NEW DEAL PROGRESSIVISM, THE
JEFFERSONIAN REVIVAL, AND
THE AGRARIAN TRADITION

Burton W. Folsom Jr.

I’m talking today about President Franklin D. Roosevelt, who attacked the Great Depression in the 1930s with a series of programs called the New Deal. In the classroom and in the textbooks, historians rank him very high among presidents, usually in the top three. In the Arthur Schlesinger poll, the most commonly cited poll, he was rated as “great” by every historian who voted in the poll except for one. And that historian ranked him as “near great.”

So we have a top-rated president. And the way FDR’s story is told is this: the Great Depression had 20 percent unemployment for several years, all the way up to almost 25 percent in 1933. Roosevelt put people to work with programs such as the Works Progress Administration (WPA) and the Tennessee Valley Authority. And suddenly, jobs were generated! In the case of the WPA, people worked to build roads and other construction projects, or hospitals and schools. That put people to work; and then they spent money, and that got the country out of the Great Depression!

In other words, you have spending and then you get recovery. But here is what Henry Morgenthau, Roosevelt’s secretary of the treasury, said about the New Deal, seven years into its implementation. He was looking at the unemployment statistics, and he saw that seven years after Roosevelt was elected, unemployment was at 20.7 percent. Then Morgenthau said this:

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’m wrong, 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. I say, after eight years of this administration, we have just as much unemployment as when we started, and an enormous debt to boot.

That was spoken by one of President Roosevelt’s best friends. The man who made that statement had a photo of himself and Roosevelt side by side. Roosevelt signed it, “From one of two of a kind.” The two men often had lunch together, breakfast together. They would pass notes to each other at cabinet meetings. But Morgenthau said in frustration about the New Deal that after seven years, it had not worked.

If you ask me, “Are you saying that when you have high unemployment, injecting money into the economy via the WPA and these various programs doesn’t work?!” Yes, that’s exactly what I’m saying.

I’m going to explain why the New Deal failed to generate recovery, first, by looking at the 1920s; second, by looking at the 1930s; and third, by looking at World War II and its aftermath. After spending—massive, record spending on New Deal programs—the country still had double-digit unemployment every year of the 1930s.

THE 1920s

When World War I ended, there was high unemployment. Four million soldiers came home from the battlefields in Europe and couldn’t get a job. We had high taxes in place, thanks to President Wilson’s attempts to fund the war. Entrepreneurs were not getting into business very much. In 1921, America faced 12 percent unemployment. That was perhaps the major issue in the 1920 campaign. Harding and Coolidge, running for president and vice president, campaigned in 1920 against their opponents with this question on everyone’s mind: What are you going to do about this unemployment?

Once they were in office, what did Harding and Coolidge do? Some wanted a gigantic stimulus package, using this logic: “Just about everybody has an automobile, but the roads aren’t very good, because they were built for slow-moving horses and buggies. You need different surfacing, of course, for cars. We don’t have a lot of paved roads, so why don’t we put these soldiers returning home from the war to work building roads? Then they will plow money into the economy, and we’ll slash this 12 percent unemployment. So let’s do public works!”

Harding said no. Coolidge said no. Their argument was interesting. First, they said, nothing in the Constitution gives the federal government the authority to build roads. There’s a reason for that: James Madison even used that rationale for his veto of a public works bill in 1817. Madison and Jefferson, those old-style agrarians, said if you had that power in the federal government for road building, politicians would build roads in their home states where they wanted votes. Therefore, the states themselves should be in charge of road building. Yes, we want roads; we just don’t think the federal government ought to be the place where it’s done.

That reasoning worked for Jefferson and Madison; it worked for Harding. He also believed that the idea of a federal workforce building roads wouldn’t create jobs. Because if you build a road and you put people to work, that’s nice, but where do you get the money to do it? That’s the key question. What you see is the road being built, and you see former soldiers at work building the road. What you don’t see is the money that is taken from taxpayers to build the road. Those taxpayers would have spent the money on other things, and that spending would have helped the economy and created jobs.

And that makes an interesting question: Who better spends money? Government bureaucrats or you? And who is more likely to spend money on things that people really want? We recognize roads have to be built. It should be done at the state and local levels. At the federal level, we keep the government as small as possible, with limited powers. We keep taxation limited. People should be able spend their own money.

Harding’s opponents used an argument you might find familiar. They said, in effect, he was engaging in the “politics of no.” But Harding responded with a plan: first, to cut federal spending, and second, to cut income tax rates. Now that’s interesting. This is the reverse of the stimulus package. You have high unemployment, so what do you do? You cut back federal spending, and you cut the income tax, and in effect more people are going to have money to spend as they see fit. Harding and Coolidge argued that would get us out of the depression of 1920 and 1921.

The interesting thing about being a historian is that we get to study what happened. First of all, Harding and Coolidge were true to their word. They did what they promised. Harding died in office, so Coolidge followed him and completed his program. They cut federal spending by about 50 percent in the first two years of Harding’s presidency, from roughly $6.5 billion in 1921 to $3.1 billion in 1923. And they cut the federal income tax, the top rate, from 73 percent down to 56 percent, and eventually slashed it to 25 percent. They also cut tax rates for all income-tax payers.

The question is, What was the unemployment rate after this shrinking of the federal government? The answer: 2 percent. I will be technically accurate and use the official figure of the U.S. Census: 2.4 percent. Yes, 2.4 percent unemployment in 1923, after 11.7 percent unemployment in 1921.

Harding and Coolidge, in effect, said, “We’re trusting entrepreneurs to make the difference.” And what happened was a burst of entrepreneurship. “We get to keep the money we make from the projects we build!” That’s exciting. The 1920s: radio is invented and used and becomes a standard household item. It just sweeps in, just as the iPhone has done over the past few years. Six years ago hardly anyone had an iPhone, and four years from now, practically everybody will have one. That was true of the radio in the 1920s.

But I’m not done. Here are some other changes. Sliced bread! Did you ever hear that something is the greatest invention since sliced bread? It was invented in the 1920s. That’s the beginning of the peanut butter and jelly sandwich. Then came Scotch tape! Air-conditioning!

Air-conditioning is a fantastic example of how a macroeconomic policy can create entrepreneurship. It was invented by Willis Carrier. He was hired by a firm in Brooklyn, which was a printing company—a printing company!—because it would print items, and the ink smeared when finished products were placed in stacks. Carrier was asked, “Could you invent something to dehumidify the room more quickly? If you dehumidify the room more quickly, we won’t get the smearing from the damp ink.” And so Carrier began working to develop a machine to pull humidity out of the room, and he noticed that this mechanical process had a cooling effect. He didn’t work on air-conditioning further for a while, but said to himself, “You know, this is something that I might want to explore, that I can actually cool a room as well as dehumidify it.”

At first, faced with the high taxes, Carrier didn’t want to take risks on his invention. But then, when the tax cuts came in 1924, he began to promote his air conditioner. The first industry to buy an air conditioner—now this is interesting—was movie theaters. That’s because movie sales would spike in the winter and drop in the summer due to high temperatures in the theater. The Rivoli Theatre in New York City took a chance and bought Carrier’s air-conditioning. All of a sudden, it had big attendance. By 1930, there were three hundred movie theaters with air conditioners. These were huge contraptions, multi-ton devices. Next came the factory owners who wanted them. Then, in 1939, I regret to say we put them in Congress, which kept them in session longer. Politicians could then pass more laws. So there are some negative, unintended consequences of air-conditioning.

The 1920s were full of inventions. We had talking movies. In the 1920s we went from movies that were silent movies, like The Artist, to talking movies. The studios were ready to take the risk, because the government was telling them, “If you make some money by giving people what they want—and that’s how you make money, giving people something that they want—then you get to keep most of the money you make.” That generated invention. Risk.

Another product of the 1920s is interesting because we’re all still using it. It was called “hookless number 2.” Today, we know the invention as the zipper. When Gideon Sundback took his first hookless number 2 to the patent office, the patent guy, and many others, couldn’t imagine a use for it.

Nothing happened with hookless number 2 for several years, because tax rates were too high. Then we hit the mid-1920s, and all of a sudden, B. F. Goodrich took a chance and bought 150,000 hookless number 2s to make galoshes for women. Goodrich advertised it, bringing in Madison Avenue advertisers from New York. The ads featured a picture of a woman with her galoshes, and the caption “Zip ’er up.” And calling the device hookless number 2 went by the wayside. “Zipper” was the new name. As an alternative to using only buttons, zippers become increasingly popular.

Another development of the 1920s was the popularizing of the refrigerator. Families used to have an iceman come by and drop a big chunk of ice into the icebox, but a refrigerator was so much easier. Refrigerators became much more popular in the 1920s.

What’s interesting about this 1920s phenomenon—all these inventions, the reduction of unemployment, the change in life, the growth in national productivity and prosperity, and low unemployment—is that very little of this could have been anticipated. If you had asked Harding, “Well, what are these people going to invent that’s going to make life so much better by the end of the decade?” he couldn’t have said, “We’re going to invent air-conditioning,” or “We’re going to invent the zipper, so zip your lip!”

We couldn’t have had any of those kinds of conversations because Harding and Coolidge didn’t know what was going to work and what wasn’t. In a market economy, consumers choose those products that they want to buy, and, lo and behold, some of them are very good. And the 1920s became a decade of incredible inventiveness and remarkable prosperity. Coolidge had more faith in entrepreneurs than in government.

Big changes, like those that occurred in the 1920s, always have detractors. In this case, the detractors were our Southern Agrarians, folks like Donald Davidson and Robert Penn Warren. When they wrote their book I’ll Take My Stand in 1930, after this great decade, they said, “Industry is breaking down regionalism, and regionalism is wonderful.” They didn’t want industry, or industrial progress, because it encroached on regional culture. Progress is homogenizing in a way—if everybody has an iPhone, nobody has a rotary telephone, and there may be places where the rotary telephone is a way of life. By the same token, how many of us are willing to give up our iPhones to preserve the agrarian lifestyle? Most Americans weren’t willing to give up inventions, either. It’s very easy for Professor Donald Davidson at Vanderbilt, in Nashville, to say, “Well, these nationalizing trends are no good!” But what are you supposed to tell the people in Charleston, South Caroline—don’t buy an air conditioner? How many would like to go through July and August in Charleston with no air conditioner?

Many of these inventions were wonderful for the South. How big would Atlanta be without air-conditioning? In 1930, before air-conditioning, Atlanta was smaller in size than Akron, Ohio. Now Atlanta is a city of five million. The change and the opportunities that Atlanta is able to offer people in the South are magnificent. True, decades ago the regionalism in the South began to break up, and there were complaints about Yankees coming down and moving in, but economic progress provided tremendous opportunities in the South. Sure enough, we’re watching the economy of the South gradually, slowly but surely, surpassing the economy of the North, so much so that we’re hearing that Alabama’s economy is going to pass Michigan’s soon. That was unthinkable forty years ago.

Opportunities are there with industry, but it does break down regional barriers. The Southern Agrarians valued regional barriers. Davidson wrote, in his essay on the Old South and Charleston, that it was too bad when people were motivated solely by money. I think that’s right, and the Bible tells us that the love of money is the root of all evil. But I’m not sure that if you’re inventing an air conditioner, you necessarily love money. You may be self-interested, but there’s an inventiveness, too, a part of you that shouts, “I want to change the world! I want to improve life! I want to help people!” When you invent a product like that, lives are being saved. People are not going to have the kind of overheating and heat stroke that’s going to take lives and make people miserable and unproductive. Being cooler in the summer makes it easier to do daily jobs, and I’m grateful for those inventors.

Frankly, I believe that Madison and Jefferson, those old agrarian types, would have been amazed and very pleased to see the South as a center of industrial progress.

1930s

At the end of the 1920s, President Herbert Hoover began to increase the power of the federal government. Even though Hoover was a Republican, like Harding and Coolidge, Hoover was from a different wing of the Republican Party. He favored much more intervention. He thought to himself, “Well, I realize we got unemployment down to 2 percent, but I think we can use government to help make that even better!”

Hoover signed the highest tariff in U.S. history, which in effect said we’re not going to buy watches from Switzerland and we’re going to put a high tariff on them so we can sell our watches, made in Massachusetts and Connecticut. Not only were American watches, back in the 1920s, more expensive—our watches were roughly four dollars, while a Swiss watch was roughly two to three dollars—but the U.S. watches didn’t keep very good time. We had to reset them each morning. The Swiss watches kept better time and were cheaper. So Americans bought the Swiss watches, but American watchmakers lost the business.

Hoover had a solution. He thought, “Let’s put a tariff or a tax on imported Swiss watches, and then people will buy American.” Well, that was nice, except the people in Switzerland didn’t just sit around and say, “Well, we’ll just yodel in the hills to the sound of music after losing our watchmaking business.” On the contrary, they said, “We’re not buying American!”

So now, American automobiles, which were competitive, and American typewriters, and American air-conditioning, saw their market cut off in Switzerland. You might think, “Well, Switzerland. That isn’t that big a country.” But there was just one problem: this was happening all over Europe. We wouldn’t buy British blankets. We wouldn’t buy Spanish olives. And so, all over Europe, markets were retaliating against American products. That devastated the U.S. economy. Some of this was reflected, for example, in auto sales. In 1929, the last year of the Roaring Twenties, we sold five million automobiles; in 1933, we sold about a million and a half automobiles. Now there was more to that decline than just foreign sales, but those were a part of it. We hurt all of American industry through high tariffs.

At the same time, the Federal Reserve raised interest rates, making it harder to borrow money. Milton Friedman won the Nobel Prize writing a book that described how these actions hurt the American economy. Then Hoover raised tax rates. That made it harder for entrepreneurs to make a profit and made them less willing to take risks. Hoover’s administration was a failure, and it’s not surprising that Franklin Roosevelt beat him.

Franklin Roosevelt ran for office actually promising to cut federal spending, because he thought Hoover had gone way too far by taking a good economy and weakening it tremendously.

When Roosevelt came into power, he changed his mind. Roosevelt began pouring federal funds into the American economy, the equivalent of the modern-day stimulus package. One program was called the Triple-A, the Agricultural Adjustment Administration (AAA).

The idea behind the AAA was that farmers would get higher prices for their products. People couldn’t afford to buy much, because unemployment was over 20 percent. So Roosevelt came up with an idea so wild it could only have been invented by a college professor: let’s pay farmers not to produce! Only a college professor could have thought up this monstrosity. Indeed, one of FDR’s advisers who was a college professor suggested that the federal government pay farmers not to produce, and that strategy became part of the Agricultural Adjustment Act: have the farmers set aside as much as a fourth of their land, 25 percent, and they would be paid not to produce on that 25 percent. Farm income would go up, the experts said, and also there won’t be a glut of product on the market. The AAA was supposed to reduce the overproduction of corn, wheat, cotton, and other farm products, because farmers would be producing on only three-fourths of their land.

But there was a hitch in this brilliant plan. Roosevelt discovered that there were some farmers taking this money not to produce and then sneaking crops onto that land anyway, to make double the money. The solution? The feds sent inspectors out to everybody’s land. They had measuring equipment to ensure that if a farmer had a 160-acre farm, the farmer let forty acres lie fallow. And if those forty acres were growing crops, the farmer would have to dig up what he had planted. Meanwhile, of course, people were starving during the Great Depression.

Ultimately, FDR hired thousands of inspectors and a fleet of airplanes to make sure farmers were not cheating. Soon, the Department of Agriculture became the second-largest department in the federal government, next to the Department of War.

But there was another problem. In 1934, federal experts found that some of the farmers had taken the money that they were paid for not producing and used it to buy fertilizer for the other three-fourths of their land. Many farmers had great production on three-fourths of their acreage. Some crops were actually up in production in 1934.

Thus, the farm crisis persisted.

Now, who paid for all these inspectors and airplanes and photography and all of that? The taxpayer. Taxes rose to a top rate under Roosevelt of 79 percent in the 1930s. The government was telling our super-entrepreneurs that they had to give four out of every five dollars to the U.S. government. Lo and behold, we discovered that very few people were inventing things. If you look at inventions and patents, we find very few in the 1930s, compared with the 1920s.

One of the few inventions was the board game Monopoly. “You’re broke, pass ‘Go’ and get two hundred dollars!” The game excited people, and that’s one of the few popular inventions of the 1930s. Fake money.

But we don’t find many job-creating inventions in the 1930s.

The Great Depression persisted through Roosevelt’s first two terms. So, you ask, “If this was so bad, how did this guy keep getting reelected?” That’s a very good question. The easiest way to explain that odd phenomenon is by looking at how people thought at the time—and by looking at FDR’s propaganda.

V. G. Coplen was the Democratic Party county chairman in Indiana. He said this about the Works Progress Administration: “What I think will help is to change the WPA management from top to bottom. Put men in there who are in favor of using these Democratic projects to make votes for the Democratic Party.” In other words, target WPA projects—everybody has roads they want built—and figure out what states and what districts are going to get those roads. Those who please President Roosevelt, or those who are in swing states that President Roosevelt wants to carry, would get the federal projects (and federal dollars).

For example, the Democrats had not carried Pennsylvania in decades. Pennsylvania was targeted with a heavy amount of WPA spending. David Lawrence, a magazine editor, conducted a survey of Pennsylvania. He found that those counties in Pennsylvania that received no federal funds, or limited federal funds, in 1936 voted Republican. The more money you received, the more likely your county was to vote Democrat. And Roosevelt made sure that a lot of money went into Pennsylvania’s big cities, Pittsburgh and Philadelphia.

Here’s another quotation, this one from a congressman, Frank Towey, from New Jersey. He said this: “In this county, there are 18,000 people on the WPA. With an average of three in a family, you have 54,000 potential Democratic votes. Can anyone beat that if it is properly mobilized?” Interesting, isn’t it? As we went into the 1940 election where Roosevelt ran for a third term, the WPA was very strong.

James Doherty, a New Hampshire Democrat, said this: “It is my personal belief that to the victor belong the spoils, and the Democrats should be holding most of those WPA positions so that we might strengthen our fences for the 1940 election.”

Let’s conclude with a Southern senator. As you know, Southern senators were a big part of the Democratic Party. Carter Glass, Virginia’s senior senator, spoke about the overwhelming reelection of Franklin Roosevelt in 1936, with high unemployment in the United States. He said: “The 1936 election would have been much closer had my party not had a $4.8 billion WPA relief bill as campaign fodder.”

Right. He saw it happen, and they all saw it. They saw federal money going out at election time. The Democratic Party was able to win elections even though the policies were not getting us out of the Great Depression. This is a huge change in American history. I wish the Southern Agrarians would have written more on this. But apparently they did not consider this political change quite as threatening as the rise of industry.

A few agrarians did oppose this; I’m not suggesting that Robert Penn Warren was a big fan of Roosevelt. But by writing a big novel against Huey Long, All the King’s Men, Warren was writing against Roosevelt’s main opponent in the Democratic Party.

These people, the Southern Agrarians, were not really as opposed to what was going on in the federal government as they were to industrial development and how it was breaking down regional distinctions in the South.

WAR AND POSTWAR

World War II did not get America out of the Great Depression. Employment during the war was only temporary and often wasteful. For example, during World War II, the United States set up the Office of War Information (OWI). It was designed to give Americans war news and promote enthusiasm for winning the war. Instead, it hyped the benefits of the New Deal and the glories of FDR. In 1943, with Marines fighting in the Pacific, the air force bombing Europe, and a huge shortage in available ships for the war effort, the OWI printed millions of pamphlets on FDR’s wonderful administration and planned to ship them to South America. One congressman called OWI’s leadership on the carpet and asked how much shipping this project displaced. The response? One shipment alone displaced 800 tons of shipping in the middle of a war. Congress finally cut funding for the OWI and the WPA.

By the time of his death, Roosevelt had dramatically reshaped the income tax structure. The top tax bracket was 94 percent on all income over $200,000. For every dollar you earned over $200,000, you kept six cents. When 1945 came, and the bombs were dropped at Hiroshima and Nagasaki, Roosevelt was already dead, but Harry Truman wanted to continue his policies. Roosevelt had wanted programs to have massive continuation of federal intervention.

But that’s when Americans actually resisted. Congress said, “Our people fought this war. Our cadets, civilians who became soldiers, twelve million and more who went overseas, fought that war for freedom. They didn’t fight that war so that 94 percent of everybody’s earnings could be taken away. That’s not the United States. Other people do that. That isn’t what we do in this country.”

This became the big fight of our time. Roosevelt had wanted big spending and a whole new batch of federal programs after the war. He advocated massive spending in his Economic Bill of Rights, presented in 1944 as a postwar program. FDR wanted a Federal Housing Authority. He said, “Everybody has a right to a ‘decent home.’ ” And this meant that if Mr. Smith had a right to a decent home, then Mr. Jones down the street had an obligation to pay for Mr. Smith’s decent home.

That’s a different sort of freedom than the freedom of speech. Freedom of speech does not impose obligations on others to sit around and listen. Freedom of religion does not mean you have to pay for anybody’s church. But if Mr. Smith has a right to a decent home, then all of us have an obligation to finance that home. And by the way, what is a decent home?

Many politicians could see that this was going to be an incredible boondoggle. But those who supported FDR said, “If you don’t have government jobs to build people these homes and have more types of WPA projects, we’re going to go into huge unemployment.” Sidney Hillman, who was head of the CIO (which later became the AFL-CIO), said, “If you don’t have a lot of programs, and have them quick, the soldiers are going to come home and you’re going to have ten million unemployed in six to ten weeks!” Senator Harley Kilgore, West Virginia, said, “No, it’s going to be eighteen million! We’re going to have unemployment worse than the Great Depression. Twelve million soldiers are going to come home and there’s nothing for them!”

Instead Congress, led by Senator Walter George of Georgia, a Democrat, and Senator Albert Hawkes of New Jersey, a Republican, cut federal tax rates and cut federal spending. They even cited what Harding, Coolidge, and Andrew Mellon (their secretary of the treasury) did in the 1920s.

Federal spending went down by two-thirds after World War II. We cut the corporate income tax from 90 percent to 38 percent! We cut the income tax. We told people, “You’re going to get to keep more of what you produce. We’re going to trust Americans with the freedom they went overseas to earn and we will take our chances. Rather than empowering government bureaucrats and czars with power to allocate federal funds taken from taxpayers, we’re going to cut the tax rates and turn people loose.”

Unemployment in 1946 and 1947, the two years after the war, was the same: 3.9 percent. We assimilated twelve million people back into the workforce with an incredible expansion by American entrepreneurs. Inventions began cropping up again. Television had been invented before the war, but it became increasingly popular after the war. Xerox machines, fast food, McDonald’s, Holiday Inns. We saw a renewal of the inventive spirit of the 1920s.

That is what ended the Great Depression: giving people more freedom, not empowering government bureaucrats. That is the story of overcoming the New Deal and Franklin Roosevelt.

That is our choice today. Either we can follow Roosevelt, or we can follow those who came before and after him. We can prosper, or we can increase government and lose our liberty and prosperity.