Getting the New Deal Wrong

I understand people get incredibly passionate about the 1930s, I really do, and the piece I read recently in favor of Senator Bernie Sanders has a paragraph touching on the New Deal with statements such as Franklin D. Roosevelt being an answer to 1930s America's call for "Hope and Change" and also how he engaged in "one crazy, untested, heavily-criticized, but often effective program after another" in reference to the New Deal.  The problem with this, at its core, is that FDR was not a paragon of revolutionary change nor were his initial New Deal efforts an amazing effort to entirely redo the American economy or radically re-invent the social structures of the United States.  FDR began from a fairly moderate position and worked within the confines of the existing United States, he only moved further left as the 1930s wore on.

Yes, in the first 100 days plus, as part of the First New Deal, FDR did end the United States reliance upon gold as the backing of our currency (domestic impact only) and did massively reform the bank system to stabilize the system.  However FDR did not replace the banks with a federally owned system, instead he used existing banks and a system of consolidation.  In fact, the Emergency Banking Legislation FDR passed was anti-local banking in nature, squashing over 4,000 local banks forcibly into larger national banks to stabilize the system.

FDR did pump $500 million into state, county, and local governments for the purpose of civil improvements, revenue drawn in part by borrowing on the credit of the federal government.  FDR faced regular criticism from his own cabinet members and conservative Democrats, as well as Republicans, for his regular argument that between 1933-1934 he had two federal budgets to oversee, the "regular budget" which he "balanced" by cutting salaries to federal workers and veterans pensions and the "emergency budget" for his various social programs which he ran in a high deficit.  But lets talk about the real turd in this First New Deal, the Blue Eagle program or as it is officially known, the National Recovery Administration (NRA).

That shiny Blue Eagle was something put into the windows of businesses that voluntarily complied with the National Recovery Administration (NRA) efforts at a centrally planned United States economy.  Using a system of price controls, wage controls, employment quotas, and production quotas this system of industry-developed and policed economic plans was implemented across the nation to stabilize the economy.  What it actually did was simply create an immediate, and powerful, black market in goods and services to undermine its controls and pushed more economic power to larger corporations which had set the prices and standards to ensure their economies of scale could pound smaller competitors out of business.  (Which was a stated FDR goal of the NRA program by the way, ending "harmful competition" and more "soberly administering" the current economic capacity of the nation.)

The second New Deal, from 1935-1938, is the one most Americans associate with FDR.  That is then the National Labor Relations Act, the Works Progress Administration (poster above), and Social Security were all created.  In addition that was when FDR put through his massive income tax increase - targeted at the ultra-wealthy.  These are the programs, along with First New Deal programs that were successful, that most Americans think back upon when they wax nostalgic about the Progressive 1930s and compare these policies to Senator Sanders proposed plans.  There is just one more tiny problem to bring up though.

That image is from 1937, when the economy went into another tailspin when FDR moved to end many of the federal programs to see if the United States economy had stabilized without federal subsidies.  The short answer is no, it hadn't, and cutting off the artificial stimulation of federal aid provoked a massive crunch in the economy.  FDR claimed it was the work of a criminal conspiracy aimed at undermining him, the Democrats, and the New Deal spearheaded by a wealthy elite, but no evidence of that was ever found.  FDR eventually had to pump another $5 billion in federal aid in 1938 to once again boost domestic purchasing power and end the 1937 recession.

It's not that FDR's policies failed or the United States didn't need many of the efforts of the New Deal, but what is critical is to paint the New Deal accurately.  It was a massive effort that did some good, did some bad, and flirted with some ideas that the United States pretty roundly rejected.  Even in the worst economic crisis in modern United States history the general public showed they were not interested in planned economies, massive federal reshaping of the economy, or even prolonged federal presence in the economy except for dealing with an immediate crisis in 1932-1933.

Senator Sanders supporters can certainly argue for modern change, but please don't hold the New Deal up as "proof" that popular outrage sparked a huge change in the economy led by a Progressive Wonder in FDR.  FDR actually was far more conservative, and cautious, in his efforts and pushed the nation in a new direction gradually.

Sources:  Wikipedia entries on the New Deal and the National Recovery Administration