Catastrophe - Dick Morris [25]
FDR handled the situation brilliantly, closing all the banks and then gradually reopening them—one by one—assuring the public that he had determined that they were sound. In his inaugural address of 1933, he denounced “nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”82
The effect was electrifying. The crowds no longer beseiged the banks, and the system was restored.
In his first hundred days in office, FDR bombarded Congress with proposals to catalyze recovery. For the farms, he proposed to limit production to raise prices. For business, he sought to stop deflation and increase wages. For the unemployed, he created the Civilian Conservation Corps, to put them to work in rural areas protecting our national resources. Elsewhere, he spent prodigiously on public works to offer short-term employment.
Ironically, in view of his subsequent lurch to the left, Roosevelt’s first hundred days were a model of conservatism. Raymond Moley, the FDR aide who founded the “Brain Trust” that advised Roosevelt and remained its most important member during Roosevelt’s first term, wrote in 1939 that “it cannot be emphasized too strongly that the policies which vanquished the bank crisis were thoroughly conservative…. Those who conceived and executed them were intent upon rallying confidence first, of the conservative business and banking leaders of the country and, then, through them, of the public generally.”83
Even when the hundred days were over, Roosevelt maintained a brisk pace of national legislation to end the Depression and (as the Democratic Party theme song put it) make America a place where “Happy Days Are Here Again.”
But FDR had only limited success with his bold, innovative programs. When he took office, unemployment stood at a shocking 23 percent. But by the end of his first term, it remained stubbornly high at 13 percent. There were still 10 million people for whom Roosevelt couldn’t create jobs.
Roosevelt had put Keynesian economics to the test—and reached the limits of what it could do.
There is actually substantial evidence that FDR’s policies extended and deepened the depression. Amity Shlaes, a senior fellow at the Council on Foreign Relations and a syndicated columnist for Bloomberg, writes in her excellent, must-read book The Forgotten Man that “both Hoover and Roosevelt misstepped in a number of ways.”84
She writes that Roosevelt “created regulatory, aid, and relief agencies based on the premise that recovery could be achieved only through a large military-style effort.”85 But, she notes, Roosevelt’s interventions created massive uncertainty and left potential investors wondering what would happen next. The National Recovery Administration (NRA), the centerpiece of his program, tried to raise wages and promote unionization. Its bureaucrats “frightened away capital…and discouraged employers from hiring workers.”86
“Another problem,” Shlaes continues, “was that laws like that which created the NRA…were so broad that no one knew how they would be interpreted. The resulting hesitation in itself arrested growth.”87
So how did FDR get elected four times? Shlaes ascribes his political success to the fact that he “systematized interest-group politics…to include many constituencies—labor, senior citizens, farmers, union workers. The president made groups where only individual citizens or isolated cranks had stood before, ministered to those groups, and was rewarded with their votes.”88
Unable to restore prosperity, FDR switched strategies as his 1936 reelection campaign approached. Rather than hinge his case to the nation on his record in eradicating the depression, he focused instead on class warfare, attacking the “economic royalists” who had led us into the depression. “I should like to have it said of my first