| New Deal or Raw Deal? |
By Burton W., Jr. Folsom
GLENN: Burton Folsom is an author of New Deal, Raw Deal, and you'll learn more about FDR than you've ever learned and, of course, Burton, I'm sure, have they started to try to discredit you yet?
FOLSOM: Well, that press conference by President Obama last night did send a sharp Barb against those who are critical of FDR and indeed he did not get us out of the Great Depression. His version of a stimulus package of the 1930s did not work and, hey, I think that has historical lessons for the president.
GLENN: Okay. So here is what Obama said last night and then, if you will, just jump off from there, Burton. Here it is.
PRESIDENT OBAMA: Some of the criticisms are really with the basic idea that government should intervene at all in this moment of crisis. You have some people very sincere who philosophically just think that government has no business interfering in the marketplace and, in fact, there are several who suggested that FDR was wrong to intervene back in the New Deal. They're fighting battles that I thought were resolved a pretty long time ago.
GLENN: You know what's funny is I thought they resolved a long time ago during the American Revolution. I mean, I'm sorry to point out that every founding father would be the one that would say, "Yeah, government really has no place in business."
FOLSOM: Absolutely. Article I, Section 8 makes that so clear, limited government. Not even building roads and that kind of thing.
GLENN: I mean, I love -- here we are talking about healthcare, universal healthcare. Even Ben Franklin didn't go to the government, and he could have. Ben Franklin was wildly influential, wildly popular. What did he do? He built the first hospital, but he built it with private money. He went to all the rich people he knew. He didn't say that government should take the money from the rich. He went and said, "Hey, this is the right idea. We should build a hospital." And so they built a private hospital. The first one in the United States. Built privately by one of the founders who could have had the -- he did -- correct me if I'm wrong, Burton. He had the power. He could have gotten that through congress but that's not the way they understood America at the time.
FOLSOM: Absolutely not. And when it came to library buildings, Franklin had private funds building libraries in Philadelphia. When we wanted something done in this country in the 1700s, groups of people got together, formed associations and got the job done.
GLENN: Right. This is exactly the opposite now of what Barack Obama and FDR believed. FDR -- and really it started with Woodrow Wilson, they believed that government was the answer. Barack Obama said something stunning that only government can create the jobs needed to be able to pull us out. Give me the comparisons between the New Deal and the stimulus deal and the facts that America may have never heard before on the new deal in the 1930s.
GLENN: Well, the new deal did promise a kind of stimulus package. It wasn't labeled that way, but it was the idea, "Hey, we're good to fix farming and then we're also going to provide infrastructure for roads and highways and that thing through the WPA." So you have the AAA, the Agricultural Adjustment Act, we're going to fix farming. And sure enough prices, farm prices went down. Well, they went down because government had already been involved passing the biggest tariff in United States history. Nations were retaliating against us because we had put a high tariff on their product. They were refusing to buy our wheat and corn. So we put in the AAA, we're going to raise farm prices. And the way we decide to do it is by Roosevelt by paying farmers not to produce on part of their land. If we paid them not to produce on part of their land, they won't grow as much and they will get more money and that will raise prices. Well, that is not really going to fix the problem, Glenn. In fact, two or three years after the AAA in 1935 we were actually importing corn to the tune of 35 million bushels, wheat to the tune of 13 million bushels, cotton to the tune of 36 million pounds because we weren't greedy enough in part because we were paying farmers not to produce the products we were now importing and that is called fixing the prices.
GLENN: May I ask you, Burton, and I don't know this part of history but I'm just guessing. The way we got away with importing all of this, not having an outcry was I'm guessing they sold it to the American people if they even knew about it at the time. They sold it to the American people as something of, we're helping the rest of the world and mending fences and being able to be protectionist in nature.
FOLSOM: I want to give him credit. He did reduce tariffs. He had the act of 1934 and he began to reduce some of those tariffs. And yes we were able to improve our trade relations but still that's at a price of the absurdity of paying farmers not to produce on part of their land and then importing some of those very products we were paying farmers not to produce.
GLENN: Okay, all right. So there we have farming. Then what else did we do?
FOLSOM: Well, the WPA was designed to build roads but here's the thing. And the same thing with the stimulus package, Glenn. You are going to build roads. It sounds good, you are going to build schools, you are going to fix bridges and all of this. But then the next question is who decides what bridges and what roads get built and fixed?
GLENN: Wait a minute, hang on just a minute. In the school thing, I don't know if anybody saw the speech last night but when he was talking about that one school from the 1800s that shakes when the train goes by, there's no money in this stimulus package to build new schools. Just thought I'd throw that out.
GLENN: But when you're talking about the work project program, you built Hoover Dam, you built gigantic projects that were good for the country. How could you possibly say that this program didn't work?
FOLSOM: Right. Well, the first -- as I said, the first thing is you have to decide who is going to choose which areas get built and which ones don't get built and what we found immediately was the Democrats were choosing, it's going to be our areas in our districts that are going to get rebuilt and we're going to use that rebuilding to seek votes from the voters. Yeah, I have quotes. For example, we have a fellow by the name of V. G. Copeland who is saying in the, "Hey, what I think will help is to change the WPA management from top to bottom, put men in there who are in favor of using these Democratic projects to make votes for the Democratic Party." You have another man, James Doherty, a New Hampshire Democrat that says, quote, "It is my personal belief that to the victor belongs the spoil and the Democrats should be holding most of those WPA positions so that we might strengthen our fences for the 1940 election" so you are going to get projects built but the Democrats are going to go out and say "We built the projects, vote for us" and they will not decide to vote for projects in areas that Republicans might like to have them built. So in effect you are transferring wealth to a political party.
GLENN: So really -- and this we're already seeing with Obama where he is taking the census and moving it away. 1903 the census moved to the commerce department and it's been there forever. Now he's moving it to the White House and Rahm Emanuel, which would indeed be a way to shift all of these projects and the money to Democratic areas. If you don't have an actual head count where you could just estimate, "Well, I estimate on that block over there, there's 2500 people living" and they could -- in fact, that's what these projects would do. They would move to those areas.
FOLSOM: I think you have a good point, Glenn, and I that I that kind of thing could possibly happen. Part of the thing is I can't tell much about President Obama's character yet. Roosevelt had very poor character and he was very quick to use a lot of money, federal money for political expediency. I think Obama really believes that the stimulus package will work. I'm not sure that Roosevelt completely believed that, but I do think he thought he could help the Democratic Party with it. If Obama really thinks the stimulus package will work, maybe he'll wake up when it doesn't work.
GLENN: Yeah... no. I think what Obama believes in is collective governance.
GLENN: Excuse you. Are you shaving or -- with a buzz saw?
FOLSOM: I'm sorry.
GLENN: What is that noise?
FOLSOM: I'm sorry. We're chopping the stimulus package up, Glenn, into pieces over here.
GLENN: Okay. So listen, here's the thing. I think he believes in socialism, as many of the people did back in the New Deal and all they are doing is putting framework of socialism in here. Here's probably -- I don't like strawman argument. So I'm going to give you the toughest argument on the other side. The toughest argument on the other side, on Obama's side is this, and this comes from -- who is this, Stu? This is one of the -- yeah, this is one of the guys that's cited everywhere on, you know, pro, you know, pro FDR New Deal stuff. He says, I heard that, you know, the New Deal didn't work, et cetera, et cetera. On deeper examination I discovered that the right bases its New Deal revisionism on the recession on the years straddling '37 and 1938 but that was four years into Roosevelt's term, four years marked by spectacular economic growth. Additionally the fleeting decline happened not because of the New Deal spending programs but because Roosevelt listened momentarily to conservatives and backed off them. Nobel Prize economist Paul Krugman notes in '37-'38 FDR was persuaded to balance the budget and cut spending and the economy went back down. Tell me if any of that is true.
FOLSOM: That is a standard New Deal argument, Glenn. That is what you often get in the textbooks. What happened is Roosevelt had incredible spending and their argument is if he had only spent more and stepped it up in the late Thirties, it would have had more recovery potential. And what I'm suggesting is that, we doubled the national debt in the 1930s and that we had higher interest rates, we had instability and that was causing the lack of recovery.
GLENN: But did he have spectacular economic growth in the first four years?
FOLSOM: I would say that that's absolutely false unless you consider 15% -- it's slightly under -- unemployment to be spectacular economic growth. We've only had one period in American history, the 1890s, where we had unemployment that was anywhere near that high. I say that --
GLENN: If I'm not mistaken -- I'm sorry. If I'm not mistaken, when FDR got into office if you took three lines of men and you started in Los Angeles, they would go all the way, work lines, three mile lines of men all the way to Maine. When he left -- or in 1939 that line went from Los Angeles to Maine and then meandered down the coastline all the way into Virginia.
GLENN: So unemployment never went down. We were just shifting jobs from one group to another group it seems.
FOLSOM: We did have some ups and downs and sometimes the defenders of Roosevelt liked to take the low figure right there in 1936 and match it with the high figure when he came into office. But I think the fair thing to do is, hey, look at what happened in his second term. Unemployment steadily went up because of the instability. Roosevelt even put a tax on corporate undistributed profits. We have a 79% marginal tax on incomes and we simply have entrepreneurs refusing to invest in the economy and unemployment remaining high because of that.
GLENN: Will you do me a favor. Tonight I know you are going to join me on TV. Just have some of these stats and figures and look for a couple of things. Did in 1936 the Supreme Court finally allow the unions to finally come into play and do, just crippling business. I believe that passed in 1936. And then there was another thing if I'm not mistaken that you just mentioned, and explain this on television tonight because I've only got 10 seconds here, where FDR forced people if you didn't reinvest in your business, then you would be taxed and all that money would go away and the businesses didn't want to do it because of a possible other down turn and that is also what happened in that same year. If you can just cover that tonight on television on Fox, Fox News Channel, 5:00. By the way, the name of this book is New Deal, Raw Deal by Burton Folsom.