THE REAL ROOSEVELT ADMINISTRATION

July 17, 2010

The Yalta Myth is no longer sufficiently credible to be flammable, and the argument that Roosevelt failed to end the Depression is too foamite-sodden for even so fiendishly persistent and endearing a pyromaniac as the delightful and otherwise rigorous Amity Shlaes to make any headway reigniting it. But, sensing the proximity of tinder with the feral olfactory acuity of a hob ferret detecting the invisible presence of a mate in heat, the Scorch Roosevelt Society has encroached, as softly as bats, on what the Republicans tried, without success, to sell 72 years ago as the “Roosevelt Recession.”

The argument is that Roosevelt threw money out of the windows from 1933 to 1937 to pull out of the Depression, and then eased up; and that the economy therefore relapsed until he was rescued by Hitler and Tojo, in response to whom he was able to absorb the unemployed in the arms buildup and the war. These choristers claim that Obama is about to suffer the same fate, for similar reasons, with no savior in sight, not even one so unbidden as Hitler.

Coming in to office in March 1933, Roosevelt found unemployment at between 25 and 33 percent, depending on which unofficial source is relied on (the states kept these numbers, rather haphazardly, and the Hoover administration was not much interested in precision); and there was no direct federal aid for the jobless. The banking and stock- and commodity-exchange systems had collapsed and shut down. The stock market was down by 90 percent, the money supply had shrunk drastically, there was severe deflation, and 45 percent of the country’s residential accommodation was under threat of mortgage foreclosure. All farm prices were below subsistence levels. Roosevelt instituted gigantic programs that would today be called workfare in the fields of infrastructure and conservation.

By reconstructing the banking system, sponsoring democratically agreed farm-price levels (by free vote of farmers by agricultural category) and incentivizing farmers to scale back production to levels necessary to sustain those prices, refinancing millions of mortgages, and generally infusing optimism into the country, the New Deal achieved in its first year the rehiring of about 4 million of the unemployed, and the absorption of 6 million more in the workfare and conservation programs. So about 60 percent of the unemployed were gainfully occupied within a year. All the codes and blue eagles and parades, attracting the celebrities from Al Jolson to John Steinbeck (the precursors to Warren Beatty and Barbra Streisand) were razzmatazz to boost public morale. All this was the first New Deal.

By 1934, Roosevelt had withdrawn the dollar from the gold standard, though intergovernmental dollar holdings could be translated into gold, and he had fought off the French, British, and German bacterium of reliance on an overvalued U.S. dollar, which lingers yet in the systems of such viral carriers as China. He also established Social Security, the cornerstone of the second New Deal, which provided direct cash relief to the unemployed. But Roosevelt incentivized both public- and private-sector work over what he called “the pauperism of the dole.”

Last week Amity Shlaes, who inexplicably turns into an unstoppable cuckoo bird where the New Deal is concerned, was up to her mischief again. She accused FDR of the “great error” of ignoring “the impact on the economy of taxes, employment, and the entrepreneurial environment,” of praising “very high taxes,” and, through his undistributed-profits tax on corporations, causing “that sickening double dip.” Good try, Amity, but no sale; that is bunk.

In mid-1935, responding to the political inroads of Huey Long, Charles E. Coughlin, Francis Townsend, and other extremists, Roosevelt raised income taxes on the wealthiest, but spoke of the virtues of high taxes only during the war, and as a temporary measure — along with some further wage and work regulations, and a change in the structure of hydroelectric-power groups after the collapse of the Insull interests. Taxing undistributed income was an unsuccessful effort to raise investment and dividends and discourage hoarding of cash by companies, but it was hardly confiscatory taxation. FDR did resent corporate ingratitude for what he sincerely thought to be his rescue of almost all the capitalist Arcadia his opponents cherished.

Roosevelt was always determined to maintain the leadership of the popular majority by pushing his opponents out to extremes, and by keeping the partisanship fairly good-natured. Norman Thomas’s Socialist-party vote declined by 85 percent from 1932 to 1936; when asked if the New Deal was not carrying out his program, he replied, “Yes, carrying it out in a coffin.” FDR would single out Congressmen “Martin, Barton, and Fish” and humorously repeat their names so that his crowd shouted out the names when he got to them; he also said how scandalized “the Scottish soul” of his dog (a Scottie) was when the Republicans said that he had sent a destroyer to collect him on an Aleutian island. It was quite light-hearted.

If he had once singled out by name the “malefactors of great wealth” and exploited the anger of the Depression-scourged masses, they would have burned down the houses of the rich. Instead he funneled all their diffuse resentment onto nonexistent categories of “economic royalists, monopolists, war profiteers,” and so forth. Roosevelt preserved the moral integrality of the nation, and focused opinion on the country’s real enemies, the Nazis and Japanese imperialists. What today’s critics ignore is the political context in which Roosevelt operated, when Fascists and Communists were numerous and much mythologized and the other major democracies were torpid, and there were terrible and explosive human problems within the U.S.

Roosevelt also always placated large factions in his party so as not to lose them off the back of the polyglot bandwagon that he made of the Democrats to turn them into the natural party of government after 70 years of the Republican incantation of the magic name of Lincoln. His Silver Purchase Act of 1934 was a pretty rich payoff ($1.5 billion over 15 years) for the silver interests, but under three-time presidential candidate and party kingmaker William Jennings Bryan (whose brother was the vice-presidential candidate in 1924 and daughter was a strong candidate for a Cabinet seat in 1932), bimetallists had wagged the dog.

After FDR’s landslide reelection in 1936, unemployment had been reduced by more than half from 1933, to about 12 percent in a 5 percent larger work force; the public-works and conservation programs absorbed 70 percent of the remaining unemployed; and direct relief assured at least the subsistence of the remainder.

Roosevelt placated the opponents of deficit spending in his own party, led by Treasury Secretary Henry Morgenthau and former budget director Lewis Douglas. Conventional unemployment then started back toward 22 percent, and in the spring of 1938, with the Republicans, who had agitated for precisely these measures, cock-a-hoop about the “Roosevelt Recession,” he resumed heavy pump-priming. The fiscal conservatives could not, and did not, say that they had not been given their chance. Roosevelt was not an ideologue and had said at the outset of his presidency that the crisis was so extreme there was no useful precedent for how to resolve it. He promised un-self-conscious experimentation, and that is what he delivered. The 1937–38 pause was a breath-catching, party-unifying moment, and possesses none of the epochal proof of anything that Amity and her FDR Arson Society are claiming, including in her partial exhumation of poor old Morgenthau in the Wall Street Journal on July 13.

This third New Deal rapidly brought traditional unemployment back down from 22 percent to 17 percent, of whom the majority were in the workfare programs. All was proceeding on course satisfactorily when these trends were accelerated by the fourth New Deal, launched in the autumn of 1939, when Roosevelt began the greatest defense buildup in the history of the world. Unemployment was below 10 percent on Election Day 1940, and in practice almost all were engaged in the official assistance programs (including in the construction of the about-to-be-historic aircraft carriers Yorktown and Enterprise). By Pearl Harbor, in December 1941, there was no unemployment, by any measurement: an absolute reduction of the 17 million jobless of nine years before, in a work force larger by almost 10 million — or 27 million jobs in nine years, in a population of 130 million; or, to put it still another way, almost 70 percent of total net new job creation by Ronald Reagan, George Bush Sr., and Bill Clinton in 20 years in a population that reached 300 million. (The fifth and last New Deal would be the GI Bill of Rights, which effectively turned the American working class into a middle class.)

Many of these problems of historical interpretation would not have arisen if highly capable pro-Roosevelt historians — such as Arthur Schlesinger, Frank Freidel, William Leuchtenberg, and Doris Goodwin — had not allowed Roosevelt’s enemies to treat the hard-working, economically paid builders of the Lincoln Tunnel, Chicago waterfront, and TVA as unemployed, while the armed forces and defense-production conscripts of Germany, Britain, France, and Japan were somehow more legitimately employed.

I can’t believe it is necessary here to contrast with the Thirties the current conditions of the U.S. economy. Roosevelt always sent precise bills to the Congress, roused public support for them, and jammed them through as unaltered as possible. This administration, as if conducting a free-thinking art kindergarten, has put casters on Christmas trees and wheeled them in to the Capitol rotunda for their boughs to be weighted down by the favored baubles of gluttonous Democratic committee chairmen.

If this administration wanted to reduce unemployment and ensure against inflation, it should never have touched a candy-store stimulus that could never work, nor wasted a year on a health-care bill that makes things worse and not better. It should have had workfare infrastructure programs as used by Roosevelt, tax cuts as passed by Reagan, and revenue replacement taxes on discretionary energy use, non-essential financial transactions, deluxe health-care plans, and luxury-goods sales.

Roosevelt gets a solid pass on economics but a near-perfect score on catastrophe avoidance. This group died early on. Fire when ready, Amity, but not with a Dick Cheney confusion about targets.

We believe that the Constitution of the United States speaks for itself. There is no need to rewrite, change or reinterpret it to suit the fancies of special interest groups or protected classes.