the restoration of confidence.” The Revenue Act, which Congress approved in June, raised income-tax rates at all levels, including a drastic increase of the top marginal rate from 25 percent to 63 percent and quadrupling the lowest tax rate from 1.1 percent to 4 percent. Corporate taxes were raised to 13.75 percent. Estate tax rates also climbed sharply. Various exemptions were reduced significantly or, for corporate taxes, eliminated entirely. Having caused a significant reduction in economic activity, the increased rate of taxation led to a significant fall in revenue.[18]Joseph J. Thorndike, “New Deal Taxes: Four Things Everyone Should Know,” Tax History Project, November 20, 2008; Veronique de Rugy, “High Taxes and High Budget Deficits: The Hoover–Roosevelt Tax Increases of the 1930s” (PDF), Cato Institute, March 2003; and Dennis S. Ippolito, Deficits, Debt, and the New Politics of Tax Policy (New York, Cambridge University Press, 2012), p. 35.

Apparently mesmerized by the mythical Roosevelt and Hoover, now-iconic economist Thomas Piketty, who in his best-selling Capital in the Twenty-First Century proclaims that economic prosperity and equality can be enhanced through steep tax increases on the rich, falsely attributes Hoover’s gigantic tax hike to Roosevelt and places it in 1933, after Roosevelt had taken office! Piketty writes: “Roosevelt came to power in 1933, when the crisis was already three years old and one-quarter of the country was unemployed. He immediately decided on a sharp increase in the top income tax rate, which had been decreased to 25 percent in the late 1920s and again under Hoover’s disastrous presidency. The top rate rose to 63 percent in 1933….” (Piketty, pp. 506-7)[19]Quoted by Robert P. Murphy, “Piketty Can’t Even Get His Basic Tax History Right,” Free Advice, May 9, 2014.

Apparently many of Piketty’s reviewers, more than a few of whom are professional economists, cleave to the Roosevelt/Hoover myth, in light of the fact that few reviews exposed the writer’s gross error — though it must be granted that many professional reviewers do not closely read the books they are paid to review. Nonetheless, the reality is almost the polar opposite from what Piketty claimed: the early Roosevelt professed to support budget reduction in preference to increased taxation, and, as will now be shown, abjured soak-the-rich taxes as counter-productive.

Roosevelt stated his position on taxes and government debt in his speech in Pittsburgh on October 19, 1932. First he went over deficits: “For over two years our Federal Government has experienced unprecedented deficits, in spite of increased taxes.” After pointing out that this took place at all levels of government — federal, state, and local — he declared:

“Come-easy-go-easy” was the rule. It was all very merry while it lasted. We did not greatly worry. We thought we were getting rich. But when the Crash came, we were shocked to find that while income melted away like snow in the spring, governmental expense did not drop at all. It is estimated that in 1932 our total national income will not much exceed 45 billions, or half of what it used to be, while our total cost of Government will likely be considerably in excess of 15 billions. This simply means that the 14 percent that Government cost has risen to has now become 33 1/3 percent of our national income…. That is a perfectly impossible economic condition. Quite apart from every man’s own tax assessment, that burden is a brake on any return to normal business activity.[20]Franklin D. Roosevelt, Campaign Address on the Federal Budget at Pittsburgh, Pennsylvania, October 19, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

Emphasizing that higher taxation was not the answer, Roosevelt pointed out that taxation was harmful to the general welfare even if the taxes were paid only by the wealthy:

Taxes are paid in the sweat of every man who labors because they are a burden on production and are paid through production. If those taxes are excessive, they are reflected in idle factories, in tax-sold farms, and in hordes of hungry people, tramping the streets and seeking jobs in vain. Our workers may never see a tax bill, but they pay. They pay in deductions from wages, in increased cost of what they buy, or — as now — in broad unemployment throughout the land. There is not an unemployed man, there is not a struggling farmer, whose interest in this subject is not direct and vital. It comes home to every one of us![21]Franklin D. Roosevelt, Campaign Address on the Federal Budget at Pittsburgh, Pennsylvania, October 19, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

We may question whether Roosevelt really believed what he was saying during the campaign. Roosevelt biographer Ted Morgan, who is quite willing to analyze Roosevelt’s motives elsewhere, presents the matter as puzzling and gives it little attention. Morgan writes: “The paradox of the 1932 campaign was that Roosevelt spoke out against spending, against unbalanced budgets and a bloated bureaucracy, while Hoover defended deficit spending and experimental measures — it was as if the speeches had gotten mixed up.”[22]Ted Morgan, FDR: A Biography (New York: Simon and Schuster, 1985), p. 362.

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It is commonplace for politicians to promise one thing while running for office in order to appeal to voters and then do something quite different after they enter office. And Roosevelt was a politician nonpareil. His deceptive practices were most apparent in regard to World War II. Before Pearl Harbor, he repeatedly claimed that all of his activities to aid the Allies were intended to keep the United States out of war, when in fact he sought the opposite, which is what his non-neutral policies were actually achieving. After the United States entered the war, he proclaimed that it was being fought to bring about a peace based on the idealistic principles of the Atlantic Charter when, in actuality, he was making deals with Stalin that would turn over Eastern and much of Central Europe to the latter’s totalitarian dictatorship.

As Roosevelt confided to his close friend, Secretary of Treasury Henry Morgenthau, six months after the United States had entered World War II: “You know I am a juggler, and I never let my right hand know what my left hand does … and furthermore I am perfectly willing to mislead and tell untruths if it will help win the war.”[23]Quoted in Thomas Fleming, The New Dealers’ War (New York, Basic Books, 2001), p. 26. That Roosevelt might also have resorted to lies to get elected president in 1932 is definitely possible. But his advocating a reduction in the size of government and its expenditures to garner votes definitely suggests that he and his advisors believed that the American people wanted a return to the old verities of limited government and that they had not been swayed by the problems of the Great Depression to demand a permanently powerful welfare state, as is sometimes assumed.

Roosevelt sought to placate the business and investment communities[24]Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), p 85. in order to get the economy moving forward again, but, as historian Julian Zelizer maintains, he “also believed that a large portion of the electorate still saw balanced budgets as a symbol of stable government. Moreover, the majority of Americans clearly shared the traditional American aversion to taxation…. The public generally believed that fiscally conservative policies guaranteed low taxes.” Zelizer points out that leaders of the Democratic Party of all ideological hues as well as American Federation of Labor President William Green sought a reduction in government spending.[25]Julian E. Zelizer, Governing America: The Revival of Political History (Princeton, N.J.: Princeton University Press, 2012), p. 128.

Whatever his motivation, Roosevelt supported economizing, as illustrated by his selecting Lewis Douglas for budget director. Douglas was on the record as holding that a balanced budget was essential in order to move the country out of the Depression. Historian Kelly McMichael Stott in her article, “FDR, Lewis Douglas, and the Raw Deal,” points out that “Roosevelt and Douglas held similar views on economic policy, and in January 1933 Douglas, under Roosevelt’s direction, began writing the Economy Act.”[26]Kelly McMichael Stott, “FDR, Lewis Douglas, and the Raw Deal,” Historian, 63:1, Fall 2000, p. 107. For similar views on Douglas, see Zelizer, 127-130.

Roosevelt’s first major biographer, Frank Freidel, likewise stresses the Douglas-Roosevelt connection, observing that “through the early months of his presidency, for a few minutes almost every morning while he was still in his bedroom, Roosevelt saw his director of the budget to talk over specific economies, and discuss larger programs.”[27]Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 253. Moreover, Freidel acknowledges that “[t]he slashing of federal expenditures, balancing of the budget, and reorganization of federal agencies to make them more efficient were all integral components of Roosevelt’s overall recovery program. He gave them first priority.”[28]Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 237.

Freidel explains that it was quite understandable for Roosevelt to hold such views, since they were commonplace among people of his era. When Roosevelt came to Washington in 1913 to serve in Woodrow Wilson’s administration as assistant secretary of the navy, the federal budget was less than three-quarters of a billion dollars and the national debt was only little over one billion dollars. The post-World War I high budget of $25 billion would decline to $16 billion in 1931.

“Then the Depression brought deficits unprecedented in peacetime,” Freidel writes, “and by the pre-World War I standards, which many people would have still liked to consider normal, [they] were nothing short of horrendous.”[29]Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 238.

On March 10, 1933, just six days after his inauguration, Roosevelt submitted to Congress his budget-cutting measure, developed by Douglas. Officially labeled “A Bill to Maintain the Credit of the United States Government,” it was popularly called the Economy Bill. In his accompanying message, Roosevelt told Congress, “Too often in recent history, liberal governments have been wrecked on the rocks of loose fiscal policy. We must avoid this danger.”[30]Franklin D. Roosevelt, Message to Congress on Economies in Government, March 10, 1933, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

To decrease the federal budget, the bill authorized the president to reduce the pay of federal workers, downsize or eliminate government agencies, and, most controversially, cut veterans’ benefits. More than a fourth of the federal budget was going to veterans, and they had a politically powerful lobby. Economizers usually focused on veterans’ benefits as excessive, pointing out that veterans were collecting benefits for injuries that were not related to their military service. Douglas estimated that the cuts from the bill would reduce the federal budget by $500 million, about 80 percent of which would come from payments to the veterans and the remainder from the pay of federal employees.[31]Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), pp. 95-100.

While the press was sympathetic, veterans and their supporters were enraged. The bill faced stiff opposition from Roosevelt’s own party. However, by dint of his personal popularity and the use of pressure tactics, Roosevelt was able to push the bill through the House of Representatives by a vote of 266 to 138.

To get it through the Senate, where there was fear of a filibuster, Roosevelt promoted his very popular beer and light-wine legalization bill, which by permitting the sale of those beverages (which had been prohibited by the Volstead Act of 1919[32]The Eighteenth Amendment to the Constitution, establishing national prohibition of alcoholic beverages, was very brief. It did not define such terms in the amendment as “intoxicating liquors” and did not specify penalties for violation. The Volstead Act of 1919 implemented those details. The amendment was ratified in January 16, 1919, went into effect on January 16, 1920, and was repealed by the 21st Amendment on December 5, 1933.) would also tax them. The bill appealed not only to the drinking public but also to those who believed it would increase employment and government revenue. It became known as the Beer-Wine Revenue Act, and was enacted on March 22. This popular bill served as something of a pleasant diversion during the divisive debates over the Economy Bill. That bill thus passed the Senate by a lopsided vote of 62 to 13.[33]Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), pp. 105-106.

On March 20, 1933, Roosevelt signed the Economy Bill into law; it was popularly dubbed the Economy Act.

At the same time that Roosevelt was reducing the regular federal budget, he was injecting large amounts of money into his emergency budget for newly created programs. But it seems that Roosevelt did actually believe in the need to cut existing government programs: on March 27 he vetoed an appropriation bill emerging from Congress that would have added additional spending. In his veto message, Roosevelt stated:

In March 1933, the Congress passed, and I signed, “An Act to maintain the credit of the United States Government.” This law became one of the principal pillars of national recovery for the clear reason that for the first time in many years the recurring annual expenses for the maintenance of the Government were brought within the current revenues of the Government. It is true that very large but wholly distinct funds are being dispensed daily for emergency purposes, but these funds are going directly to the purpose of saving farms, saving homes and giving relief and employment to millions of our fellow citizens. They are nonrecurring in nature, while the increases contemplated in this Bill are continuous and permanent.[34]Franklin D. Roosevelt, Veto of the Appropriations Bill, March 27, 1934, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

Roosevelt elaborated further about the temporary nature of his New Deal measures. “Because of the emergency expenditures for relief and unemployment,” he explained, “the expected total deficits this year and in 1935 are necessarily large; but at the same time a program for a completely balanced budget by June 30, 1936, was determined upon as a definite objective.”[35]Franklin D. Roosevelt, Veto of the Appropriations Bill, March 27, 1934, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

Again, one might retort, “That’s what they all say,” because modern presidents generally have some purported budget plan that they perpetually violate. But Freidel points out that the burgeoning emergency budget “involved no hypocrisy on Roosevelt’s part. Before his inauguration he had planned that emergency budget to carry the temporary burden of relief, hoping that with the rapid return of recovery that budget could quickly be eliminated and that overall he could keep the government finances in balance.”[36]Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 252.

Moreover, while the Economy Act could not take effect until July 1, 1933, Roosevelt was actively working with Budget Director Douglas to implement other budget-cutting measures, which included the reduction of departmental personnel and expenditures, and the reorganization or elimination of agencies, including some outfits of a rather exotic nature.[37]Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 249. Roosevelt issued Executive Order 6166 to achieve the latter goals. It stated that the reductions it called for would save an estimated $25 million.[38]Franklin D. Roosevelt: White House Statement Summarizing Executive Order 6166, June 10, 1933, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

Among the agencies abolished were such ideal targets for budget-cutting as the National Screw Thread Commission, the purpose of which was to ascertain and establish screw-thread standards for manufacturers and the federal government.[39]Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 252. A recent paper referring to this commission stated: “Indeed, the individuals and interest groups who negotiated and often clashed under the auspices of the National Screw Thread Commission were rarely rational; more than a few had a screw loose.”[40]Stephen Mihm, “The Nuts and Bolts of Modernity” (PDF), Society for the History of Technology (SHOT) Dearborn Meeting Preliminary Program, November 6-9, 2014. (Search for the title on the page to find the link.)

Newsweek editor and political journalist Jonathan Alter, in his book The Defining Moment: FDR’s Hundred Days and the Triumph of Hope, points out, “All told, the cuts in government spending were far more than Hoover even dared to propose, and by the end of the Hundred Days they would cause a near rebellion on Capitol Hill.”[41]Jonathan Alter, The Defining Moment: FDR’s Hundred Days and the Triumph of Hope (New York, Simon and Schuster, 2006), p. 275. During an interview with CBS’s “60 Minutes” on November 14, 2008, President-elect Barack Obama said he had recently been reading The Defining Moment and hoped to apply in his own adminstration some of Roosevelt’s strategies as outlined in the book.

It seems quite likely that Roosevelt really saw his new programs as simply temporary — they would keep people employed and fed until the economy had corrected itself. Roosevelt basically had two budgets: the regular federal budget, which needed to be balanced, and the emergency budget, which was temporarily needed to deal with the particular exigencies of the Depression. Once America had returned to its normal prosperity, the emergency programs and their budget presumably would no longer be needed.

Now, free-market economists hold that, if left alone, the market will move to correct itself and that government intervention in the economy can prevent the natural correction from coming about. Of course, Roosevelt’s new programs had exactly that latter effect.

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I must insert an anecdote about my family’s encounter with the Economy Act. My mother used to tell me the story of my father (who died when I was 8) losing his draftsman’s job in the federal government as a result of Roosevelt’s budget-cutting. My mother, who was from Massachusetts and continued to cast an absentee ballot (District of Columbia residents not having the vote at that time), visited the office of Democratic Bay State Senator David I. Walsh. Bearing a chocolate cake as a gift — which did not reach the status of bribery even in those penurious times — my mother explained that she was a constituent of the senator’s and a registered Democrat, and that my father had lost his federal job and needed another one. The staff told her that they would attempt to do something, and not long afterward my father was given a draftsman’s position in the Public Works Administration (PWA), one of the New Deal agencies. Sometime later, his unit became part of a permanent federal agency.

While Roosevelt’s economic thinking reflected much of the traditional American capitalistic economic orthodoxy, as illustrated, that does not mean that some significant New Deal programs did not deviate from it from the outset. Probably the most significant of that category in the early New Deal was the National Industrial Recovery Act (NIRA), which created the National Recovery Administration (NRA). The NRA sought to alter the competitive market mechanism by promoting cooperation among business, labor, and government in order to maintain prices and wages above market rates, in the then-widespread belief, especially in the business community, that excessive (“cut-throat”) competition had caused and prolonged the Depression. The belief was that such competition led to a vicious downward spiral of reduced prices and reduced wages, ultimately bringing about business failures and unemployment. As Hugh Johnson, the head of the NRA, colorfully put it: “The very heart of the New Deal is the principle of concerted action in industry and agriculture under government supervision looking to a balanced economy as opposed to the murderous doctrine of savage and wolfish individualism, looking to dog-eat-dog and devil take the hindmost.”[42]Quoted in Arthur M. Schlesinger, The Coming of the New Deal: 1933-1935, The Age of Roosevelt, vol. 2 (Boston: Houghton Mifflin, 1958), p. 112.

Nevertheless, the legislation tried to appear to be all things to all people and ended up mired in ambiguity. While one clause exempted the proposed codes from the anti-trust laws, another forbade the codes “to permit monopolies or monopolistic practices, or to eliminate, oppress, or discriminate against small enterprises.”[43]Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton, N.J.: Princeton University Press, 1966), pp. 38-50. Once in operation, however, the NRA essentially acted as a giant cartel scheme, under which the federal government attempted to enforce cartel pricing and output reductions in the economy.

It should be pointed out that Roosevelt was relying on the power of government to enforce a position held by Hoover. As secretary of commerce under Presidents Harding and Coolidge and as president, Hoover had exhorted businesses to pay high wages to workers and had supported the Trade Association movement, which sought to bring about cooperation among similar businesses that involved the maintenance of prices above the competitive market level. Unlike the NRA, however, Hoover held that those trade associations should be voluntary with no government coercion involved. Still, his appeals to patriotism and civic duty had an effect on businessmen’s actions.[44]Richard K. Vedder and Lowell E. Gallaway, Out of Work: Unemployment and Government in Twentieth-Century America (New York: New York University Press, 1993), pp. 89-95.

Though an intelligent man who was certainly a master of interpersonal skills, Roosevelt was not a deep thinker on economics. In that, he resembled most successful politicians. Nor was he an ideologue. He, as well as others, described his policy as one of experimentation or pragmatism (presumably of the Deweyan variety). However, the fact that he pursued divergent, even contradictory, polices simultaneously meant that the results of any one policy could not be determined accurately.[45]Gary Dean Best discusses the divergent economic philosophies and programs being pushed in the Roosevelt administration in the following two books: Peddling Panaceas: Popular Economists in the New Deal Era (New Brunswick, N.J.: Transaction Publishers, 2005) and Retreat from Liberalism: Collectivists versus Progressives in the New Deal Years (Westport, Conn.: Praeger, 2002).

That Roosevelt as president would gravitate toward economic statism is perhaps explained by his enormous self-confidence and the fact that he had become the state, in keeping with Louis XIV’s alleged declaration, “L’Etat, c’est moi.” Nonetheless, the traditional American economic verities loomed larger in his policies, at least in the early period of the New Deal, than either his critics or his supporters have tended to acknowledge.

References

[1] Democratic Party Platform of 1932, June 27, 1932, Political Party Platforms, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[2] Franklin D. Roosevelt, Address Accepting the Presidential Nomination at the Democratic National Convention in Chicago, July 2, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[3] Franklin D. Roosevelt, Radio Address on the National Democratic Platform From Albany, New York, July 30, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[4] Arthur M. Schlesinger, Jr., The Age of Roosevelt. Vol. 1: The Crisis of the Old Order, 1919-1933 (Boston: Houghton Mifflin, 1957).

[5] Murray N. Rothbard, “Herbert Hoover and the Myth of Laissez-Faire,” 1966, posted at The Internet Guy, December 15, 2008.

[6] William E. Leuchtenburg, The FDR Years: On Roosevelt and His Legacy (New York: Columbia University Press, 1997), pp. 212-213.

[7] William E. Leuchtenburg, The FDR Years: On Roosevelt and His Legacy (New York: Columbia University Press, 1997), pp. 212-213.

[8] William E. Leuchtenburg, Herbert Hoover: The American Presidents Series: The 31st President, 1929-1933 (New York: Henry Holt and Co., 2009), pp. 133-35.

[9] Jonah Goldberg, “Dispelling The Herbert Hoover Myth,” CBS News / National Review Online, October 3, 2008.

[10] Paul Krugman, “Stuck in the Muddle,” New York Times, January 22, 2009.

[11] Jack Coleman, “Clownish Rachel Maddow Rewrites History of Great Depression, Reinforces Liberal Creation Myth,” MRC NewsBusters, December 15, 2008. The article includes video of Maddow’s presentation on MSNBC.

[12] Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), p. 30. For more information illustrating that the Hoover myth persists, see: David Boaz, “The Hoover Myth Marches On,” Cato at Liberty, October 15, 2011; and Steven Horwitz, “Herbert Hoover: Father of the New Deal,” Cato Institute Briefing Papers, September 29, 2011.

[13] Franklin D. Roosevelt, Campaign Address on Agriculture and Tariffs at Sioux City, Iowa, September 29, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[14] Murray N. Rothbard, America’s Great Depression (PDF), fifth edition (Mises Institute, 2000), pp. 336. Rothbard summarizes Hoover’s record thus:

“Mr. Hoover met the challenge of the Great Depression by acting quickly and decisively, indeed almost continuously throughout his term of office, putting into effect ‘the greatest program of offense and defense’ against depression ever attempted in America. Bravely he used every modern economic ‘tool,’ every device of progressive and ‘enlightened’ economics, every facet of government planning, to combat the depression. For the first time, laissez-faire was boldly thrown overboard and every governmental weapon thrown into the breach. America had awakened, and was now ready to use the State to the hilt, unhampered by the supposed shibboleths of laissez-faire. President Hoover was a bold and audacious leader in this awakening. By every ‘progressive’ tenet of our day, he should have ended his term a conquering hero; instead he left America in utter and complete ruin — a ruin unprecedented in length and intensity.”

[15] Quoted in Thomas Sowell, The Housing Boom and Bust, revised edition (New York: Basic Books, 2010), p. 165.

[16] Franklin D. Roosevelt, Radio Address on the National Democratic Platform from Albany, New York July 30, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[17] Murray N. Rothbard, America’s Great Depression (PDF), fifth edition (Mises Institute, 2000), p. 286.

[18] Joseph J. Thorndike, “New Deal Taxes: Four Things Everyone Should Know,” Tax History Project, November 20, 2008; Veronique de Rugy, “High Taxes and High Budget Deficits: The Hoover–Roosevelt Tax Increases of the 1930s” (PDF), Cato Institute, March 2003; and Dennis S. Ippolito, Deficits, Debt, and the New Politics of Tax Policy (New York, Cambridge University Press, 2012), p. 35.

[19] Quoted by Robert P. Murphy, “Piketty Can’t Even Get His Basic Tax History Right,” Free Advice, May 9, 2014.

[20] Franklin D. Roosevelt, Campaign Address on the Federal Budget at Pittsburgh, Pennsylvania, October 19, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[21] Franklin D. Roosevelt, Campaign Address on the Federal Budget at Pittsburgh, Pennsylvania, October 19, 1932, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[22] Ted Morgan, FDR: A Biography (New York: Simon and Schuster, 1985), p. 362.

[23] Quoted in Thomas Fleming, The New Dealers’ War (New York, Basic Books, 2001), p. 26.

[24] Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), p 85.

[25] Julian E. Zelizer, Governing America: The Revival of Political History (Princeton, N.J.: Princeton University Press, 2012), p. 128.

[26] Kelly McMichael Stott, “FDR, Lewis Douglas, and the Raw Deal,” Historian, 63:1, Fall 2000, p. 107. For similar views on Douglas, see Zelizer, 127-130.

[27] Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 253.

[28] Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 237.

[29] Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 238.

[30] Franklin D. Roosevelt, Message to Congress on Economies in Government, March 10, 1933, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[31] Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), pp. 95-100.

[32] The Eighteenth Amendment to the Constitution, establishing national prohibition of alcoholic beverages, was very brief. It did not define such terms in the amendment as “intoxicating liquors” and did not specify penalties for violation. The Volstead Act of 1919 implemented those details. The amendment was ratified in January 16, 1919, went into effect on January 16, 1920, and was repealed by the 21st Amendment on December 5, 1933.

[33] Adam Cohen, Nothing to Fear: FDR’s Inner Circle and the Hundred Days That Created Modern America (New York: Penguin Press, 2009), pp. 105-106.

[34] Franklin D. Roosevelt, Veto of the Appropriations Bill, March 27, 1934, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[35] Franklin D. Roosevelt, Veto of the Appropriations Bill, March 27, 1934, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[36] Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 252.

[37] Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 249.

[38] Franklin D. Roosevelt: White House Statement Summarizing Executive Order 6166, June 10, 1933, posted by Gerhard Peters and John T. Woolley, The American Presidency Project.

[39] Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston: Little, Brown, and Company, 1973), p. 252.

[40] Stephen Mihm, “The Nuts and Bolts of Modernity” (PDF), Society for the History of Technology (SHOT) Dearborn Meeting Preliminary Program, November 6-9, 2014. (Search for the title on the page to find the link.)

[41] Jonathan Alter, The Defining Moment: FDR’s Hundred Days and the Triumph of Hope (New York, Simon and Schuster, 2006), p. 275. During an interview with CBS’s “60 Minutes” on November 14, 2008, President-elect Barack Obama said he had recently been reading The Defining Moment and hoped to apply in his own adminstration some of Roosevelt’s strategies as outlined in the book.

[42] Quoted in Arthur M. Schlesinger, The Coming of the New Deal: 1933-1935, The Age of Roosevelt, vol. 2 (Boston: Houghton Mifflin, 1958), p. 112.

[43] Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton, N.J.: Princeton University Press, 1966), pp. 38-50.

[44] Richard K. Vedder and Lowell E. Gallaway, Out of Work: Unemployment and Government in Twentieth-Century America (New York: New York University Press, 1993), pp. 89-95.

[45] Gary Dean Best discusses the divergent economic philosophies and programs being pushed in the Roosevelt administration in the following two books: Peddling Panaceas: Popular Economists in the New Deal Era (New Brunswick, N.J.: Transaction Publishers, 2005) and Retreat from Liberalism: Collectivists versus Progressives in the New Deal Years (Westport, Conn.: Praeger, 2002).

(Republished from The Last Ditch by permission of author or representative)
 
• Category: History • Tags: Franklin D. Roosevelt 
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