The Real “New Deal”

“Franklin Roosevelt arrived at the Capitol in early 1933 with a peculiar belief that the Constitution of the United States began and ended with the preamble and that anything and everything was allowable to meet its provisions.” As we all should know, the Preamble reads:

 “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

                                                                                                                                                                     “In his First Inaugural Address Roosevelt told America that they “…have nothing to fear but fear itself.” That, of course, was nonsense but it did reveal the ethos of Roosevelt the man. When he was first stricken with polio, no one knew what was happening to him and he spent those first days terrified of the unknown – as anyone would. Fear was his constant companion and it was fear that he overcame in the years following. Thinking of himself now as the “father” to all Americans, he now transferred that experience, inappropriately, to the American people. More likely, American’s traditional rugged individualism governed three quarters of the people where fear might have influenced the remainder.

He defined a liberal (political) party (which he believed the Democrat Party must be) as one:

‘…which believes that, as new conditions and problems arise beyond the power of men and women to meet as individuals, it becomes the duty of Government itself to find new remedies with which to meet them.

The liberal party insists that the Government has the defined duty to use all its power and resources to meet new social problems with new social controls – to ensure to the average person the right to his own economic and political life, liberty, and the pursuit of happiness.’

By inserting the words “social controls” and “political” into his definition, he condemned Americans to political interference from the federal government in every aspect of their lives, like it or not, which became the sine qua non for the massive expansion of federal power into every phase of national life during his presidency and under Democrat regimes ever since.

In reality, this is fundamentally different from the concept of the Founders who were one with the American people in believing that most of life could and should be confronted by themselves and their rugged individualist neighbors and that charity and government should be the very last resorts utilized to overcome ones problems.

By the time he was inaugurated on March 4, 1933, the country had been in the “Great Depression” for more than 3 ½ years! Unemployment was about 20% but the country was stable and calm. There were a substantial number of citizens without work, housing or food but under President Hoover’slaissez-faire policies, designed to allow the economy to recover under market forces, the economy was trudging along at about half-speed compared to the pre-meltdown period and the banks continued to be substantially stressed – perhaps in crisis. Like his famous cousin, Roosevelt was determined to “get action” and into action he went – with the Preamble as his solitary guide. Thus, the New Deal came to life.

 “Legislation passed during the New Deal era had three often conflicting or obstructing goals: Relief, Recovery, and Reform – to prevent the recurrence of the boom and bust cycle that was erroneously thought to have caused the Great Depression in the first place. Roosevelt called this first round of legislation “must legislation.” For the most part, he would disregard principles of the free-market capitalist economic system which was the engine that made America work – literally and figuratively.

 In his first days in office, Roosevelt declared a nationwide banking holiday from March 6–10, 1933, and halted all gold transactions in order to open the banks on a sounder basis. He also called the Democrat controlled Congress into special session – the “Hundred Days” and passed much of the legislation that formed the New Deal. Congressmen, infused with the sense of urgency that FDR had created with his inaugural speech, passed every bill that came their way [largely unaltered from its creation in the White House].

FDR crafted bills and strategies by intuition, always moving confidently even when it turned out to be in the wrong direction. Congress prepared the Emergency Banking Relief Act of 1933 in [an incredible] eight hours, giving the President the authority to regulate banking transactions and reopen solvent banks.

FDR then turned to the power of the radio to deliver the first of his famous fireside chats. He assured an audience of over thirty-five million Americans over the weekend before the banks were to reopen that it was safer to keep their money in a bank rather than in their homes. Confidence in the banks ebbed back into the country. On the Monday when banks reopened their doors, deposits outranked withdrawals for the first time in months, thanks to the contagious optimism of the President.

The Hundred Days Congress also created the Federal Deposit Insurance Corporation to insure individual deposits up to $5,000, a sum which was later raised [eventually to $100,000]. This legislation prevented a recurrence of the bank failure epidemic. FDR also ordered all private gold to be surrendered to the Treasury for paper, and took the nation off the gold standard. [But what if gold made someone happy? Too bad! In retrospect, this was an error since gold was valued at about $20 per ounce at the time and today is well over $1000 per ounce.]

Roosevelt also reduced the value of the gold content of the dollar from one-hundred to sixty cents, theorizing, with the help of various anonymous economic advisers, that changing the value of the currency would stimulate business through controlled inflation. Although prices did rise a little, they did not reflect the 40% change that FDR had made in the value of gold, and the purchasing power of the dollar actually went down, especially on imports. [Another error.]

Roosevelt’s next round of proposed legislation put into action his willingness (amid falling federal revenue) to spend federal money in order to jumpstart the economy. Other bills passed began with the Agricultural Adjustment Act on March 16. The measure was aimed at restoring farm income and reducing surpluses by using a tax on processors to fund subsidies for farmers who limited their acreage in production – while there were breadlines in almost all communities. [Another error.]

On March 21, the Civilian Conservation Corps (CCC) was created, putting over 250,000 young men to work on conservation projects under the guidance of the Army. This corps built some wonderful and useful projects but added no wealth to the country. Also, that day, the Federal Emergency Relief Administration was created and put under the leadership of Harry Hopkins, the former social worker who had been one of Roosevelt’s most trusted advisors since his time as Governor of New York. Hopkins allotted over three billion dollars in direct dole payments or wages for work to the States.

April 10, saw the creation of the Tennessee Valley Authority, probably the most visionary of the planned economy schemes of the New Deal, a long sought public [read federal government controlled] power project on the Tennessee River, which mushroomed in Congress into a development project for the entire watershed of 640,000 square miles.”

Through federal government officials’ extortion of electrical industry owners and threats to operators of existing power projects and grids, among other unconstitutional takings, the project brought low-cost electric power, along with employment, housing and the restoration of eroded soil and reforestation to a desperately poverty-stricken area. Though the TVA was a hugely successful project, its communist-like overtones prevented conservatives from ever allowing its expansion beyond the Tennessee River. [Another error.]

“The most complex product of the Hundred Days Congress was the National Industry Recovery Act (NIRA), which was meant to help labor, industry and the unemployed. Although Roosevelt insisted in his second fireside chat that the Act was only a partnership between business-and-industry and the national government, this legislation intruded into business far more than ever before. The bill was finally passed on June 16, 1933, after objections from the Senate, which insisted that the bill would only promote the concentration of wealth and power. The National Recovery Administration or NRA was to administer the Act.

The bill called for individual industries to write-up codes of fair competition, decide maximum hours of labor per person, and introduce minimum wages in order to spread work among the greatest number of people. The Act allowed local codes for trade to be written by private trade and industrial groups. The President could choose to give some codes the force of law. Labor was granted the right to collectively bargain and the right to choose its representatives for bargaining.

The NIRA was supported with much hoopla, with its blue-eagle symbol cheered all over the country at factories and schools. However, the NIRA called for industry to lower prices at the same time it was to increase wages [a fundamentally insane concept in a capitalist system], which, for many small businesses, was too much profit margin to give up and still stay in business. [Another error.]

In order to guarantee their future, businesses that placed the blue eagle in their windows would often secretly violate the codes. The Supreme Court later declared the codes unconstitutional in the famous (and revealing) Schechter v. United States (1935) decision.

The Schechter brothers were long-time kosher chicken wholesalers in Brooklyn, NY. The regulations at issue were promulgated under the authority of the NIRA of 1933. These included price and wage fixing, as well as requirements regarding the sale of whole chickens, including unhealthy ones. The federal government prosecutors claimed the Schechters sold sick poultry – which is an absurd charge under kosher tradition – probably the most regulated in the world.

Also encompassed in the decision were NIRA provisions regarding maximum work hours and a right of unions to organize workers. Among the eighteen charges against Schechter Poultry were “the sale to a butcher of an unfit chicken” and the sale of two uninspected chickens.

Ten charges were for violating codes requiring “straight killing.” Straight killing prohibited customers from selecting the chickens they wanted; instead a customer had to place his hand in the coop and select the first chicken that came to hand. [Talk about the “long arm of the law”!]

Chief Justice Charles Evans Hughes wrote for a unanimous Supreme Court in invalidating the industrial “codes of fair competition” which the NIRA enabled the President to issue. The Court held that the codes violated the constitutional separation of powers as an impermissible delegation of legislativepower to the Executive. The Court also held that the NIRA provisions were in excess of congressional power under the Commerce Clausecontained in Article I, Section 8, Clause 3of the Constitution.

The Court distinguished between direct effects on interstate commerce, which Congress could lawfully regulate, and indirect effects, which were purely matters of State law. Though the raising and sale of poultry was an interstate industry, the Court found that the “stream of interstate commerce” had stopped in this case – Schechter’s slaughterhouses’ chickens were sold exclusively to intrastate buyers. Any interstate effect of Schechter was indirect, and therefore beyond federal reach.

Though many considered the NIRA a “dead statute” at this point in the New Deal scheme, the Court used its invalidation as an opportunity to affirm constitutional limits on congressional power, for fear that it could otherwise reach virtually anything that could be said to “affect” interstate commerce and intrude on many areas of legitimate State power.

The court ruled that the law violated the 10th Amendment. The court believed that “to permit Congress to regulate the wages and hours in a tiny slaughterhouse because of remote effects on interstate commerce would leave nothing for the Tenth Amendment to reserve. [to the States].”

Speaking to aides of Roosevelt, Justice Louis Brandeis remarked that, “This is the end of this business of centralization, and I want you to go back and tell the President that we’re not going to let this government centralize everything.” After the decision was announced, newspapers reported that 500 other cases of alleged NIRA code violations were going to be dropped.

A descendent of the Schechters, said that the brothers probably voted for Roosevelt in all four of his presidential campaigns. Their main political concern in the 1930s was anti-Semitism.”

[That may have been the motivation for the charges all along. Again, the law of unintended consequences]

Associate Justice Cardozo felt that in this case, Schechter was simply too small a player to be relevant to interstate commerce. This is the real, historical significance of this case. The entire weight of the federal government was brought to bear on a tiny, private, essentially religious, business for a questionable violation of selling two “unfit chickens”!

This was the real fear in the “New Deal”.

Although FDR had felt a need to be liked from his youth in Hyde Park, he also prided himself in his inscrutability. To assure he would know all sides of an argument or issue, he often had two or three advisors investigating the same issues without their mutual knowledge. He would often respond to arguments with a noncommittal nod, leaving family members, legislators and aides alike frustrated with their efforts. His Cabinet became cumbersome and inefficient as a result.

The White House during the first term was constantly abuzz with activity. The President, Eleanor, the children, grandchildren, Missy LeHand, Louis Howe, and a rotating set of advisors and visitors all had their lodgings in the White House. The President was very informal and addressed all the White House staff by their first names.”

The modern Democrat Party began in Roosevelt’s Oval Office. Identity-centered politics – the “factions” that the Founders, especially Jefferson and Madison, had feared so much that they had constructed a new and intricate Constitutional form of government to constrain their power – now took center stage. The wisdom of Greek solons, Roman senators, English parliaments and American congresses, inspired by such great minds as Paul of Tarsus, Augustine of Hippo, Thomas Aquinas, Thomas More and William Shakespeare, by Johnson, Locke, Hobbes, Burke, Wollstonecraft and Mill and by the Renaissance and the Enlightenment, was now replaced with what amounted to an authoritarian regime of unaccountable academics and political hacks. It was now big v. little, rich v. poor, capitalists v. socialists, Republican v. Democrat. A colossal error for America.

 The United States became vassal States, beholden to the federal government dole for their needy citizens and powerless to resist new laws, regulations and unfunded mandates, allegedly by the supremacy clause in the Constitution. The Congress, in the hands of the Democrats, became a rubber stamp and the Supreme Court was a nuisance, at best. The President, declaring a national emergency, after the emergency had already passed, became the American government for all practical purposes. (The emergency should have been declared by Hoover at the end of 1929.)

 Through regulations promulgated by a leviathan bureaucracy and through newly appointed local federal prosecutors and lower federal courts packed with his nominees, essentially legislating from the bench, FDR consolidated the entirety of federal power in the office of the President. For now, the wisdom and work of the American people would be replaced by the whims of the President.

 His justification was the plight of the factions, which he sometimes pitted against each other. The victims were defined as the poor, the unemployed, the young, the women (with Eleanor’s prodding), the ignorant, the black community, etc. The villains in all this were the rich (his peers), the industrialists, the bankers, the financiers, the denizens of Wall Street – even kosher-chicken sellers – and a myriad of others who had succeeded in our capitalist economy.

 As with most progressives (most of whom were theoreticians and had never created a job or run a competitive business in the free market), Roosevelt failed to appreciate that his villains, the capitalists of the Industrial Revolution in America (and their progeny), functioned in the “wild west” of early modern capitalism – with “good guys” and “bad guys” everywhere, although none pure as the driven snow – as Wyatt Earp would tell you.

 Famed historian Fredrick Jackson Turner’s “frontier”, as he pointed out, was not merely a physical one; it was also an economic one as well as a psychological one. After all, the frontier, after 1869, was conquered using the railroads, the greatest economic symbol of the industrial revolution of them all (and central to my “auntie’s” opus). Capitalist “gunslingers” on both sides of the law roamed the wilds of the industrial landscape, but now the biggest gunslinger of them all was the President himself – with all of the “firepower” of the federal government backing him up. As in the Old West, “might-makes-right” was again the law both east and west of the Pecos (with props to Judge Roy Bean).

 Franklin Roosevelt’s New Deal also ushered in a new wave of government propaganda. Under the guise of putting people back to work, hundreds of thousands of jobs were created by the federal government – many specifically to witness the history of the New Deal. Of course, as Roosevelt acolytes owing their employment to the President, they wrote in glowing terms about the successes of his initiatives.

 As a result of this calculated plan (and FDR was nothing if not calculating), “New Deal propagandists seared into popular culture the images of sharecroppers fleeing the Dust Bowl, lines of unemployed, ‘forgotten men’ selling apples on the street for a chance to put food on the table, and ex-college professors, now vagabonds huddling around campfires in ‘Hoovervilles’. In actuality, the average, middle class American in the suburbs or small towns saw little of this.”

 The truth is – and the historical facts show definitively – that “The Great Depression was the best of times – if you had a steady job – and 75% of American breadwinners were employed. For the typical person with a good job, the 1930s were good times: prices were stable; crime was low after prohibition had been repealed and signs of progress were everywhere. Many homes now had radios, phonographs, telephones, electricity, washing machines, a family car, milk delivered on the doorstep, unlocked doors, and indoor plumbing.

 There was much to do in leisure time, with triple feature movies in the new luxurious cinemas of Hollywood titans Adolph Zukor and Marcus Loew for fifteen cents, piano lessons for the kids, interesting articles in the Saturday Evening Post, photographic essays in Life magazine, and the Book of the Month Club and Reader’s Digest that delivered the latest exciting, uplifting books to your home.

 For many Americans, never having been entrepreneurs and with no hope or wish of ever going into business, but instead dependent upon a ‘good job’ for a livelihood, Roosevelt seemed to offer security. Even if he failed to conquer unemployment, at least he seemed to be trying. He gave the impression of being a man of action, willing to do anything for the good of the workers. Many Americans believed that capitalism had failed and that a new system must be found. The dominant propaganda theme of the Democratic Party was ‘Gloom is good’.”

 Whereas the Nazis and Soviets (already having achieved dictatorial power) were pushing their own Big Lie, making posters of happy worker-slaves, Roosevelt’s New Dealers (still seeking an excuse for greater power) made a virtue of failure. New Deal propaganda worked exceedingly well and has been repeated in various forms by the Democrat Party for generations ever since.

 Although Roosevelt’s economic policies did not succeed in getting America out of the Depression – let me repeat that – Roosevelt’s economic policies did not succeed in getting America out of the Depression – he was totally victorious in using public funds to buy the lifelong loyalty of academics, intellectuals, artists, writers, labor unions, celebrities and the press – thereby institutionalizing for succeeding generations – federal government coercion of the truth (to which the People are actually and legally entitled) in public information.

 “He started by flattering the universities, boasting of a ‘brains trust’, which was more fiction than fact. He never brought together a standing panel of reputable economists and business people to provide him with reasoned, impartial, coherent advice on how to attack the Depression – nor would he have listened to them if he had assembled such a team.

 Instead, as we have seen, “…he was guided by hard-core, political operatives and influence peddlers, like Chase and Tugwell, Hopkins and Harold Ickes, while occasionally consulting with an odd and disordered assortment of college professors (predominantly from Columbia and Harvard), social workers, Soviet agents (like Alger Hiss, Lauchlin Currie, perhaps Henry Wallace and, as recently revealed, Harry Hopkins himself), fascist sympathizers (like Joseph Kennedy and Charles Lindbergh) and intellectuals of various persuasions, all of whom were flattered by Presidential attention and wooed by the sweet scent of power.”

 One of the most discerning observers of the day, H. L. Mencken, perceived Roosevelt to be “surrounded by ‘an astonishing rabble of impudent nobodies, a gang of half-educated pedagogues, non-constitutional lawyers, starry-eyed uplifters, and other such sorry wizards.’  His New Deal was a ‘political racket’, a ‘series of stupendous bogus miracles,’ with its ‘constant appeals to class envy and hatred,’ treating government as ‘a milch-cow with one hundred twenty-five million teats’ and marked by ‘frequent repudiations of categorical pledges.’” (A History of the American People, Paul Johnson, p. 762.)

Next time: The rest of the New Deal mythology.

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