FDR American Badass is supposed to come out sometime this year. The problem is that it doesn’t look bad enough to paradoxically become good, but it doesn’t look good enough to really channel something by, say, Mel Brooks. So what we’ll be left with is a few people leaving the theater who say, “Well, at least he got us out of the Great Depression.”
There’s only one problem with that. It’s wrong.
I hate to be one to pick on a dead guy who lived much of his life in a wheelchair, but the truth about FDR’s economic policies really needs to be spelled out, particularly since the past few years has seen a resurgence in the belief that we can tax and spend our way to prosperity. (Ask Greece and Spain how that’s working out for them.)
Let’s start with the New Deal. Its various alphabet-soup agencies—the WPA, AAA, NRA and even the TVA (Tennessee Valley Authority)—failed to create sustainable jobs. In May 1939, U.S. unemployment still exceeded 20%. … European countries, according to a League of Nations survey, averaged only about 12% in 1938. The New Deal, by forcing taxes up and discouraging entrepreneurs from investing, probably did more harm than good.
The only thing that made FDR’s employment numbers look good were the war. It turns out that if you send millions of men off to fight Nazis and then have millions on the home front churning out bombs and bullets, destroyers and airplanes, you get a decent dip in unemployment. Who knew.
FDR died, the war ended, and along with him so did much of his domestic agenda.
Congress reduced taxes. Income tax rates were cut across the board. FDR’s top marginal rate, 94% on all income over $200,000, was cut to 86.45 percent. The lowest rate was cut to 19 percent from 23 percent, and with a change in the amount of income exempt from taxation an estimated 12 million Americans were eliminated from the tax rolls entirely.
Corporate tax rates were trimmed and FDR’s “excess profits” tax was repealed, which meant that top marginal corporate tax rates effectively went to 38 percent from 90 percent after 1945.
Georgia Sen. Walter George, chairman of the Senate Finance Committee, defended the Revenue Act of 1945 with arguments that today we would call “supply-side economics.” If the tax bill “has the effect which it is hoped it will have,” George said, “it will so stimulate the expansion of business as to bring in a greater total revenue.”
He was prophetic. By the late 1940s, a revived economy was generating more annual federal revenue than the U.S. had received during the war years, when tax rates were higher. Price controls from the war were also eliminated by the end of 1946. The U.S. began running budget surpluses. …
Unemployment, which had been in double digits throughout the 1930s, was only 3.9 percent in 1946 and, except for a couple of short recessions, remained in that range for the next decade.
When it came to economics, FDR wasn’t a “badass” — he was just bad. And generations of people believe the exact opposite. It’s been verboten for so long to lay a finger on FDR, that even a conservative like myself doesn’t have a heart to break it to his grandmother that it was all smoke and mirrors. She always smiles when she tells me about the time she was standing outside a church with a young child when FDR’s car drove up, the President of the United States waved and said the child was “adorable,” tipped his hat and then departed. Only a jerk would try and shatter that memory with a cold lesson in economics.
I won’t say this to my grandmother, but I will say it to you: Keynesian economics failed with FDR, it failed with Barack Obama, and we’d be foolish to try it again. And if you don’t believe me, you might just be a werewolf.