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New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America

5 star:		(120)
4 star:		(19)
3 star:		(1)
2 star:		(5)
1 star:		(17)

 

 

I'll confess to not being a fan of big government so I was prepared to be receptive to a harsh assessment of the New Deal. However, I was not prepared for the scathing indictment armed with facts, logic, primary source quotes and data that constitute this powerful book.

The book is hard to put down even as you recoil in horror at the lunatic economic policies of the era and the blatant turn to fascism. If you tried to design a program to extend the Great Depression indefinitely, you could have done little better than FDR did. The economic incompetence and unintended consequences which are detailed in all their frightening glory is mind boggling, but it is only part of the story.

The book also demonstrates the endemic political patronage and vote buying that resulted from the concentration of money and power in the hands of the federal government. State and local politicians who supported Roosevelt were rewarded with a cascade of federal dollars, those who opposed him were frozen out and inevitably lost subsequent elections.

Citizens who opposed FDR were set upon by the IRS or the NRA. The use of government power to persecute and intimidate dissension is chilling. There are several quotes or diary entries from even Roosevelt's supporters and cabinet members that point out both the insanity of the policies and the dangers of FDR's abuse of power.

With our government setting out on what's been called the "New New Deal", this book should be required reading for every citizen so they can understand both the failure of the New Deal as an economic cure and the abuse of power and vote buying that the huge transfer of money and independence from the private sector to the public sector caused and will undoubtedly cause again.

PS- As of the writing of this review, it appears you either love this book or you hate it as there are only 5 star reviews and 1 star reviews. However, if you read the reviews, you'll notice that those who have given it 5 star reviews have clearly read the book as they either quote from it or recount specific stories or facts mentioned in the book. On the other hand (again, as of this writing) the 1 star reviews don't mention a single specific point in the book and attempt to refute it. It seems pretty clear that they haven't actually read the book. If they have read it (which I doubt), they choose to review it with ad-hominem attacks, claims of bias (a historian with a world view??!!...I'm shocked!)and irrelevant rants about Bush etc. Please, do us all a favor.. if you want to attack a book at least read it and make specific logical refutations, don't simply pile on trite cliches and emotional appeals that have nothing to do with the author's scholarship.

Burton Folsom's New Deal or Raw Deal? is a timely, informative and captivating read on the destructive economic policies on the Franklin Delano Roosevelt Administration. This book is a valuable addition to the growing number of books on how government intervention, not free markets, plunged the United States deep into the Great Depression.

Folsom corrects many common misconceptions about the New Deal and the Great Depression in this book. The first misconception is that President Hoover was a principled advocate of laissez-faire capitalism. In fact, Folsom argues, Hoover was a big government Republican. Consider the Smoot-Hawley Act, which imposed unprecedented tariffs on thousands of imported items. Not only did this drastically increase the prices of U.S. imports (hurting U.S. consumers), but it also encouraged European nations to impose retaliatory tariffs on U.S. exports (hurting U.S. producers.) Furthermore, Hoover responded to the early onset of the Great Depression with disastrous economic regulations. He endorsed the Federal Farm Board, which issued over $500 million in cotton and wheat subsidies only to have the massive surpluses dumped on an oversaturated world market. Hoover also supposed the Reconstruction Finance Corporation, which spent over $1.5 billion on bailouts to failing banks and industries.

Another major point of Folsom's book is that many of FDR's programs were struck down as unconstitutional. These include the National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA). The NIRA imposed economy-wide price controls and production regulations on domestic manufacturing. The AAA was similar in spirit, except it focused on price and production controls on agriculture. The extent of the controls evidently became so detailed where, for example, the purchasers of a live chicken were required by law to blindly reach into the coop to randomly choose a chicken. Customers were not free to choose whichever chicken they fancied. Recognizing the absurdity of this, one of the Supreme Court justices quipped "what if the chickens are all on the other side?" before the Supreme Court unanimously ruled the NIRA unconstitutional.

Folsom also emphasizes the crushing tax burdens imposed by the New Deal. Under FDR, the highest income tax rate was 79%, meaning that four out of five earned dollars was confiscated by the government! According to Folsom, FDR also seriously entertained the idea of imposing a 99.5% income tax rate on all who earned over $100,000 in income. Flippantly justifying this, FDR joked that nobody in his administration would ever make that kind of money. Under FDR, the national debt grew more in the 1930s than it grew in the previous 150 years of the existence of the United States. Putting it in other words, Folsom indicates that if $100/minute was deposited into an account the day Columbus discovered North America up until FDR took office, there would not be enough money in this account to fully defray the costs of the New Deal.

The last major point that I will reiterate is the extensive level of corruption of the FDR administration. According to Folsom's research, the Works Progress Administration (WPA) offered large government handouts to whichever lobbyists ingratiated themselves most with the administration. FDR used the WPA to make or break the careers of public officials, depending on whether they supported him. This corruption rose to such an overt and perverse level that officials at the WPA used to cheerfully greet callers with "Democratic headquarters!" The Hatch Act, which forbids government employees from using their office for political activity, was passed in response to these activities.

If you like FDR, reading this book will shock you. If you already despise FDR, reading this book will reveal how truly appalling his administration was and how in many respects, FDR was like a gangster. In addition to the above, you will learn about how FDR used the IRS to intimidate political opponents, such as the esteemed banker Andrew Mellon as well as FDR's unscrupulous court-packing scheme. You will learn about the sheer arbitrary nature of FDR's economic controls. This cannot be better exemplified than how, when advised to increase the unit price of gold from 19 cents to 22 cents, FDR proposed 21 cents since it was his "lucky number".

Anyone interested in politics and economic history should read this book, before history repeats itself.

Folsom has delivered a book that is tough to put down. While flying to a conference the other day, I was reading New Deal or Raw Deal and telling my friend (who was reading another book) how great Folsom's book is and talking about some key points brought up by Dr. Folsom. I left my seat for a moment; when I returned, my friend was reading Folsom's book, and I had a hard time getting it back.

Roosevelt helped create major rifts between those who were wealthy and those who were poor and middle class. He even indicated he did that to win the election rather than pursue what was best for the country. He tried to stack the Supreme Court and used the IRS to harass his major critics.

I've had to remind myself repeatedly that this is not a fictional work and that it is about a president in the USA rather than a dictator in some distant country. For example, the New Deal's birth of the National Industrial Recovery Act of 1933 was bizarre. "It allowed American industrialists to collaborate to set the prices of their products and even the wages and hours that went into making them. Leaders in all industries, from steel and coal to shoulder pads and dog food, were invited to sit down and write codes of fair competition that would be binding on all producers in their industry. Laborers were often allowed to organize, and anti-trust laws were suspended." (pp. 43-44) The result was that many big companies could easily take business from smaller companies because the larger companies controlled the price fixing. An example Folsom uses is Jacob Maged of Jersey City, NJ. After 22 years of running a successful small business pressing clothes, Maged's reputation was one of quality work at a reasonable cost. The NRA then demanded that he charge 40 cents to press a suit instead of 35 cents. He was sent to jail and given a $100 fine for refusing to increase his prices.

Folsom has thoroughly documented the facts in the book, including several pages of sources.

By the end of the book, it is no mystery whether Roosevelt orchestrated the New Deal or a raw deal.

This book is incredibly timely. The most disturbing part is it seems like we are headed in the same direction today.

Although this work is scholarly, it is written in prose more suitable for the general reader who is not heavily into New Deal and economic history. There is much more that could have been added to reinforce the author's points, but undoubtedly the necessity to keep the book under 300 pages and hold down the cost and length for the general reader came into play to render the book a little less than totally satisfying. The problem which lowers my rating from five to four start comes from that aspect -- namely when there were (for example) five points to be made on a subject, three supporting the author's viewpoint and two that didn't, the author cut one of the points opposing his viewpoint. Allow me to hastened to add, however, that one should not accept these ratios as given in every case -- merely as an illustration.

In another book review I took the author to task on a subject with very contradictory evidence where the author had included two items supporting his viewpoint and none for the opposition. This work is much, much better -- but still suffers a little from incompleteness and a lack of fully developing both sides. An example is the figures on unemployment -- during the thirties the unemployment figures were always less than accurate -- sometimes due to not being able to collect proper data, and sometimes during the New Deal when there was an attempt to lower the numbers for political purposes. For example even today when a worker has been out of work for 18 months his status is changed from "unemployed" to "discouraged" and unemployment goes down. Neat huh? What a way to cook the books.

At any rate, the author's discussion of the glorification of the New Deal by Commanger, Morris, Schlesinger and Leuchtenburg is dead on, and this is how the New Deal has been taught to schoolchildren since World War II. If you want to see examples of the impact of challenging what has been accepted uncritically in school (& in universities), read the two and one star reviews. Above all, they should convince the reader to read this book. The other factor is that the current administration likewise believes in the leftist take on the New Deal, and we are seeing many of Roosevelt's mistakes and unsuccessful policies being resurrected. Like what, you ask? Like spending by the Federal Government will lift the US out of a depression. It didn't work under Roosevelt, it didn't for the Japanese in the 90s, and it won't work this time.

Morgenthal made many mistakes, most notably the scheme to confiscate bullion gold from all American citizens, but most of his economic views in the 30s have stood the test of time. The author's presentation of the opposing viewpoints of Roosevelt and Morgenthal are illuminating, with Roosevelt ALWAYS being incorrect (the plan to turn Germany into a pastoral state notwithstanding -- one could not give Germany's best agricultural land to Poland and Russia and then attempt to rebuild their economy on agriculture.)

The NRA was, of course, a disaster and ultimately unconstitutional, and the WPA was used essentially for political purposes. The AAA hardly helped agriculture, and the idea of a minimum wage, so loved by labor unions, can be seen to be hinder employment even today. It has all but eliminated employment of America's youth and has replaced those jobs with ones given to illegal immigrants under the table. One can simply not legislate wages or prices in spite of the vested interests that moe to raise the minimum wage every few years.

So what did Roosevelt do that was right? The repeal of the Smoot-Hawley Act was a terrific boon, as was the bank holiday. The formation of the SEC was positive although we have found that it has become a dumping ground for incompetent bureaucrats that don't do their job, and so was the elimination of the gold standard. Pretty much everything else was negative, and within the next twenty years we will be faced with the collapse of the most horrible Ponzi scheme ever concocted by man -- Social Security. Roosevelt promised that Social Security taxes would never rise above one percent of income. Tell that to a self-employed person who pays a self-employment tax (both sides of Social Security and Medicare) today of 15.3%. The government doesn't even try to hide the fact that it's just a tax whose revenue is spent every year by Congress. There is no lock box, no social security trust fund, no nothing -- it's all spent (and more) every year.

With respect to income taxes, read carefully Roosevelt's attempt to tax individuals making over certain amounts ar rates of 100% and 90% for all of their income over those amounts. Sounds rather like Congress today taking the AIG bonuses at 90%. The problem is that what we think we know from the New Deal is wrong.

In short, read this book for an idea -- and an incomplete one at that -- of what you think you know that is dead wrong. And then give the whole subject some thought -- don't simply scream that these points are not what you know from school of even things you know from what your parents told you. Roosevelt didn't take office and eliminate unemployment the next day, week, month or year. That was Hitler, and his ideas on how to take a country out of a depression were even worse than Roosevelt's.

I recommend this book to all -- I only wish the author had been more thorough and served up more information on the issues so that the far-left today couldn't dismiss the book as simply "lies." And remember, Roosevelt's administration was thoroughly penetrated by Soviet agents like Hiss and White who did the best they could to move the US into the socialist/communist camp.

Other good books include "The Road To Serfdom", "The Forgotten Man", "FDR's Folly" and "Pride, Prejudice and Politics: Roosevelt Versus Recovery."

I read the book.

I thought it was revealing and showed how FDR
thought and operated. Does anyone doubt that FDR did a lot
of things with reelection in mind? In 1938 unemployment was
still over 20%. Eight years of New Deal had little to nothing
to show as mentioned in the Secretary of the Treasury Morgenthau quote:

"We have tried spending money. We are spending more than
we have ever spent before and it does not work. ...
After eight years of this Administration, we have just as
much unemployment as when we started ...."

Folsom's review of the current literature on the New Deal
and FDR is informative. He points to Leuchtenburg and others as
the standard histories of the New Deal and suggests that they
paint a biased picture of FDR. He questions whether these
historians have let their political ideology guide their writings.

It has become a standard trait of historians to embed
their viewpoints in the presentation. They let their political
philosopy guide the story. That is also true of Folsom. The saving grace
of Folsom is that he lists extentsive references to the facts he
presents and references some the opposing viewpoints. Furthermore, he is
readable. If you want to understand the New Deal you must read this
book. However, once you have read it you won't understand the New Deal.

It seems to fully understand the New Deal, there is not a single book
to be read that can be trusted. What must be done is to read many of
them and only then, come to your own conclusions. Folsom provides an extensive list of references for those who wish to learn more.

Burton Folsom, a Professor of History at Hillsdale College, already has one classic to his credit: "Myth of the Robber Barons." Now he offers a concise, yet detailed, revision of the Leuchtenberg-Schlesinger myth that Franklin Roosevelt "saved" capitalism. In both his introduction and concluding remarks, Folsom assesses why the legend arose that Roosevelt had "brought us out of the Depression." He engages in a brief analysis of what caused the Great Depression, frequently noting that the economists have left the historians in the dust: the majority of economists today neither think that business failures caused the Great Depression, or that Roosevelt's policies did much to temper it, let alone solve the crisis.

Folsom assesses adequate blame to Herbert Hoover, though not (as is commonly portrayed) as a wild-eyed laissez-faire capitalist, but as a meddling Progressive in the mold of Woodrow Wilson. Roosevelt in many ways merely continues, but greatly expands, Hoover's programs. One of the more interesting chapters deals with the NRA and its price fixing schemes. Here we had an agency of the federal government telling tailors what they could charge to hem a pair of pants! The NRA, thankfully, was brought down by a butcher who, in the process of selling chickens, allowed his customers to (imagine this!) select the chicken they wanted. The NRA goons attempted to force him to demand that they blindly take the first chicken that came within reach. In the subsequent court decision, the NRA was ruled unconstitutional. By that time, at least one businessman, who thought he couldn't charge the high prices demanded by the NRA or lose his customers, languished in jail, running his business from behind bars.

Folsom covers the better-known distortions of the New Deal---the minimum wage, Social Security, the banking regulations---but also reveals how Roosevelt used the IRS to smash political enemies, including editors whose columns he didn't care for. It's a chilling image, given talk of re-instituting the modern-day "gag rule" called the "fairness doctrine." Roosevelt used federal money as much to ensure his re-election as he did to stimulate a recovery, plastering wavering districts with cash until they arrived at the right ballot-box conclusions. Thus, as Folsom shows, the New Deal was not just an economic rebuilding program, but a political weapon designed to ensure the Democrat Party would hold power for much of the 20th century.

A good compliment to Amity Shlaes' "The Forgotten Man," Folsom sticks more to the specifics of how each piece of legislation retarded recovery. There is no question, when you finish, that Roosevelt stuck most Americans with a "raw deal" to ensure he remained in the White House for more than a decade.

Another veil of revisionist history is uncovered. Those who believe that increased deficit spending by the government and increasing the taxes on the "rich" will be the way to get out of our current situation ought to read this book and see that 8 years of this same plan did nothing to rescue this great country from the depression. The book reads fairly easy, I found particularly interesting the political games played even back then by FDR. Now we know where our current politicians learned how to play the political game.

(Note: I own and have READ all of this book) (...)
Interesting book.
This is a very well written and well researched book. A keeper.
It is not one I read cover to cover over two days. It's more a case of reading a chapter, digesting it, cross referencing it, and then moving on. The prose, to my taste, is a little on the heavy, slightly cumbersome side. It's not a novel. It's not a racy read, like perhaps Fleming writes. It's more of an economics history text book. What IS attractive is that the style is balanced, very fair, presenting BOTH SIDES of the arguments. That makes it a good research book. It avoids shrill indignation, or fatuous adulation. It is timely, with, on the one side, many advisers of Mr Obama, publicly touting some similar 'big government spending' policies and attitudes, whilst presenting them as excitingly new and original. That is historically simply not correct. Just read the book and see how intensely Roosevelt tried to wield the clout of Big Government. I believe this book gives a better insight into the arguments for and against the New Deal. I feel there was a well meaning idealism at work (former social workers Hopkins and Perkins et all meant well), Roosevelt indubitably (The First Hundred days, etc) was not a Coolidge, and put his back into it. But against that, this book raises again the shadow side of FDR and his policies, which today, only the true devotees choose to wholly ignore. The machinations, the sledge hammer political approach, the war on the "economic Royalists", the "court packing" fiasco, the cynical use of the IRS to persecute his detractors, the 'taxpayer dollar bombardment' of swing states, etc, etc. Many reasoned studies today attack FDR pretty furiously. Defenders of FDR mostly seem to just ignore such misguided babbling, and I'm always on the hunt for good, reasoned, New Deal apologies. However, let me say no matter which side you prefer, the extreme laissez faire minimalist Coolidge approach, or the heavy 'beneficient hand' of Big Government, you will find in this book many good summaries of the principle arguments, for and against.
Mr Obama himself, I suspect, knows more than some give him credit for, and is astute enough to know government stimulatory ('anti-cyclical')spending is a double edged sword, which needs very careful handling lest it cut the wrong way. The deficit economic theories of Keynes (who met with Roosevelt, and didn't get along too well) have been widely challenged. Many argue against them, saying "Tried, tested...and failed". However,others hold a polar opposite view, and argue that FDR should have spent more, not less, and that the same massive government spending today,in 2009, is the only way forward. Still others allege a common misconception exists today of what Keynes was actually saying!
However, read the book and draw your own conclusions. And enjoy, as I did, checking thoughtfully on the historic 1930's backdrop to today's intense economic debate. The stakes... are high.

I have a lot of areas highlighted. Some examples:
"Federal Aid encourages the expectations of paternal care on the part of Government and weakens the sturdiness of our national character".(p.77)
"This historic shift to using federal dollars for local relief profoundly changed the American work ethic" (p.81)
"Such a system tended to make liars out of everyone involved. Governors and mayors would shed abundant tears telling Hopkins and Roosevelt of their financial hardships; Hopkins and Roosevelt then listened and pretended to dispense FERA money solely on the basis of need, not on political considerations." (p.82)
(p.132) "Forbes magazine protested that "a fundamental motive of the New Deal is to wage war against bigness in business."
(p.132) Roosevelt encouraged this fight and tore into business in his State of the Union message in January 1936. He condemned the "selfish power" and the old 'resplendent economic autocracy' that was fighting his 'new instruments of public power.' Roosevelt added, "In the hands of a people's Government this power is wholesome and proper. But in the hands of political puppets of an economic autocracy such power would provide shackles for the liberties of the people."
Hm. You can imagine the raucous cheers. These are fighting words, unquestionably encouraging a class hatred. Was that good for America? If you love FDR, and many people do, I fully respect that, then you are however faced with the requirement to face the often heard complaint that the entrepreneurial class (ranging from small to big) was discouraged from launching new business ventures and investments, and creating employment. Uncertainty undermined confidence.
Next question might be: "Did that matter?" If you feel it didn't matter, then I would like to hear your reasoning, and your notion of what America stands for.
I hate to say it, but if you like FDR and his policies, then you will probably growl your way through this book. Folsom does not pull any punches.
(p.133) "Roosevelt's next step was to impose yet another tax on business - this one a tax on all undistributed corporate profits."
(P.133) "Businessmen may have been nearly unanimous in criticizing this new tax on profits, but Roosevelt believed it was a vote-getter in November, and throughout the election year he hammered away at "economic royalists" and "malefactors of great wealth".
I don't doubt it WAS a vote-getter. Good for Roosevelt. The question one might ask: Was it good for the country?
And one I really chuckled about, "With so much help from most reporters in so many areas, Roosevelt sometimes became careless in telling the truth." (p.228)
"So much help from most reporters in so many area" is a criticism, no, a devastating condemnation of the impartiality/objectivity of the media at that time. Many of course make the same somber assessment of today's trendy so-called 'liberal' media. Who, oddly enough, don't seem to be alarmed at the steady non-liberal (in the old, classic sense) erosion of freedom, and the ever growing boot print of bigger and bigger central government. This book illuminates some of the cynical,manipulative origins of this insidious, ongoing process. The unethical undermining of American democracy's (beautifully eloquent) founding idealism, and its replacement with a 'no holds barred', and 'the end justifies the means' approach to fooling and bamboozling the voting masses. (Many of whom were tragically desperate, and aching for the coming of a true savior.) How an elite, puffed up with hubris, arrogant and inflexible, dragged down the Old Jeffersonian America. If it ever existed?
But against that, I think it also shows the tragedy of good intentions, real problems, real hurt, real despair. I refuse to believe there was not a great deal of good in the motivations of many of the key New Deal players.Some led extraordinarily dedicated lives. Good did come out of it. As usual, nothing is black and white.

If you are considering this book, check out the "contents" page. It is laid out well, very clear, and it makes it very easy to leaf back and forwards afterward and look something up.
This is an excellent read. Now I need to go read another book which is more sympathetic to FDR, and once again contrast the arguments. I'm wide open to reading suggestions. I have several more FDR books on my wish list, and I shall review them all over time. Trying very hard not to be biased, and willing to sincerely weigh all counter arguments...
Peace. Enjoy the read.
PS: Please "comment" constructively if you feel I am missing the point, or if you can recommend further reading to illustrate positive New Deal accomplishments not properly brought out in this book.

In school you are taught Roosevelt was the country's greatest president who pulled the country out of the 1929 Recession. This recession had turned into a depression by Hoover and Roosevelt actions. In this well researched book about 15% of the book(40 pages) are footnotes citing sources. My non economics major wife and two friends understood the economic theories as presented and how Roosevelt, an economic illiterate, greatly extended the depression. He thought the Raw Deal would have to be restarted after WWII but looks like the country survived without it. It is interesting to compare then to the modern day.

Great book for the times in which we live. If you're interested in the effect of government intervention in the free market this is your book.

The quote that best sums up the book is from Henry Morgenthau - FDR's Treasury Secretary after 8 years of increased government spending to help with the depression:

"We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"

I hope we learn from the past.