The Real Story About What Ended the Great

Depression (Hint: It Wasnt the New Deal)

Stephen Moore / September 28, 2014
My seventh-grade son recently wrote a U.S. History paper extolling the virtues of President
Franklin Roosevelts New Deal. It ended the Great Depression, he wrote with great certainty.
Hes only 12 and parroting what the history texts and his teachers told him.
Thats his excuse. Whats Ken Burns?
Mr. Burns docudrama on the Rooseveltsfor those who werent bored to tearsrepeats
nearly all the worn-out fairy tales of the FDR presidency, including what I call the most
enduring myth of the 20th century, which is that FDRs avalanche of alphabet-soup
government programs ended the Great Depression. Shouldnt there be a statute of limitations
on such lies?
Ask nearly anyone over the age of 80, and they will say that FDR cared about the working man
and gave the country hope, a point that Mr. Burns emphasizes. Roosevelt exuded empathy,
which isnt a bad thingremember Bill Clintons memorable line I feel your pain?but
caring doesnt create jobs or lift gross domestic product.
Nor does spending government money revive growth, despite the theories put into practice by
the then-dean of all economists, John Maynard Keynes. Any objective analysis of these facts
can lead to no other conclusion. U.S. unemployment averaged a rate of 18 percent during
Roosevelts first eight years in office. In the decade of the 1930s, U.S. industrial production and
national income fell by about almost one-third. In 1940, after year eight years of the New Deal,
unemployment was still averaged a god-awful 14 percent.

Former President Franklin D. Roosevelt and his wife Eleanor with their Scotch terrier Fala on the
terrace of his house in Hyde Park, New York. (Photo: Newscom)
Think of it this way. The unemployment rate was more than twice as high eight years into the
New Deal than it is today, and American workers now are angry as hornets. Imagine, if jobs
were twice as scarce today, the pitchforked revolt that would be going on. This is success?
Almost everything FDR did to jump-start growth retarded it. The rise in the minimum wage
kept unemployment intolerably high. (Are you listening, Nancy Pelosi?) Roosevelts work
programs like the Works Progress Administration, National Recovery Administration and the
Agricultural Adjustment Administration were so bureaucratic as to have minimal impact on
jobs. Raising tax rates to nearly 80 percent on the rich stalled the economy. Social Security is
and always was from the start a Madoff-style Ponzi scheme that will eventually sink into
bankruptcy unless reformed.
The most alarming story of economic ignorance surrounding this New Deal era was the tax

increases while the economy was faltering. According to economist Burt Folsom, FDR signed
one of the most financially devastating taxes: On April 27, 1942, he signed an executive order
taxing all personal income above $25,000 [rich back then] at 100 percent. Congress balked at
that idea and later lowered it to 90 percent at the top level. The New Dealers completely
ignored the lessons of the 1920s tax cuts, which just a decade before had unfurled an age of
super-growth.
Then there was the spending and debt barrage. Federal spending catapulted from $4.65 billion
in 1933 to nearly $13.7 billion in 1941. This tripling of the federal budget in just eight years
came at a time of almost no inflation (just 13.1 percent cumulative during that period). Budget
surpluses during the prosperous Coolidge years became ever-larger deficits under FDRs fiscal
reign. During his first term, more than half the federal budget on average came from borrowed
money.
The cruel irony of the New Deal is that the liberals honorable intentions to help the poor and
the unemployed caused more human suffering than any other set of ideas in the past century.
What is maddening is that thanks to this historical fabrication of FDRs presidency, dutifully
repeated by Mr. Burns, we have repeated the mistakes again and again. Had the history books
been properly written, its quite possible we would never had to endure the catastrophic
failure of Obamanomics and the stimulus plans that only stimulated debt. The entire
rationale for the Obama economic plan in 2009 was to re-create new New Deal.
Doubly amazing is that at this very moment, the left is writing another fabricated history of
the years we have just lived through. The history books are already painting Obama policies as
the just-in-time emergency policies that prevented a Second Great Depression. I wonder if 80
years from now, the American people will be as gullible as they are today in believing, as my
12-year-old does, that FDR was an economic savior.
Originally appeared in The Washington Times