I need a break from writing my paper anyway
this is going to be fun.
If you want to understand how dumb FDR's policies, were, you have to understand how dumb Hoovers' were. To understand how dumb Hoover was, you need to understand how Not Dumb Hardings were.
President Harding was handed Wilsons' mess; similar to how Obama got handed Bush's boondoggle. The GNP plunged by 24%, unemployment more than doubled. The recession was, from peak to trough, nearly as severe as the one that presaged the Great Depression a decde later. Hardings' Secretar of Commerce (Herbert Hoover) insisted that the Federal government should step in and provide relief. Instead, Harding drastically cut Federal spending and Federal tax rates, declaring his intention to "'strike the shackles from industry". Harding cut not until he balanced the budget, but until he had surpluses, which he used to pay off national debt. within a little over a year, unemployment had been cut almost in half, from about 11.7% to 6.7. The unemployment rate continued to fall under his tenure, until it bottomed out at 1.8% in 1926.
Coolidge was President at that point, having picked up in 1925, but having largely continued his predecessors' economic policies. It wasn't until Hoover won the Presidency in 1928 that he would get to try out his ideas about managing the economy on a national level.
And manage he attempted to do. In response to the recession, Hoover put in place the programs that would eventually grow into the New Deal (as multiple New Deal craftsmen later admitted). He created a temporary bureau to expand public works to provide employment, put in place a "stimulus" (though he forced the Railroad Industry to finance it) roughly equal to 1/3 of federal outlays in 1929, created the Reconstruction Finance Corporation (whose job it was to to supply faltering too-big-to-fail businesses uch as railroads and banks with emergency low-interest loans). By 1932 the RFC was also loaning money to states (something for us to look forward to, I suppose) to prop up unemployment benefits and public works projects. He also propped up wages. in 1921, businesses had been able to cover their losses by cutting wages. in 1929 they weren't allowed to do so, and the result was growing unemployment, from 3% in 1929, to 9% by the beginning of 1930. After that doozie, Hoover decided he needed to "protect American workers", particularly farmers, and thus we got the Hawley Smoot Tarrif. Prior to it's passage, the New York Times published a list of 1,028 economics who stated that the results of such a tarrif would be devastating. GM's European director, Graeme Howard sent Hoover a telegram that was impressively prescient: PASSAGE BILL WOULD SPELL ECONOMIC ISOLATION UNITED STATES AND MOST SEVERE DEPRESSION EVER EXPERIENCED. Hoover pushed it right on through. As if that wasn't enough, the Revenue Act of 1932 jacked up taxes; as it was becoming increasingly clear that Hoover didn't have the money to pay for his social programs.
Like another current President we could name, FDR campaigned against Hoovers' deficites (that he had built up attempting to "prime the pump" and so forth), only to put Hoovers policies on steroids. Interestingly, FDR decided that the real problem was that people had too much money and food, and so he decided to reduce the supplies of both. His American Agricultural Administration destroyed tons of crops and over six million pigs in an attempt to make food more difficult to get (i'm not making this up, that was the
plan). This, mind you at a time when the Department of Agriculture states America was not producing enough food to maintain its population at the subsistence diet level. He also reduced the money supply by pushing deflation. Not that he went about this too intellectually rigorously. He would set gold rates as he ate eggs in bed, for example, based on what numbers "felt lucky".
I'm going to say this clearly so that it's incredible stupidity stands out clear:
FDR jacked up prices in the middle of a recession. The Great Economist Keynes came to meet Roosevelt, feeling upbeat about this President who was putting (however imperfectly) his ideas about public spending to work; only to leave shaking his head and complaining that the President was a complete economic illiterate.
FDR also expanded Hoovers policies of propping up wages (which is really just another price - the one you pay for labor). The Wagner Act was supposed to solve the unemployment problem by unionizing everyone under the sun. Apparently unknown to FDR was that Unions make their money by
reducing employment so that resources devoted to labor are disproportionately divided among their members. Unemployment shot up. Roosevelt tried to hire those who had been put out of work by his own policies via massive public works projects, but the funds to pay them had to come from somewhere, and that somewhere was the private market. intended as a stopgap measure, they instead displaced and destroyed private-sector jobs, leaving those workers worse off than before and the government further in debt.
Not that public works spending was primarily intended to help the country. It was intended to help people, specific people. Specifically people in areas' where FDR's victory in 1932 had been thin. The South, which was solidly democratic, wasn't much of a threat, and so it got the leat amount of assistance from the WPA, despite being the poorest region in the nation. Critical instead were western states, which were toss-ups. Gavin Wright, John Wallis, Jim Couch, William Shughart and other researches went through district by district and found that as much as 80% of the differences in New Deal spending could be accounted for by taking note of political factors (Catawba, you asked). How did FDR get reelected? he picked the toss up states and he bought them off using federal money. WPA workers were told to "voluntarily" donate a portion of their salaries to the Presidents' reelection campaign and support local Democratic politicians if they wanted to keep their jobs. FDR and Hoover between them had destroyed any private-sector growth potential, so there was no where else for the workers to go, they were caught in the machine.
Roosevelt also engaged in blatant class warfare, threatning and even prosecuting bankers for their failure to have the decency to be impoverished if they weren't going to magically produce for him a growing economy. Anti-business measures such as the (unconstitutional) National Recovery Act created reams of bureacratic nightmares for business owners, and put millions more out of work. Erratic leaps in policy (the New Deal wasn't a single unified identifiable plan or even ideology, but more of a grab bag of "well-then-maybe-
this-will-work" ideas) left capital guessing and unwilling to enter the market place (again, just like it's doing today).
First Hoover and then FDR took a Recession that should have been no deeper, longer, and not much more painful than the one we saw in 1921, and turned it into the Great Depression. As Henry Morgantheau (FDR's Treasury Secretary) put it ""We have tried spending money. We are spending more than we have ever spent before and it does not work. We have just as much unemployment as when we started. . . . And an enormous debt to boot!" Mind you he said this in 1939. Had he clued in about 6 years earlier, the country could have perhaps been saved alot of pain.
