Franklin Delano Roosevelt has been hailed by many who hold partiality to Keynesian economics to be the savior of the American economy through his New Deal. As a constitutionalist and one who is extremely critical of the “tax and spend” policies of FDR, I see most of the policies he pushed for during his administration adding more to the problems of the 1930s than providing effective solutions.

As I was reading through constituent letters to the President in Down and Out in the Great Depression, I was immediately drawn to a letter written in 1936 by a 12 year-old boy on behalf of his father who was unemployed at the time, as well as his twenty year old sister coupled with a very low family income and an inability to pay rent and other bills.

On top of this, the boy makes a note that his father has repeatedly applied for relief but wasn’t given anything (McElvaine, 117). Reading this, I immediately reflected on the effects of the Great Depression and how such a situation wasn’t exclusive but in fact indicative of a broader issue affecting many American families in the 1930s. Looking at legislation, I identified the Emergency Relief Appropriation Act of 1935 as being one of the pivotal pieces of legislation that outlined FDR's welfare initiative. According to Faragher's Out of Many: History of the American People, "

In April 1935, the administration pushed through Congress the Emergency Relief Appropriation Act, which allocated $5 billion for large-scale public works programs for the jobless” (Faragher et al, 635). Under the direction of the WPA (The Workers Progress Association), created by President Roosevelt via executive order in May of 1935, appropriations were established of approximately $5 billion for jobless programs on a large public scale.

As a result of the program, over 8 million jobless Americans were employed in construction and community service projects (Faragher et al, 635). It was this pivotal legislation that led to a more permanent government initiatives to supposedly combat poverty under the Social Security Act of 1935, which ideally was supposed to provide unemployment insurance and compensation for those that were jobless.

“The act’s unemployment compensation plan established a minimum weekly payment and a minimum number of weeks during which those who lost jobs could collect” (Faragher et al, 635). Such programs were pivotal to the establishment of the welfare state, which apportioned tax payer dollars to federal programs initiated to assist those stricken with poverty.

It would seem as if the child in the letter above was highlighting that although these pieces of legislation went into effect the year prior (1935), his father still had not been able to receive any relief, implying the Social Security Act to be virtually ineffective for his family in matters of unemployment relief. I must say that this case, as mentioned earlier, wasn’t the only one to provide evidence of the welfare state’s failures.

The New Deal programs en masse skyrocketed taxes from about $1.6 billion in 1933 to about $5.3 billion in 1940 (Powell, 2003), which adjusted for inflation in today's dollars would be equivalent to a tax rate of $27.6 billion being increased to approximately $91.4 billion spanning around 7 years.

These taxes, especially Social Security excise taxes on payroll, were responsible for extended periods of unemployment, which under FDR continued to hover around a devastating 17%, which basically is the coup de grace in the argument that the Social Security Act assisted significantly in eliminating poverty or at least reducing it significantly.

Consider this excerpt from a study from The Cato Institute, “What about the good supposedly done by New Deal spending programs? These didn’t increase the number of jobs in the economy because the money spent on New Deal projects came from taxpayers who consequently had less money to spend on food, coats, cars, books and other things that would have stimulated the economy. This is a classic case of the seen versus the unseen — we can see the jobs created by New Deal spending, but we cannot see jobs destroyed by New Deal taxing” (Powell, 2003).

For the 12-year-old’s situation, his father very well could have been a victim of the new tax increases, and his family’s inability to receive relief could be indicative of an economy’s inability to run off of incredibly hiked tax rates.

The socialist mindset behind the tax increases not only eliminates job growth but also weakens federal programs as taxpayer funding becomes increasingly scarce. The Emergency Relief Act, for example, was responsible for around 8 million Americans receiving some form of work, but there’s no telling how many jobs were lost as a result of the New Deal’s taxes, including those associated with the social security program.

This is the danger of government intrusion and what Keynesianism does in unraveling economic stability and providing extremely low-quality government programs. The data used to praise FDR is typically skewed to favor a biased narrative, which is why so many on the liberal left hail FDR as the man who saved the economy from the pulpits and the universities, much to the pleasure of the hive-minded next generation liberals.

But if one decides to think for himself or herself, they will find that it's rather hard to keep that argument afloat when you have a 17% unemployment rate, massive tax increases and a skyrocketing national debt soiling your record.

References:

McElvaine, Robert S. 1983. Down and Out in the Great Depression. Chapel Hill: The University of North Carolina Press.

Faragher, John Mack; Buhle, Mary Jo; Czitrom, Daniel; Armitage Susan;. 2012. Out of Many: History of the American People, Brief Edition, Combined Volume (6th Edition). Saddle River: Prentice Hall. p. 635.

Powell, Jim. 2003. "How FDR's New Deal Harmed Millions of People." Cato Institute . December 29. Accessed July 25, 2017. https://www.cato.org/publications/commentary/how-fdrs-new-deal-harmed-millions-poor-people.