January 21, 2009
By William W. Beach and Ken McIntyre
"We have tried spending money. We are spending more than we have
ever spent before and it does not work."
Sound like Rep. John Boehner of Ohio, or perhaps another
exasperated Republican stalwart, lamenting President Barack Obama's
inclination this week to try to spend our way out of the
"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 -- say, Harlem's Rep. Charlie
Rangel -- pushing Obama to "create" jobs?
How 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
Surely this must be House Speaker Nancy Pelosi denouncing the
Bush administration's economic policies.
Wrong. Wrong. And wrong again.
The words came from none other than Henry Morgenthau Jr. -- pal,
lunch companion and loyal secretary of the Treasury to President
Franklin D. Roosevelt.
Morgenthau made this "startling confession," as historian Burton
W. Folsom Jr. calls it, during the seventh year of the New Deal he
helped FDR create to combat the rampant unemployment of the Great
It was May 9, 1939, and Morgenthau was appearing before powerful
Democrats on the House Ways and Means Committee.
"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."
Indeed, Morgenthau confessed what so many keepers of FDR's flame
won't admit: The New Deal failed. Massive spending on public works
programs didn't erase historic unemployment. It didn't produce a
And neither will a "new" New Deal.
Some of the most desperate defenders of New Deal doctrine are
getting a little shrill about this. But it's an important truth,
nevertheless, especially because the same characters insist
President 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 at The Heritage Foundation caution
that Obama ought not to repeat 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. They cited lower numbers.
"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
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."
Ouch. If Heritage and our conservative principles are "fringe,"
then FDR's trusted Treasury secretary was what -- a duplicitous
What to make of a "journalist" who argues that folks on public
assistance must be considered employed -- much less "government
For the record, Heritage plotted New Deal unemployment using
Census Bureau data (Page 6, Series D, column 10), the
"official" numbers that were compiled at the time.
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.
"[I]f we counted people on work relief as employed," as George
Mason University economist Alex Tabarrok writes, "then eliminating
unemployment would be very easy -- just require everyone on any
kind of unemployment relief to lick stamps."
So why the different sets of numbers?
Over the years, economists and academics working in good faith
calculated "alternative series" of unemployment statistics 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 from the
Bureau of Labor Statistics.
Thing is, the statistics preferred by Sirota and other FDR
acolytes still reveal the New Deal didn't drive pre-World War II
unemployment below 17 percent in any year except 1937 (estimate:
These 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.
as the chart shows, is that the alternative numbers track the
census estimates in showing unemployment during the New Deal
remained the worst our nation has seen. World War II ended the
The current recession likely will be deep. It could turn out to
be more severe than any economic downturn since the Great
Depression. Call it the "Great Recession." Still, the economy and
financial markets are working through the difficulties, and
eventually will stabilize and strengthen on their own.
Amid the current economic pain, Heritage has urged Obama and the new Congress to
agree on a stimulus that actually will work by softening the
recession and speeding recovery. Here's how:
Heritage's analysis shows this approach would mean 500,000 more
jobs this year and a million jobs in 2010, on the way to creating
3.6 million jobs through 2012. Federal tax receipts would fall by
$670 billion over five years.
These aggressive changes in tax policy, plus intensive
activities by the Federal Reserve, are the best combination of
federal actions to end or shorten a recession. In contrast, tax
proposals being urged for the Obama stimulus would have almost no
effect on the economy. House Democrats' plan for $550 billion in
new spending, in part for infrastructure projects, would do even
less for recovery.
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."
William W. Beach
is director of the Center for Data Analysis at the Heritage
Foundation and Ken McIntyre
is the Marilyn and Fred Guardabassi Fellow in Media and Public
Policy Studies at The Heritage Foundation.
First appeared in Human Events
“We have tried spending money. We are spending more than we have ever spent before and it does not work.”Sound like Rep. John Boehner of Ohio, or perhaps another exasperated Republican stalwart, lamenting President Barak Obama’s inclination this week to try to spend our way out of the recession?
William W. Beach
Director, Center for Data Analysis and Lazof Family Fellow
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