FDR: 1930 - Depression, First Term and the New Deal

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We should start with the depression: FDR fiddled, while Rome burned.


The Senator of New York had repeatedly urged FDR to do something about the Wall Street ("speculation and shady financial practices of banks that would lead to crises"), and FDR did nothing: while the worst banking scandals happened under his tenure as Governor of New Yory (1929 - 1932). This was a catalyst for the great depression. Finally, public pressure forced him to "appoint a comittee" to ignore the problem, and he put the head of the Bank of U.S. in a position of power on the committee so that nothing would get done: he knew how to do nothing while pretending to do something. So the fox was appointed to guard the henhouse. The banks collapsed, but he had plausible deniability, which is what mattered to him.

FDR then spared no expense to malign Hoover, and constantly ridiculed him for the failure. While Hoover knew 1,000 times more about economics and the depression than Roosevelt and his "Brain Trust".

Hoover had warned against the depression when he still the secretary of Commerce and wrote to the Federal Reserve board cautioning them that banks were over leveraging/loaning (and Wall Street was operating on margins and broker's loans). He even called out that this easy money "might lead to dangerous inflation and perhaps a collapse", that would lead to a disaster and "bring the greatest calamities on farmers, workers, and legitimate business". All of which came to pass.

Once the Stock/Banking collapsed, in spite of Hoover's warnings, Hoover knew the worst thing we could do was to over-react and scare people -- so he tried to calm people, while FDR and others were sensationalizing it, to make it as bad as possible (for regime change).

Hoover increased public spending to try to create jobs (Keynesianism), but he just believed all of it should be on useful infrastructure like roads, dams, and public works, and work with business to create and stimulate real jobs (not just temporary Government ones). Hoover started many programs that Roosevelt took over and took credit for later. He would have done more, but the Democrats obstructed his efforts, in order to magnify the collapse, because they knew, the bigger the failure, the bigger the Democrat sweep would be. (Politicians sacrificing American interest for their own is nothing new).

Dirty Politics: When Banks were collapsing in 1933 and Hoover was a lame-duck president (waiting for Roosevelt to take power in March), Hoover contacted Roosevelt about the banking collapses, and wanted to do a temporary shut-down (to give banks time to gather their assets and liquidate), then reopen solvent banks slowly, and have the President-Elect come in and give a speech and instill confidence in the Banking System at large and quell the fear. But Roosevelt delayed and resisted (saying that no shut-down was necessary).

Privately it was noted by Roosevelt's aides that FDR was intentionally trying to make sure it was as big a collapse in Banking as was possible, so that when he came in to power, things would be completely bottomed out. Millions lost their savings as hundreds of more banks collapsed under runs and scares between Feb. and March. But then FDR came in, declared a Bank Holiday (what Hoover had suggested), gave a speech about how the only thing we have to fear is fear itself, and basically did everything that Hoover had been urging for the many weeks, but FDR delayed until he could take credit: which is what mattered to him.

The New Deal (1933)

Roosevelt became President by promising a "New Deal" in 1932.

FDR told the nation that:

  • Hoover was spendthrift whose extravagance was bankrupting the nation and we needed new management (FDR) to cut back on runaway spending, monopolies, bureaucracy, deficits and so on. After all, Hoover had increased spending 50% over the 1927 level in his 4 years and FDR was there to fix that.
  • During the election everyone knew that FDR was against big Government, against Government meddling, and was out to lower taxes to allow the economy to thrive on its own -- those were his campaign promises
  • Hoover asking farmers to plow under one row in three (to drive up the value of food and increase their total value) was ridiculed as dumb by FDR
  • FDR promised to stay on the gold-standard and "keep the dollar anchored to something with value"
  • FDR did make promises for some new programs, like water power and so on, and putting people to work -- but like a true politician he did so promising to lower spending and reducing government at the same time

FDR promised one thing, once he came in to office he did a 180 degree turn around. So much so that many referred to his policies in the first 100 days office as " the Second New Deal" -- because it bared little (if any) resemblance to the one promised (other than furthering of waterpower: hydroelectric dams that Hoover had started -- hence why the Dam is named after him and not FDR).

Broken Promises


While FDR had bombarded Hoovers Administration with attacks over the deficit and how he would be different: he was different, in his first 4 years he increase spending 300% over the 1927 level (6 times what Hoover had) and during the course of FDR's administration he spent 3 times more more money than all the 31 Presidents before him had spent combined! This hypocrisy (and duplicity) was the FDR way: criticize others to distract... then do worse, or do the exact opposite of what he promised. He far surpassed the Nixon/Clinton standards.

FDR took us off the gold standard almost immediately (in opposition to what he had promised), and when he was encouraged to play with Silver as well, he said, 'I messed with Gold and that was a flop, so why not try silver too?' His attitude was try anything because the people wanted change: don't think of the costs or consequences as long as he looks good for trying.

FDR started programs to pay people to NOT grow/produce things (to combat deflation), exactly like what he had ridiculed Hoover for.

He went agency crazy, and created more government than everyone before him (and arguably since), combined. His alphabet soup of new agencies, were all unconstitutional, and most turned out to be disasters. But he believed his own bullshit and fully believed in top-down government, despite all the evidence that it didn't work.

Plus it had a multi-fold effect:

  • (1) Once an agency was created, it was beholden on keeping its power (and those people their jobs) - so they ran illegal campaign racquets to re-elect FDR (and keep the agency around). They registered folks as Democrats as part of their job applications for those agencies.
  • (2) Once created, people quickly become dependent on Government Programs, even if they're net negatives. You can tax an area for $1.00, but if you give $.50 back, the people remember what they got (and forget what what was taken). In economics, this is the seen versus the unseen: The Broken Window Fallacy. So much of the public saw rewards but didn't realize that the reason they couldn't get jobs elsewhere, was because companies could not grow with the weight of all these laws/regulations/taxes around their necks.

The least educated bought into the attacks against:

  • "the rich" or evil "corporations" (who FDR constantly vilified), and the national tone started its change from one of growth and opportunity, to one of polarization and envy.
  • Special interests and "favor dealing" (which started under Teddy and Wilson) were greatly magnified under FDR
  • Workers couldn't get raises because of wage controls, and couldn't afford many things because price control (or tariffs) had driven costs up, but FDR would vilify the companies for complying with his laws, and explaining how he needed more power to help. (Something many left leaning politicians have tried to mimic ever since).
Of course many businesses were corrupt, and many businessmen were amoral and even cruel. But that's the cost of freedom (some people will do things you don't like). But if you don't trust people in large groups: as in companies -- there's nothing that's going to make them more moral and less cruel in even larger groups, after you give them guns and the full force of the law! The agencies that governed the businesses were usually MORE corrupt and MORE cruel.

Politicians are good at distracting the gullible from the harm they did, while taking credit for what little good they weren't able to squash. But of course to a starving man it doesn't matter, and a temporary job for 3 - 6 months seemed better than nothing -- even if they end up more a wage slave than where they started.

So FDR taught the nation that if you rob Peter to pay Paul, that you can count on Paul's vote. It divided us: our violence and murder rates increased geometrically. Worse than that, he didn't just rob Peter, but Peter and Paul's kids. Social Security was sold as a trust fund of your own money, but the truth is, it's just a youth tax -- and they took the surplus and spent that on these programs (leaving their kids, and grandkids the debt).

Many that attack the spendthrifts of today, forget where it truly started. Most don't remember that we are still paying interest and for programs today that were created while Roosevelt was President. Soon after Roosevelt left office we were paying as much for the interest on the national debt (alone) as we were to operate the whole country before his tenure! Back when we had far higher growth rates, more opportunities, and had built roads, bridges, had better schools, and so on.

Anyone that warned against all this deficit spending and the long term costs of FDR were attacked as hate-mongers, callous conservatives, and shrill. But economists estimate if we'd done nothing, and stayed on prior growth trajectories, we'd be well over twice as well off as a nation (higher incomes and lower taxes, more liberties). Thank FDR for that loss in spending power and for that social insecurity.


📚 References

Truth about the New Deal: