Franklin Delano Roosevelt

Franklin Delano Roosevelt, commonly known by his initials FDR, was the 32nd President of the United States, serving from March 4, 1933 until his death on April 12, 1945, when he was succeeded by Harry S. Truman.

Roosevelt is best known for the New Deal, his attempt to end the Great Depression through further government intervention, and for involving the United States in World War II.

In 1937, Roosevelt attempted to "pack" the Supreme Court with six new justices after the existing court repeatedly blocked his interventionist legislation.

Presidential campaign
Under the Democratic platform of 1932, which Franklin D. Roosevelt endorsed, contained several subsidies and regulations, but it hardly embraced the enormous expansion in federal power that FDR would achieve. The very first plank called for "an 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." Subsequent planks demanded a balanced budget, a low tariff, the repeal of Prohibition, "a sound currency to be preserved at all hazards," "no interference in the internal affairs of other nations," and "the removal of government from all fields of private enterprise except where necessary to develop public works and natural resources in the common interest." The document concluded with a quote from Andrew Jackson: "equal rights to all; special privilege to none."

FDR's campaign reflected that platform. He accused Herbert Hoover of "reckless and extravagant spending," and he further denounced the Republican incumbent for believing "we ought to center control of everything in Washington as rapidly as possible." Even when he called for interventions in the economy, he generally couched his words in the old liberals' language of equal treatment rather than the new liberals' vision of enlightened central planning. In his famous Forgotten Man speech of April 1932 (see transcript), the Democratic candidate pointed to the wave of foreclosures sweeping the nation. Noting that Hoover had created a "two billion dollar fund...put at the disposal of the big banks, the railroads and the corporations of the Nation," FDR averred that the government should "provide at least as much assistance to the little fellow as it is now giving to the large banks and corporations." Once in office, the new administration did indeed repeal Prohibition, and it eventually lowered some trade barriers as well. By the time of FDR's death, the federal bureaucracy's power had grown so enormously that Hoover was widely remembered as the last apostle of laissez faire.

Roosevelt both promised to abolish the disastrous policy of alcohol prohibition (which was probably as important as anything else in securing his election), and thundered against Hoover’s overspending: I accuse the present Administration of being the greatest spending Administration in peace times in all our history. It is an administration that has piled bureau on bureau, commission on commission, and has failed to anticipate the dire needs and the reduced earning power of the people. Bureaus and bureaucrats, commissions and commissioners have been retained at the expense of the taxpayer.

Now, I read in the past few days in the newspapers that the President is at work on a plan to consolidate and simplify the Federal bureaucracy. My friends, four long years ago, in the campaign of 1928, he, as a candidate, proposed to do this same thing. And today, once more a candidate, he is still proposing, and I leave you to draw your own inferences.

And on my part I ask you very simply to assign to me the task of reducing the annual operating expenses of your national Government.

Policy
A principal feature of New Deal economic policy was government-sponsored industrial cartels (the National Recovery Act); agricultural cartels (the Agricultural Adjustment Act); and labor cartels (the Norris-LaGuardia and Wagner Acts). The purpose of any cartel is to restrict output and raise prices. Lower levels of production leads to higher unemployment, which is exactly what the NRA and AAA did.

The NRA was almost identical to the Italian corporatist system that existed at the time. In Italy each trade or industrial group was organized into a government-controlled "corporative" association that had the power to plan production and pricing. In the U.S. the NRA organized each industry into federally-supervised trade associations called "Code Authorities" which could also limit output and set prices. The antitrust laws were explicitly set aside.

Over 700 industrial codes were created and were rigorously enforced by thousands of government code enforcers who, "could enter a man's factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant." A hapless New Jersey tailor named Jack Magid became nationally famous after he was arrested, convicted, and imprisoned by the code police for the "crime" of pressing a suit of clothes for 35 cents when the Tailors' Code fixed the price at 40 cents. The NRA was ruled unconstitutional by the U.S. Supreme Court on May 27, 1935. A study of the Act noted that "the licensing provision, giving the president the power of life or death over business enterprises, is the ultimate weapon of enforcement and the capstone of the powers granted to the president ... the most extraordinary extension of presidential power in American history." The Supreme Court's decision has noted, that 'fair competition' is not defined in the law and could be a convenient designation for whatever set of laws that is proposed and the president may approve. It ruled that NIRA was "an unconstitutional delegation of legislative power."

But after Roosevelt's court-packing threat of 1937, the justices succumbed to whatever creative definition of fairness that Congress or federal agencies chose to proclaim. For instance, in 1942, Congress passed the Emergency Price Control Act, which created an Office of Price Administration. The OPA had sweeping power to set or strike down prices in any industry or activity that it considered to be "defense-related" — a vague term that could have encompassed practically the entire national economy. The act contained no substantive guidelines for the administrator's decisions but merely required prices that "in his judgment will be generally fair and equitable."

Effects
The Roosevelt administration also orchestrated various price-fixing schemes in labor markets, principally for the benefit of unions. Payroll taxes to finance Social Security and Unemployment Insurance programs increased employers' wage bills even further, which also reduced the level of employment. According to an econometric estimate, government-mandated payroll cost increases added nearly 1.2 million people to the unemployment rolls by 1938.

The unemployment rate during the 1933-1940 period averaged about 18% and was as high as 28.3% in March of 1933. By the end of 1938, on the eve of World War II, the U.S. unemployment rate still hovered at just over 18 percent and was higher than it was in 1933, President Franklin D. Roosevelt's first year in office. This occurred despite (or rather, because of) six years of unprecedented levels of government intervention into the U.S. economy. The American recovery was slower than in most European nations; by 1937 Great Britain's unemployment rate had declined to 10.3 percent.

Herbert Hoover's Reconstruction Finance Corporation was greatly expanded by Roosevelt, but its effect was to make capital markets less efficient, thereby prolonging the Depression even further. As explained by RFC director Jesse Jones in his autobiography, Fifty Billion Dollars, "The law specified that we should lend only where the borrower could not get the money from others on reasonable terms." That is, only to uncreditworthy borrowers. Guided by this directive, Jones and the RFC redirected billions of dollars in valuable capital to politically-connected but economically-questionable businesses. "We even loaned money to [the owners of] a drove of reindeer in Alaska," Jones boasted. The RFC was abolished in the 1955 under a cloud of corruption and scandal.

Roosevelt's public works programs may have been an economic failure, but they were a resounding political success as they provided virtually unlimited opportunities for political patronage. In 1939 a special U.S. Senate Committee on Campaign Expenditures investigated the programs and found that in many states workers were required to sign a pledge to vote Democratic and, in some cases, to make campaign contributions, as a condition of employment. Businesses that sold supplies to the government were in some places required to make campaign contributions to the Democratic party in return for the contracts. The New Deal was largely a legalized shake-down operation.

Roosevelt's billions, adroitly used, had broken down every political machine in America. The patronage they once lived on and the local money they once had to disburse to help the poor was trivial compared to the vast floods of money Roosevelt controlled. And no political boss could compete with him in any county in America in the distribution of money and jobs.

As Henry Morgenthau, the secretary of the treasury and one of the most powerful men in America, said before the Democrats on the House Ways and Means Committee in 1939 :

"'We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong...somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises....I say after eight years of this Administration we have just as much unemployment as when we started....And an enormous debt to boot!'"

Links

 * The Myth that Is FDR by Garet Garrett, 1949. Also: MP3 audio version
 * "The Roots of the Social Security Myth" by John Attarian. (PDF)
 * Wikipedia on Supreme Court packing attempt
 * Mises Review: "Politically Incorrect Guide to..." by David Gordon, Summer 2009 (republished as Mises Daily here)
 * The Free Market: "How FDR Made the Depression Worse" by Robert Higgs, February 1995
 * The Free Market: "The Truth about FDR" by Thomas E. Woods, Jr., June 2001
 * The Free Market: "The New Deal Debunked" by Thomas J. DiLorenzo, November 2004
 * #32 – FDR Was Elected in 1932 on a Progressive Platform to Plan the Economy by, November 2014
 * Mises Review: "Politically Incorrect Guide to..." by David Gordon, Summer 2009 (republished as Mises Daily here)
 * The Free Market: "How FDR Made the Depression Worse" by Robert Higgs, February 1995
 * The Free Market: "The Truth about FDR" by Thomas E. Woods, Jr., June 2001
 * The Free Market: "The New Deal Debunked" by Thomas J. DiLorenzo, November 2004
 * #32 – FDR Was Elected in 1932 on a Progressive Platform to Plan the Economy by, November 2014
 * Mises Review: "Politically Incorrect Guide to..." by David Gordon, Summer 2009 (republished as Mises Daily here)
 * The Free Market: "How FDR Made the Depression Worse" by Robert Higgs, February 1995
 * The Free Market: "The Truth about FDR" by Thomas E. Woods, Jr., June 2001
 * The Free Market: "The New Deal Debunked" by Thomas J. DiLorenzo, November 2004
 * #32 – FDR Was Elected in 1932 on a Progressive Platform to Plan the Economy by, November 2014
 * #32 – FDR Was Elected in 1932 on a Progressive Platform to Plan the Economy by, November 2014