Imitate FDR? That could be a grave error

For a Southern boy who walked into every living room expecting to see a picture of Jesus and FDR, it is a shocker. Heresy, really, disrespect to the unquestioned faith of my Depression-era Georgia ancestors that FDR had saved us from economic ruin. Comes now economic historian Burton Folsom Jr., a part-time Atlanta resident, professor at Hillsdale College in Michigan, an institution beloved by conservatives for offering a superior education while refusing to take federal money or other taxpayer subsidies for any of its operations, to suggest that my Southern ancestors were… uh, how to put this delicately? Were, on the subject of FDR, a generous and charitable people who saw President Franklin D. Roosevelt in a most favorable light. They were wrong, utterly and completely wrong, by the economic analysis of Professor Folsom, author of “New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America.”

Rather than salvaging prosperity, FDR’s policies damaged the economy and prolonged the Depression, Folsom argued last week in an appearance before the Georgia Public Policy Foundation, an influential Atlanta-based think tank.

FDR’s approach — tax, regulate and spend — is Barack Obama’s. Folsom thinks FDR took an economic downturn that could have been short-lived and prolonged it into World War II. Obama, because his party is first acting on their frustrations at having a social agenda held in check for eight years, and their ambition to punish the rich and expand the regulatory state, will deepen and prolong the current recession. They may well do permanent harm.

“In the Panic of 1893, U.S. unemployment briefly hit what was then the all-time high of 18.4 percent, but the panic was over in a little more than five years, ” writes Folsom. “In the mini-recession of 1921, unemployment reached 11.7 percent, but hard times lasted less than two years.” In both, Presidents Cleveland and Harding “cut federal expenses and Harding cut the income tax rate as well.

“Soon investments in business became attractive again, capital slowly flowed back into the American economy, and it bounced back.” Herbert Hoover increased federal spending, imposed excise taxes and hiked the top income rate to 63 percent. Roosevelt promised to cut spending and taxes and to reduce the job-killing and economically destructive Smoot-Hawley tariffs that protected the few at the expense of all consumers.

Hoover, in signing the Smoot-Hawley Tariff Act and in spending wastefully, invited disaster. FDR enshrined it. Two examples go to the programs that shaped the memories of my ancestors. One is the Agricultural Adjustment Act (AAA) passed in 1933 that set up a complex regulatory scheme for fixing prices and production on farm products. The nation is, to this day, almost four generations later, unable to shake the excesses and miscalculations wrought by the effort. It’s why we still get what George W. Bush last year called “a massive, bloated farm bill that would do little to solve the problem” of high food prices, while transferring $300 billion to a favored few.

A great-uncle whose name I share was part of the WPA crew that started Fontana Dam in North Carolina. While some individuals were undoubtedly helped and useful projects were completed, some historians argue that the WPA may have worsened unemployment by keeping workers from pursuing private-sector jobs. Folsom notes that the Tennessee Valley Authority public works effort, the biggest of the New Deal projects, transferred wealth from 98 percent of the population for the benefit of 2 percent and, furthermore, he points out that Tennessee lagged behind nearby states for 50 years in economic development. He quotes William Chandler, author of “The Myth of TVA, ” in writing that “Among the nine states in the southeast United States, there has been essentially an inverse relationship between income per capita and the extent to which the state was served by the TVA.”

Why? Subsidized power, Chandler concluded, caused people to delay moves that could have brought them greater prosperity. The lesson is that everything government spends or regulates buys behaviors, good or bad. The massive spending, regulation and taxing imposed in an effort to buy a permanent liberal majority, and the constant overreaching necessary to control the free market response, point to a long, deep economic downturn.

This is a bunch fully capable of throwing this country into depression.