Tuesday, August 2, 2011

The President Teaches Us about "Fiscally Conservative" FDR

For the record, FDR was president from January 1933 until his death in April 1945. Government spending increased from 8.0% of gross national product under Hoover in 1932 to 10.2% of GNP in 1936. This despite the fact that GNP was 34% higher in 1936 than in 1932.Then things really took off in the spending column when the war started. Some fiscal conservative.



  1. Robert, can you explain the depression inside of the depression? Was it simply the fed pulling in money?

  2. I wonder if Obama believes that or is he just a lying sack of statist crap.

  3. He is probably on the short list for a Nobel Prize in Economics.

  4. FDR was a fascist during most of his presidency. Fascism is extreme centrism which would not make him a conservative in any accepted use of the term. What is interesting is that FDR's '32 platform could have been called conservative in an economic sense since he railed Hoover for his out of control deficit spending. Of course we all know when he got in office all of that rhetoric went out the window. FDR, along with many in his administration, admired what Mussolini had done for Italy and felt that he was successful becuase he had so much power concentrated in his position. FDR fought throughout his presidency for similar powers and almost got them.

    One thing is similar to today (although not to imply Obama is as extreme as FDR), business lost complete faith in FDR and his constant assault on property rights. There was virtually little business investment by the private sector during the 30's.

    The 1937 dip was not becuase FDR pulled back government spending, but most likely thanks to the Fed doubling the reserve standards at a time when the recovery was starting to falter. Most likely the Fed simply accelerated what was already happening naturally. Government spending cuts were announced in '37 but did not take place until well into '38, so anyone that says that FDR cut spending and created the '37 recession, is not aware of the facts.

  5. What caused the depression within the depression? It was neither spending cuts nor increased reserve requirements. The money supply didn't fall until 1938, when the recession was already underway. The fall in the money supply was a result, not a cause, of the recession. As already stated, spending was not cut until '38, and it was barely cut.

    In any event, what did cause the depression within a depression was the second New Deal -- a considerably more left-wing and anti-business concoction than the earlier, fascistic first New Deal. Spurred by their hatred of capitalism and love for unions, the second New Dealers pursued pro-labor policies that reinstated the government-propped-up artificially high wages that had proliferated during Hoover's unofficial New Deal and FDR's first New Deal. The centerpiece of the second New Deal, the Wagner Act, provided special privileges to labor unions, basically granting them carte blanche to spread violent mayhem in order to push wage rates above market levels. These government-protected artificially high wage rates, as during the Hoover administration and the first New Deal, were the primary cause of the increased unemployment during the depression within the depression.

    Add to that cause increased business costs incurred by the passage of the Social Security Act and additional wage props caused by the newly established federal minimum wage.

    Finally, the second New Dealers' openly hostile attitude towards private enterprise terrified investors, producing what Bob Higgs terms "regime uncertainty" and discouraging the investment necessary to spur economic growth. Witness FDR's ominous 1936 speech in acceptance of the presidential nomination.

    After his party suffered a considerable trouncing in the 1938 congressional elections, FDR basically abandoned his erstwhile ultra-leftist advisers and once again allied himself with big business to prepare for rearmament, transforming himself from "Dr. New Deal to Dr. Win the War."

    Fallen from grace, the second New Dealers lamented the premature end to their utopian scheme to establish a socialist/fascist government-planned economy as FDR himself, ever the unprincipled pragmatist, devoted all his efforts to provoking the enemy into firing the first shot.