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  • 'We're Spending More Than Ever and It Doesn't Work'

    “We have tried spending money. We are spending more than we have ever spent before and it does not work.”

    Sound like, oh, Rep. John Boehner of Ohio or some other exasperated Republican stalwart lamenting proposals to spend our way out of the recession?

    Listen again:

    “I want to see this 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 promises.”

    Sound more like a liberal Democrat pushing job creation — say, Harlem’s Rep. Charlie Rangel?

    What about this:

    “I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot!”

    Surely this must be House Speaker Nancy Pelosi or another leading Democrat denouncing President Bush’s economic policies.

    Wrong. Wrong. And wrong again.

    The words are those of none other than Henry Morgenthau Jr. — close friend, lunch companion, loyal secretary of the Treasury to President Franklin D. Roosevelt — and key architect of FDR’s New Deal.

    The date: May 9, 1939. The setting: Morgenthau’s appearance in Washington before less influential Democrats on the House Ways and Means Committee.

    Morgenthau made this “startling confession,” as historian Burton W. Folsom Jr. calls it, during the seventh year of FDR’s New Deal programs to combat the rampant unemployment of the Great Depression.

    “In these words, Morgenthau summarized a decade of disaster, especially during the years Roosevelt was in power. Indeed average unemployment for the whole year in 1939 would be higher than that in 1931, the year before Roosevelt captured the presidency from Herbert Hoover,” Folsom writes in his new book, “New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America.”

    ndchart.JPG

    Indeed, with those words, Morgenthau confessed what so many keepers of FDR’s flame won’t admit today: The New Deal was failed public policy. Massive spending on public works programs didn’t erase historic unemployment. It didn’t produce a recovery.

    And neither will a “new” New Deal.

    Some of the most desperate defenders of New Deal doctrine are getting a little shrill about this hard truth. It’s an important truth, nevertheless, especially because the same characters insist that Barack Obama must push through a “bold” economic stimulus that depends on hundreds of billions in new government spending to create or “save” jobs.

    Budget and financial experts here at The Heritage Foundation are among cooler heads cautioning that President Obama ought not to repeat President Roosevelt’s mistakes. In one such effort, Heritage last week distributed a chart showing that FDR’s programs didn’t succeed in pushing unemployment below 20 percent.

    Some observers — not just hysterical big government junkies but also dispassionate policymakers and news editors — took issue with the unemployment data used by Heritage because they’d seen different numbers elsewhere.

    One commentator, Media Matters senior editor Terry Krepel, warns the numbers “appear to be significantly inflated.”

    “Leading FDR slanderers,” David Sirota hyperventilates on Huffington Post, “base their claims that unemployment during the New Deal didn’t go below 20 percent by counting government workers as unemployed.”

    Sirota, who calls himself a “political journalist,” adds: “And those claims are being echoed by right-wing rags like the National Review and fringe think tanks like The Heritage Foundation.”

    If Heritage and our conservative principles are “fringe,” then FDR’s trusted Treasury secretary was what — a duplicitous traitor?

    What are we to make of a “journalist” who seriously holds that folks on public assistance must be considered employed — much less “government workers”?

    In fact, Heritage plotted New Deal unemployment using widely accepted Census Bureau data, the only “official” numbers compiled at the time. (See page 6 of PDF, Series D, column 10.)

    They didn’t count Civilian Conservation Corps workers, prisoners or anyone else who got only “three hots and a cot” as a government employee. Neither does Heritage.

    This reasoning remains standard practice today, as George Mason University economist Alex Tabarrok blogs, since “people who are on workfare, the modern version of work relief, are also counted as unemployed.”

    “[I]f we counted people on work relief as employed,” Tabarrok adds, “then eliminating unemployment would be very easy — just require everyone on any kind of unemployment relief to lick stamps.

    “[D]id the fiscal stimulus work to restore the economy and get people back to work? Well, we can’t answer that question using unemployment statistics if we count people on work relief as employed.”

    So why the different sets of numbers out there?

    Over the years, economists and academics working in good faith calculated “alternative series” of unemployment statistics for the Great Depression years in hopes of painting a more accurate picture. All begin with census data. The alternative numbers, generally showing somewhat lower levels of unemployment, are available on the Web site of the Bureau of Labor Statistics.

    Such restatements of unemployment — including a change by BLS that didn’t count “discouraged” job seekers amid President Lyndon B. Johnson’s Great Society programs of the mid-1960s — tend to lower the jobless rate by shrinking the size of the work force.

    During the Depression, though, if you were an able-bodied man you were assumed to be looking for work.

    In any case, the statistics preferred by such New Deal acolytes as University of California historian Eric Rauchway reveal that FDR’s policies didn’t drive pre-World War II unemployment below 17 percent in any year except 1937 (estimate: 14.3 percent).

    This “new series” of estimates (developed by economist Stanley Lebergott) show joblessness peaking at 24.9 percent in 1933, dropping over the next four years and — under New Deal, Part 2 — shooting back up to 19 percent in 1938. Unemployment then decreased to 14.6 percent in 1940 at the advent of a wartime economy and to 9.9 percent with America’s entry into World War II the following year.

    The point is, as the chart above shows, all these trends track the Census Bureau estimates. It was still the worst unemployment our nation has seen. It didn’t get better until the war was on.

    We shouldn’t dumb down reality by suggesting suffering and hardship during the Great Depression weren’t so great. Those photographs of long lines outside soup kitchens and desperate men huddled around fires don’t lie. There is no “alternative series” of photos.

    So stop bellyaching about the numbers. The New Deal was a failed government policy that emphasized “creating jobs” by spending unjustifiable amounts of taxpayer dollars on infrastructure projects.

    Don’t listen to Heritage if you don’t want to. Listen to Henry Morgenthau.

    “We are spending more than we have ever spent before and it does not work.”

    Ken McIntyre co-wrote this post with Bill Beach.

    Posted in Economics [slideshow_deploy]

    25 Responses to 'We're Spending More Than Ever and It Doesn't Work'

    1. Ozzy6900 says:

      I'm sorry but you will never get the Left to admit that their hero, former President FDR, was a failure! You see, it is apparent that most of the Left have little or no understanding of History.

      They pushed Prohibition and that turned into a joke. They took over the Railroads and that prevented railroads from making profits. They thought it was okay to let Hitler walk into the Slavic Countries because "They were having good dialog with Hitler". They insisted that Japan was not an immediate threat to the United States but "required careful watching".

      Meanwhile, they (the Left) continued to spend tax dollars on programs that went nowhere. The people that worked in the programs DID bring home a pay to feed their families, but it was WWII that finally turned the tables.

      So, today, the Left still hasn't learned. They still want to ban everything, they still want to control free enterprise, they still think they can talk to terrorists and they firmly believe there is no threat to the American People from anyone. You see, in order to know where you are going, you need to look where you have been. The Left never looks back, but they keep making the same mistakes!

    2. Mike, Hickory, NC says:

      How many times do we have to say it?

      To Leftists/government elitists, the facts (and spent money) don't count; only their getting more money and government power, and spending more of everybody else's money to get even more money and government power) counts!

    3. Spiritof76, New Hamp says:

      You can not expect the American socialists to admit to their hero FDR's failed economic policies anymore than Stalinists to rebuke their hero's policies in Soviet Union. As a matter of fact many of the FDR agency heads had been to Russia and returned home with great admiration of Stalin. Many in his cabinet admired Mussolini.

      US is already on the way to become a full-fledged socialist state. We need to start thinking about changing our flag and national anthem as they are becoming irrelevant.

    4. Ken Washington DC says:

      As conservatives, we are to blame for the entitlements as well. We are too eager to feel sorry for others. We are too eager to help. We are too eager to be seen as caring. We never bother to explain that at times, the most caring thing one can do is allow another to suffer the pains of what they do and to allow another to have to fix their own problem. We have bought into the compassionate conservatism instead of explaining that conservatism is the most compassionate method to help people, for it does not create dependency.

      In my view, conservatives have been so eager to be viewed as nice people, they have forgotten their principles and have gone along willingly with the entitlement and give away programs. They have forgotten that anyone will like you as long as you do what they want you to do. They have forgotten that if you receive that kind of friendship, you have no friendship at all.

      My rules of conservatism:

      1. Even though it may hurt, the truth is always the most caring and helpful thing you can give to yourself or another.

      2. Remember that anyone will like you as long as you do what they want you to do.

      3. If you want people to learn what is right and to then do what is right, you cannot let them off the hook or reward them for doing what is wrong.

    5. Pingback: RSS agregator » Blog Archive » What Did FDR’s OWN Treasury Secretary Think of the ‘New Deal’ He Helped Craft?

    6. Pingback: Notable Quotes, Feb. 10, 2009

    7. Roy says:

      The only thing the liberal left understands is that, if they promise to continue to take care of all the people who don't work, won't work, or refuse to work, give them health care, subsidized housing, food, and any other convience know to man – that this will get them elected or re-elected. Promise them anything and people of limited cognitive ability will believe anything said to them. The liberal left would sell their soul,if they believe there is such a thing, for another term in office. It is a sad day when you have liars in charge who run this country. I also believe that the three Republican Senators who voted in favor of the so-called Stimulus package, and the one who did not vote are traitors to the American people. I know that you voted your conscience, but your conscience is wrong!!!!!! Last thought – it will not take two years, three years or even four years for this country to fall into total collapse. You will go to bed one night and bingo – Big Brother, Big Sister and Big Government will be right at your door-step. I lied, this is my last thought – YOU CAN'T FIX STUPID.

    8. Phil says:

      Interesting, but I think there is a flaw in the logic. They are claiming that the government spending during the Depression didn't completely cure the economy's ills. That is true. But suppose there had been no such government spending. I have to believe that the economy would have been that much worse, and the unemployment rates they tout would have been that much higher. If you look at it that way, then the problem is not that the government was spending all this money to no effect. Instead the problem is the government wasn't spending enough to completely cure the economic problems. Also, take a look at the chart. The turnaround in the unemployment rate coincides with the start of the New Deal. The New Deal did decrease the unemployment rate. It just didn't completely fix the massive problems in the economy.

    9. Clay, Covington KY says:

      As Much as I want this Morganthau quote to be true, and as much as I believe it to contain the truth of the New Deal, I am having trouble with it. Folsom claims this quote from May 1939, just over six years since Roosevelt's inaugaration not the eight referenced in the quote. Somehow I have trouble believing that a Treasury Secretary would add two years to the administration in such a setting.

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    11. Pingback: Brain-Dead Politicians: Spending Leads to Recovery « The Road to Serfdom is a Superhighway

    12. Pingback: BlogWonks » Blog Archive » Shocker: The New Deal prolonged Great Depression

    13. Bringing the Truth says:

      FDR was the 1st Council of Foreign Relations run President.

      Who started the CFR? Rockefeller.

      Who started the Federal Reserve? Rockefeller

      Who started the Tri-lateral Commission of which Obama is a stalwart product of? Rockefeller.

      Obama is a puppet for the bankers… as was FDR.

      We are being played.

      Wake up, defend the Constitution. End the Federal Reserve, try and convict the members of the CFR/Trilateral Commission for treason. Freeze the assets of the Rockefellers/Rothchilds and take back our Constitutional Republic before we become the 4th Reich.

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    16. Rick, Michgan says:

      The Morgenthau quote is bogus – do the math professor: FDR was only in office for SIX years in 1939 not EIGHT. FDR took office in 1933. Other than the un-sourced quote in Folsom book, “New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America” the quote cannot be found.

      Supposedly, Morganthau made the statement in a Congressional hearing May, 1939. A simple trip to a good library to review the Congressional Record reveals that he NEVER MADE THE STATEMENT. Nice try.

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    21. Jared says:

      Actually, the quote's not bogus, and what looks like damning poor math is only the result of the quote being incomplete. It's an "if after eight years," not an "after eight years of this." It's not Congressional testimony, either, it's a transcript from a private meeting between two Senators and Morgenthau.

      Here's the full quote, thanks to Steven Horwitz. As you can see, the full quote is quite a bit stronger in its condemnation of FDR's policies:

      [U.S. Treasury Secretary Henry Morgenthau, Jr.]: No, gentlemen, 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, as far as I am concerned, somebody else can have my job. I want

      to see this 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

      promises…

      But why not let’s come to grips? And as I say, all I am interested in

      is to really see this country prosperous and this form of Government

      continue, because after eight years if we can’t make a success somebody

      else is going to claim the right to make it and he’s got the right to make

      the trial. I say after eight years of this Administration we have just as

      much unemployment as when we started.

      Mr. Doughton: And an enormous debt to boot!

      HMJr.: And an enormous debt to boot! We are just sitting here and

      fiddling and I am just wearing myself out and getting sick. Because why?

      I can’t see any daylight. I want it for my people, for my children, and

      your children. I want to see some daylight and I don’t see it…

      —Transcript of private meeting at the Treasury Department, May 9,

      1939, F.D. Roosevelt Presidential Library

      Horwitz, Steven. "Great Apprehensions, Prolonged Depression: Gauti

      Eggertsson on the 1930s." Econ Journal Watch 6.3 (2009): 313-36. Web.

      10 Aug 2010.

    22. Koblog says:

      Good job, Jared! Excellent try. The quote's from the FDR library. Good source, I'd say.

      As for WWII ending the Depression, that's bogus, too. You cannot have a nation build a gigantic war machine using debt, then send that machine to be destroyed in battle or rust to oblivion afterward and consider that "employment."

      We actually did not return to prosperity until the 50's and that was because we were the last means of production in the world. England, France, Germany, Russia and the rest of Europe had literally been burned down, as was Japan.

      China, Korea and the Soviet Union had no ability to be world-class industry.

      Only America had working factories and the people and desire to man them. That's when the Depression ended.

    23. Pingback: Let me try to put some FDR things into a perspective...

    24. Adam Smith says:

      A dishonest misrepresentation of Morgenthau's letter. Morgenthau was complaining that policies were failing BECAUSE THE STIMILUS WAS NOT BIG ENOUGH and that taxes should be raised on the rich to balance the budget.

      You can read the original letter in its entirety, in context, here:

      Immediately after saying (as quoted above):

      “We have tried spending money. We are spending more than we have ever spent before and it does not work.”

      his very next words are :

      And I have just one interest, and if I'm wrong, as far as I am concerned, somebody else can have my job. I want to see this 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 promises. We have never taken care of them. We have never taken care of the people through your mountains and your mountains who get a $30.00 Or $40.00 a year income. There are 4,000,000 who don't have that much income. We have never done anything for them.

      We have never begun to tax the people in this country the way they should be. We took this program to the President showing how to raise another $2,000,000,000 and how to balance the budget, and we had it in October of this year. $2,000,000,000! WE HAVE NEVER BEGUN TO TAX THE PEOPLE. I DON'T PAY WHAT I SHOULD. PEOPLE OF MY CLASS DON'T. PEOPLE WHO HAVE IT SHOULD PAY.

      ~~~~~

      Don't take my word for it. You can find a full copy of the original letter on the Burt Folsum website. Folsum hates FDR, and it is his out of context quote from Morgenthau's letter that can be found all over the internet, in precisely the misrepresentative form above:
      http://www.burtfolsom.com/wp-content/uploads/2011

      PAGES 3-4

    25. Garth Ross says:

      Supply side economics works every time; demand side that we have now, does not.

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