Sirotablog
David Sirota is a political journalist and nationally syndicated newspaper columnist at Creators Syndicate. David writes about political corruption, globalization and working-class economic issues often ignored by both of America's political parties.
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December 25, 2008 8:13 PM
Fox News: "Historians Pretty Much Agree" That FDR Prolonged the Great Depression
I appeared on Fox News yesterday to discuss both the Blagojevich flap and the imminent economic recovery package from the Obama administration. You can watch the clip here. As you'll see, on that latter issue, Fox News is starting its campaign to stop Obama's big spending plan by stating - as assumed fact - that "historians pretty much agree" that Franklin Roosevelt prolonged the Great Depression, and that therefore, Obama shouldn't try another New Deal.
When I say Fox News' assertion about historians is patently false, they literally laugh at me as if I've said something so clearly untrue, something Americans supposedly assume is so obviously stupid, that it's worthy of ridicule.
The Depression issue was brought up by conservative pundit Monica Crowley - not surprising since this is the conservative talking point du jour ever since the "center-right nation" meme started looking idiotic and ever since fringe-right-wing bloviator Amity Shlaes published her since-discredited book claiming FDR essentially created the Great Depression. Crowley supported her the "FDR ruined the country" meme with the very authoritative-sounding statement that "based on all kinds of studies and academic work done on the great depression" she knows that the New Deal's "massive government intervention prolonged the Great Depression."
Of course, she doesn't offer up a single study or "academic work" as any kind of proof, and yet, when I say her assertion is absurd, Fox News anchor Greg Jarrett starts laughing at me - as if my assertion that FDR's New Deal helped end the Great Depression is so fantastical as to prompt guffawing. Jarrett proceeds to state that historians "pretty much agree" that FDR prolonged the Great Depression, and resorts to insisting that he knows that's true because "it's in the books" - whatever the hell that means. Indeed, Fox wants us to believe that what was only very recently the deranged propaganda of a handful of conservative political pundits is now such a consensus opinion among historians that to say otherwise is to evoke laughter.
Now, it's true - back in 2004, two UCLA professors published a little-noticed report claiming the New Deal's government intervention prolonged the Great Depression. But that assertion has been subsequently eviscerated by, ya know, actual data.
Here's University of California historian Eric Rauchway:
For a start, New Deal intervention saved the banks. During Hoover's presidency, around 20 percent of American banks failed, and, without deposit insurance, one collapse prompted another as savers pulled their money out of the shaky system. When Roosevelt came into office, he ordered the banks closed and audited. A week later, authorities began reopening banks, and deposits returned to vaults.
Congress also established the Federal Deposit Insurance Corporation, which, as economists Milton Friedman and Anna Jacobson Schwartz wrote, was "the structural change most conducive to monetary stability since ... the Civil War." After the creation of the FDIC, bank failures almost entirely disappeared. New Dealers also recapitalized banks by buying about a billion dollars of preferred stock...The most important thing to know about Roosevelt's economics is that, despite claims to the contrary, the economy recovered during the New Deal. During Roosevelt's first two terms, the U.S. economy grew at average annual growth rates of 9 percent to 10 percent, with the exception of the recession year of 1937-1938...
Excepting 1937-1938, unemployment fell each year of Roosevelt's first two terms. In part, the jobs came from Washington, which directly employed as many as 3.6 million people to build roads, bridges, ports, airports, stadiums, and schools -- as well as, of course, to paint murals and stage plays. But new jobs also came from the private sector, where manufacturing work increased apace.
This basic fact is clear -- unless you quote only the unemployment rate for the recession year 1938 and count government employees hired under the New Deal as unemployed, which conservative commenters have taken to doing.
So, as Rauchway says, the hard data about bank closures, job creation and overall economic growth rates proves the regulations and spending of the New Deal helped end the Great Depression. In fact, Rauchway notes that the data actually suggests that the major, data-driven criticism of the New Deal is that it didn't spend enough money fast enough.
But, OK - let's say you want to cherry pick the unemployment numbers like a right-wing pundit. Let's say that, as Rauchway notes, you are a conservative dittohead totally comfortable dishonestly "quot[ing] only the unemployment rate for the recession year 1938 and count[ing] government employees hired under the New Deal as unemployed." Shouldn't you be blaming conservative ideology, and not New Deal-ism, for those numbers? After all, as Paul Krugman recently explained to a stunningly ignorant George Will on ABC News, 1937-1938 was the period Roosevelt dialed back the New Deal in the name of conservative demands that he stop spending:
By 1937 things were a lot better than they were in 1933. Then [FDR] was persuaded to balance the budget or try to and he raised taxes and cut spending and the economy went back down again and then it took an enormous public works program known as World War II to bring the economy out of the depression.
So with all of that data, let's go back to Fox News' main assertion: Is it really true that "historians pretty much agree" that the New Deal's government intervention prolonged the Great Depression? Of course not, as New York Times economics writer Daniel Gross says:
It was only with the passage of New Deal efforts--the SEC, the FDIC, the FSLIC--that the mechanisms of private capital began to kick back into gear. Don't take it from me. Take it from Federal Reserve Chairman Ben Bernanke, who wrote the following in Essays on the Great Depression: "Only with the New Deal's rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression."...
The argument that the New Deal's efforts "perhaps had prolonged, the Depression," is a canard. One would be very hard-pressed to find a serious professional historian--I mean a serious historian, not a think-tank wanker, not an economist, not a journalist--who believes that the New Deal prolonged the Depression. (emphasis added)In other words, it's the opposite of what Fox News says. "Historians pretty much agree" on one thing when it comes to Roosevelt: The New Deal helped end the Great Depression. But I would go even further than that, and agree with economist Brad DeLong who said that whether you are a historian or not - to argue what Jarrett and Crowley argued yesterday is to publicly declare oneself as divorced from the facts as the most ridiculed conspiracy theorists. As DeLong says, "A normal person would not argue that the New Deal prolonged the Great Depression."
But, then, these are not "normal people" - those making these arguments are right-wing automatons whose claim that we shouldn't look at actual data, we should simply accept the truth of their claims because they insist "it's in the books!" or they've supposedly seen "all kinds of studies and academic work" that proves their hysteria true.
Of course, the good news is what I said on Fox News before they cut me off: While the right's historical revisionism is dishonest, it's doing progressives a big favor.
If the right wants to try to stop a serious economic recovery package and financial regulations by trying to vilify one of the most popular presidents and popular policy programs in American history, then I'll say what George Bush once said: Bring it on. Every high school civics class teaches the broad truth about Roosevelt, the New Deal and how it helped end the Great Depression, and if the conservative movement has gone so off the deep end that they want to make crazy-sounding arguments that even high schoolers know are silly, then the progressive movement is in an even better position than we may have thought.
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About David Sirota
David Sirota is a political journalist and nationally syndicated newspaper columnist at Creators Syndicate. He is the New York Times bestselling author of Hostile Takeover. He lives in Denver, Colorado. His daily blog can be found at CREDO Action. He contributes regularly to the Denver Post's Web site, is a senior editor at In These Times magazine and is working on his second book. He has been profiled in Newsweek and the Rocky Mountain News and is widely known for his reporting on political corruption, globalization and working-class economic issues often ignored by both of America's political parties. Sirota serves as co-chair of the Progressive States Network, a 501(c)3 organization that supports state legislators and that is a partner of CREDO.
You can subscribe to Sirota's e-mail newsletter by going to davidsirota.com and signing up in the lefthand corner. To find out more about Sirota, download his official biography or see his recent media appearances. You can e-mail him at sirota@credoaction.com.
The views expressed on this blog are his own, and do not necessarily represent the views of Working Assets (publisher of CREDO Action) or the institutions Sirota works for.
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Recent Sirotablog entries
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Discussion
Every time I read something or listen (e.g., when you were subbing for Jay Marvin last week on AM 760)to something you've said, I learn. Keep up the good work.
Of course the whole Faux News thing is a set up. You are on remote while the "objective" host and the Monica are sitting right across from one another, wholly uninterested in having their views subjected to any kind of rigorous examination. They know what they want to believe and they've made up their minds. Please don't try and confuse them with the facts.
Dave I have no idea if you ever read any of the comments posted here. I know you cross post everything over at the Dailykos and Huffington Post.
Look I appreciate your article. However, don't you think that giving an deserved ass kicking to a bunch of throw backs to the era of Roosevelt hating Ivy League supper club reactionaries over at Faux News, the Wall Street editoral page and the National Review is just a bit too easy a way to crank out a column. I know it earns you mad credits with the Kossacks and the Huff'n'Puffers but where is the real insight?
If you really had set of balls. You would go a lot further and point out the critical distinctions between our current worsening economic collapse and the Great Depression. Our problems today are primarily the cause of heinously flawed and corrupt trade and immigration policies that are the legacy of both the Bush I & II and Clinton administrations. The US economy of the 1930s suffered too from massive stock and real estate bubbles. It also suffered from general financial incompetence and an under developed public sector. But today the true problem driving our economic meltdown have been trade and immigration. Face it our economy has been hollowed out for the last two decades by the very policies that are nonetheless overwhelmingly supported by coastal elites in both parties and beltway cocktail crowd. The housing bubble was primarily a credit driven fiasco intended by the elites to postpone the long over due ill effects of decades of falling real wages and job market participation rates for much of the working and middle class.
I know we both agree on the Fair trade vs Free Trade debate. But, on immigration Dave you are all over the place. I know we agree that the H1-B and L1 visa programs are a cesspool of corruption. Combined with "Free Trade" the flood of foreign labor irrespective of any sort of rational labor market analysis has caused real wages and employment for numerous middle class professions to plummet. What is also not mentioned enough is that the fear of losing one's job to outsourcing/insourcing is causing lots of folks who while still employed, although at falling wages, to drastically cut back on spending. I have a good buddy now in his early forties who never is with out a female companion. He sold his condo when his company reorganized his job and made him effectively a consultant with an IT outsourcer and rabid H1-B advocate. He now must live with the same wage and a cutback benefits package even though he earned a promotion. He has been living with his mom for the last 6 years. He is so insecure about his long term employment he has refused to buy a home or a new car. You can not have true stability in the real estate sector until responsible folks like my friend reenter the market.
Ok, so we may both agree on the H1-B and middle class job destroy visa programs. But what about illegal immigration, the lower skilled visa programs like the H2, TN and others, and unprecedented and unsustainable levels of legal immigration in general. Since I lost my hard earned Vice-President titled IT job at one of the nation's largest banks in Chicago, I have to tried to make ends meet by taking several part time evening and weekend jobs while I continued my now futile efforts to find more than cut rate IT temp work. So I also know first hand the wage depressing effects that massive illegal immigration is having on lots of low skill job holders. Our out of control legal and illegal immigration labor market supply growth is really hammering those on the lower rungs of the economic ladder.
Your good buddies over at the DailyKos, Huff'n'Puff, Campaign for Americas Future and the rest of the comfortably bourgeois leftie blogger elite are positively delusional on the immigration issue, especially illegal immigration and amnesty. And don't attempt the illegal immigration is primarily a side effect of NAFTA excuse. Yes NAFTA is a disaster for blue collar Americans and a crappy deal for Mexican factory workers in their border states , but massive illegal migration from central and southern Mexico is driven far more by Mexico's economic elite's corruption, economic incompetence and intentional abandonment of their own people by encouraging them to relocate to El Norte.
If there is a huge difference between problems FDR faced and Obama it is over immigration. The 1920 & 1924 immigration restrictionist reform acts ensured that FDR would not have the added burden of creating jobs for millions of new legal and illegal workers each year. At least FDR could be certain that his Keynesian economic growth plans and infrastructure development programs would eventually work to bring back rising employment and wages because there was a slow tightening of the labor market supply that had the added benefit of encouraging further private sector productivity investment. On the other hand Obama has the impossible task of attempting to please an coalition of Chamber of Commerce cheap labor shills, Open Borders advocates, moonbat far lefties, the Catholic Church and the upper class media and blogger elites who believe that it is remotely possible for the US to have an economic recovery while it attempts to be employer to the world.
The question for you Mr Sirota is exactly whose side are you on???
Actually, the sharpest decline in unemployment that occurred during the Great Depression started in late spring, 1935, after the Supreme Court overturned the NRA (or NIRA, as it is sometimes abbreviated).
The unemployment picture sharply worsened, however, very soon after the Supreme Court flip flopped and upheld the NRA's labor-cartelizing successor, the NLRA in the spring of 1937.
Full recovery did not come for years after that.
The Krugman tax policy theory can't explain why unemployment dropped so much more rapidly after the NRA was overturned. Schlaes' explanation is much more plausible.
Rauchway idiotically ignores the fact that all depressions and recessions end eventually, and claims that we should be happy that by the time Roosevelt died in 1945 unemployment wasn't still 25%, roughly, like it was when he took office in 1933. That's a ridiculously low bar of success, and I think Sirota knows it.
Dave Sirota can run, but he can't hide from the facts!
Actually, the sharpest decline in unemployment that occurred during the Great Depression started in late spring, 1935, after the Supreme Court overturned the NRA (or NIRA, as it is sometimes abbreviated).
The unemployment picture sharply worsened, however, very soon after the Supreme Court flip flopped and upheld the NRA's labor-cartelizing successor, the NLRA in the spring of 1937.
Full recovery did not come for years after that.
The Krugman tax policy theory can't explain why unemployment dropped so much more rapidly after the NRA was overturned. Schlaes' explanation is much more plausible.
Rauchway idiotically ignores the fact that all depressions and recessions end eventually, and claims that we should be happy that by the time Roosevelt died in 1945 unemployment wasn't still 25%, roughly, like it was when he took office in 1933. That's a ridiculously low bar of success, and I think Sirota knows it.
Dave Sirota can run, but he can't hide from the facts!
The rightwing talking point that FDR prolonged the Great Depression and that Hoover was a liberal in conservative clothing (just like Bush and Bush?) is being brought back from the dead with a vengeance. Empirical reality has always been a sore point for the dunderheaded connedserfaturds. The New Deal certainly did not end the Great Depression. However, FDR's policies saved lives. Things were a hell of a lot better due to the New Deal policies and Government interventionism on the Eve of the Second World War than they were in 1933.
If rightwingers couldn't squeak and squawk about something--anything!--they'd shrivel up and die. Then what would we have around to point to as negative examples?
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The rightwing talking point that FDR prolonged the Great Depression and that Hoover was a liberal in conservative clothing (just like Bush and Bush?) is being brought back from the dead with a vengeance. Empirical reality has always been a sore point for the dunderheaded connedserfaturds. The New Deal certainly did not end the Great Depression. However, FDR's policies saved lives. Things were a hell of a lot better due to the New Deal policies and Government interventionism on the Eve of the Second World War than they were in 1933.
If rightwingers couldn't squeak and squawk about something--anything!--they'd shrivel up and die. Then what would we have around to point to as negative examples?
BTW -- Krugman's criticism of FDR is focused on his relative moderation in implementing national socio- economic reconstruction.
"One would be very hard-pressed to find a serious professional historian--I mean a serious historian, not a think-tank wanker, not an economist, not a journalist--who believes that the New Deal prolonged the Depression"
You might try reading Burton Folsom Jrs new book 'New Deal or Raw Deal' before you and your ilk make comments like that.
As for the comment "On deeper examination, I discovered that the right bases its New Deal revisionism on the short-lived recession in a year straddling 1937 and 1938. But that was four years into Roosevelt's term -- four years marked by spectacular economic growth" you might want to look at the following comments made by FDR's Secretary of the Treasury on May 9, 1939, before the House Ways and Means committee. Henry Morgenthau Jr said at that hearing about FDR's New Deal ........................ "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong...somebody else can have my job. I want to see the country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promise....I say after eight years of this administration we have just as much unemployment as when we started....and an enourmous debt to boot!"
David,
The New Deal did not prolong the depression, however you fail to touch on the fact that Roosevelt's emphasis was on protecting American citizen workers. He forced an effort that rounded up and deported illegal aliens, and played hardball against employers who demanded to be allowed to hire them. It only was lifted upon the creation of many, many jobs for American citizens, increasing their employment.
American citizens have been plagued by increasing un/underemployment since the '80s, when outsourcing began. The many amnesties, and the refusal to enforce our immigration laws so as to facilitate business and corporate interests ability to violate wage standard laws and workplace protections with impunity.
Bill Clinton lied to us about NAFTA, he claimed that millions of American citizen's jobs had to be sacrificed so Mexico could grow a middle class, a tax base upon which it could raise revenue to improve standards for the poor there. Mexico co-wrote NAFTA and promised to enact reforms, raise wages and increase opportunity. It has avoided doing so, and this is confirmed by the president of Banco de Mexico, who has stated that Mexicans who enter the US illegally, help the Mexican government avoid having to enact the reforms it promised to. That if they stayed in Mexico, the government would have to honor it's promises. By ignoring these facts, you help rationalize a corrupt status quo.
Mexico is now the 14th wealthiest country in the world, has a large and thriving middle class, a housing boom, zero national debt, and many billion/millionaires. It has every ability to raise taxes and do more for it's people.
American citizens are in dire poverty, we have citizens with children, living in tent cities across the US, because they are discriminated against in their quest for employment. Social programs are overwhelmed by illegal aliens, and their lobbies, funded with millions of dollars by the US Chamber of Commerce and Business Roundtable, demand illegals be subsidized because they earn lower wages. This is another form of corporate welfare, and it is being shown to be denying citizens access to the welfare programs they should be able to rely on in these dire economic times. In Washington state, a program that used to provide coverage to poor citizens between the ages of 18 - 66 who worked but aren't provided/can't afford health insurance, has been re-written to only provide help to illegal aliens. A nurse in Washington state blogged about this on the Seattle Post Intelligencer's site.
It is not racist or xenophobic for American citizens, who happen to be black and brown as well as white, attempt to petition their government, to seek redress, as the Constitution provides them the right to do, speaking out against the violation of their rights as Americans. Yet corrupt leaders, including democrats, who are taking millions from the same corporate interests we recognized were bad when it was republicans who were doing it, demonize and dehumanize poor citizens merely for asking that our laws be enforced and that there be no amnesty, and employers be fined and prosecuted.
Barack Obama has been caught in one lie after another. He's surrounded himself with the same sorts of corporate toadies that Bush and Clinton did. Perhaps living in that affluent enclave of Colorado that you reside in is having an ivory tower affect upon you, but the rest of us aren't blinded to the realities.
Sanjay Gupta for Surgeon General? He never reports on the US health care crisis, only on above the glass ceiling fads and illnesses that the super wealthy are concerned about. Occaisionally he pats himself on the back for flying out to join Doctors Without Borders.. who incidently can't be bothered to address the fact that American citizens in the US die every day because they are denied health care.
Bill Richardson was corrupt as part of the Clinton Administration, as were Rahm Emmanual, and Cecilia Munoz. Richardson has been increasingly more corrupt as governor of New Mexico. Friends there have told me about how he exacerbated the poverty and unemployment in the state, and has spent more time flying around the world, and making deals that he's lined his pockets with profits from.
Ron Kirk from Texas, is in lust with the idea of selling up our national infrastructure. He does not care about the American people, but in his profit margins. Hilda Solis demands that citizens be discriminated against, and that our laws protecting citizens be eroded. She harassed a retired Hispanic member of congress, a few years back, when he regreted expanding ESL to allow students to be taught in their own language for a few years, because it's been proven to be a failure, and has lead to students being taught for their entire time in school in Spanish, and has not contributed to their learning English, and has in fact increased the dropout rate.
Solis is NOT interested in helping poor Hispanics, rather she is interested in the vast sums she rakes in from her corporate paymasters. The entire CHC has fought to help banking and investment interests avoid having to be regulated, when a few years back, it was found that the Hogar program was leading to increased defaults within a short time after it was implemented, because illegal aliens were able to get mortgages for properties valued over 300 thousand dollars, by falsely inflating their wages, because they weren't required to documented their incomes as citizens are required to. The realtors and lenders who were involved in the program with the frauds were also Hispanic. The CHC, including Solis pitched a fit when the Center for Reasonable Lending's Hispanic outreach person asked that Hogar be investigated and problems resolved because it was harming the people it purported to be in aid of helping.
It was later found that the CHC was making huge sums from it's contacts with lenders and the industry, even selling a subscription to a newsletter pointing out new avenues for them to inrich themselves within the Hispanic community.
The CHC have morphed into a clone of the corrupt government of Mexico, and are not serving their constutituents, especially their citizen constituents.
If you refuse to speak out against the frauds in the democratic party, you are no better than the "journalists" in the MSM who provided cover to Bush.
I enjoyed your confrontation with Stossel on minimum wage. His whole argument is a mere thought experiment based on neo-classical suppositions. I love it when empirical facts are brought in.
And the idea that higher wages are good for the whole economy agrees both with my post-Keynesian sentiments as well as my computer models. The idea that the economy will benefit if the workers have enough money to buy things is so radical! Friedmanite nonsense has led to deindustrialization.
The question about FDR prolonging the depression skirts the real issue: banks stop lending during depressions. The greater part of the money supply is endogenous bank credit money.
FDR didn't get the banks lending. The federal reserve system needs to be abolished so that we can have democratic money. Then maybe the credit flow won't stop for 10 - 20 years. Web of Debt
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