FDR’S New Deal: A Serious Effort But The Longest Failure - Politics Forum.org | PoFo

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Inter-war period (1919-1938), Russian civil war (1917–1921) and other non World War topics (1914-1945).
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#1714922
FDR’S New Deal gave hope to many and put significant numbers to work.

The huge expansion of government however, probably diminished wealth instead of creating it, which resulted in a shrinking pie for a larger population.

WEALTH CREATION



There are two examples of government programs that are generally seen as highly successful, wealth creating efforts.

The GI Bill Following WW2, under President Truman, saw millions receive college degrees as a result of those benefits, and the national highway system in the 1950’s, under President Eisenhower, added great wealth to the nation, each, while making huge gains to vital areas of the economy and our standard of living.

Those of us who were alive when FDR was president, know of the constant reference to the fact, that FDR gave hope to millions, during those times of true poverty, hopelessness and no work for millions. Most of those millions, would have taken any employment, at any price, for a regular job.

FDR’S huge increase in federal spending, followed a huge but likewise failed government effort by his predecessor, Herbert Hoover.

It gave hope and it was seen by many as a gallant effort.

But, it was a miserable failure for the nation as a whole.

In the 1920’s the federal government spent 3.5% of GDP, by the end of the 1930’s, spending was over 9% of GDP.

Bedsides pulling this unheard of amount of private sector wealth and investment capital out of the private sector,
it created uncertainty among investors, the likes of which had never been seen.

The results for unemployment were miserable.

Stats are not as precise for that period as they are today, but by 1937, about 4 years into the NEW DEAL unemployment was at 17% and most economic factors affecting the workforce were a disaster; those factors literally dwarf anything we’re talking about, in today’s economy.

At its worst the Great Depression had unemployment of 25%. At the end of the 1930’s until WW2 changed things, unemployment was 17.2%.

Now that federal spending takes 23% plus of GDP—part of the total of 36%-- there seems to be either a general indifference to the extreme importance of wealth creation or a lack of understanding of its importance and difficulty.

To expand the pie for the greater good, a nation cannot afford to misallocate precious resources.

In America’s case, its most precious individual resource is the productivity of its workforce, and the proper use of that resource.

The federal government is insidiously robbing that resource, so politicians can keep getting reelected for promises they can’t keep.

The present and upcoming workforce will not be voting in its own interest, until it understands, faces up to, and acts upon, controlling the cost of government in order to expand the pie for those willing to work hard for the appropriate reward.
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By Ombrageux
#1714978
American entry into WW2 ended the Depression. Specifically, it was the creation of a truly colossal public works program, in the form the draft and massive military expenditure, which ended the Depression. Note that warring is a completely 'wasteful' activity. This tells us that if the New Deal failed, and it certainly did not end the Depression, it was because it was too half-hearted an attempt at Keynesianism.
By Mercutio
#1715031
The present and upcoming workforce will not be voting in its own interest, until it understands, faces up to, and acts upon, controlling the cost of government in order to expand the pie for those willing to work hard for the appropriate reward.

A lot of people will say that the Depression lasted longer than it should've because of tax increases on the wealthy which were an effort to control the cost of government.

That idea has since bitten the dust even before the criminal Bush came along. The criminal Cheney was on Reagans payroll which led him to say years later, "Reagan proved deficits don't matter".

In cases of emergencies I would agree. In cases when you go into deficit to help your fat cat buddies live large, not so much.
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By RonPaulalways
#1722343
American entry into WW2 ended the Depression. Specifically, it was the creation of a truly colossal public works program, in the form the draft and massive military expenditure, which ended the Depression. Note that warring is a completely 'wasteful' activity. This tells us that if the New Deal failed, and it certainly did not end the Depression, it was because it was too half-hearted an attempt at Keynesianism.


The New Deal could not do what World War 2 did, because it couldn't draft millions of men and force them to work (as slaves). It also couldn't unite all political factions into working for the national interest, since there was no existential threat in the 1930's. Slavery (the draft) and the threat of annihilation ended the great depression. Losing 400,000 men and enslaving millions more is too high a price to end chronic unemployment.

There was a better way. In 1919 there was massive market crash. The government did nothing, and no one expected the government to do any thing, and within two years, the economy had bounced back. Back then the federal government only made up 3% of GDP thus the economy was less centralized and less fragile and susceptible to systemic multi year failures stemming from bad government policy.

It was giving women the vote in 1920 that ushered in the age of big government. 1920 is also the year prohibition was enacted, and the size of government as a percentage of GDP steadily increased from 1920 onward.

Today government makes up nearly 40% of GPD.
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By Paradigm
#1722360
There were actually two Great Depressions back-to-back. The GDP in 1936 was the same as it was in 1929. But there was some indication that there might be some inflation, and FDR was not enough of a Keynesian to realize that a little inflation might be a good thing under the circumstances, so he quickly acted to combat it, thus putting us back into a depression. So FDR did prolong the Depression, but not through any of his New Deal programs.
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By RonPaulalways
#1722364
These kinds of mistakes are inevitable when you rest all power in one body. That's why a decentralized economy (a small government that leaves economic agents essentially independent) is superior.

Also, FDR kept unemployment rates artificially high through his attempts to try to increase prices for wages and products. One example of this policy was plowing over crops in order to increase agriculture prices.
By Manuel
#1722428
The New Deal was valuable not for its short-term economic gains, but the long-term restructuring of the American economy that made the war recovery last longer than five years. It set in place regulations to help prevent future crashes, regulations eventually discarded by both Democrats and Republicans for short term economic growth which would help them win reelection. Unfortunately, it seems Obama is concentrating on a short term revival rather than a long-term economic restructuring, by propping up the financial sector rather than the industrial one - despite the fact that the financial sector alone cannot survive, while the industrial one can.

The public works program did more than generate employment, and was continued long after the New Deal ended. We can thank these programs for the world's most extensive highway systems, for bridges, for the prevalence of hydroelectric power in certain regions, etc. Today, Obama should focus on repairing our roads, and expanding them, as well as massive construction of nuclear power plants.

Looking at the New Deal as an example of short-term recovery is flawed. The American public needs to understand that in order to prevent future crashes, they should dig in for a long recession until the system can be stabilized. Unfortunately, short term economic interests will prevent this from happening, so libertarians need not worry about any form of a new New Deal taking place. Rather, it will simply be a spending orgy that does nothing but stave off a depression for another twenty years.
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By RonPaulalways
#1857825
The public works program did more than generate employment, and was continued long after the New Deal ended.


Programs like Fannie Mae and Freddie Mac, created in the New Deal, also continued long after the New Deal ended, and have led to the slow erosion of America's economic vigor.
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By redcarpet
#13176706
It was the mobilisation of the economy to militarise for war that ended the Great Depression, correct. That's not to say FDR wasn't on the right track beforehand. He and Hitler were Keynesians before everyone else ;)
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By Dr House
#13176837
Ombrageux wrote:American entry into WW2 ended the Depression. Specifically, it was the creation of a truly colossal public works program, in the form the draft and massive military expenditure, which ended the Depression. Note that warring is a completely 'wasteful' activity. This tells us that if the New Deal failed, and it certainly did not end the Depression, it was because it was too half-hearted an attempt at Keynesianism.

It tells us that for the Depression to end industrial production needed to be restored (which the New Deal failed to do) and wages needed to be restored to their market-clearing rate (which was not allowed). During the war Roosevelt froze wages to minimize wartime expenses, which combined with rapid inflation (which caused real wages to decline) and a massive shot in the arm to heavy industry caused unemployment to disappear overnight. The depression might have ended sooner if either the New Deal was never implemented (as it caused private-sector divestment and squashed industrial production growth), or if central planning was implemented instead.
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By RonPaulalways
#13180748
^ I agree, and think you've provided an excellent characterization of the problems and what was required to fix it.
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By Dr House
#13181063
I'm glad, but you do realize I suggested central planning as a lesser-evil alternative right?
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By RonPaulalways
#13181867
Good central planning (e.g. regulating Fannie Mae) is better than shitty central planning (e.g. letting Fannie Mae guarantee trillions in worthless mortgages).

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