Morris: Roosevelt's “conservative course” helped lower unemployment during Great Depression; reversal in policy caused recession

Morris claims FDR's “largely conservative course” lowered unemployment until, he suggested, FDR gave up and “a new depression came on the country.” During his Fox News appearance, Morris claimed, “In Franklin Roosevelt's first term, he really tried to solve the Great Depression, and followed a largely conservative course. And he lowered the unemployment from 23 down to 13. Then in his second term, he figured, you know, I'm not going to get it below 13. And a new depression came on the country. It went back up to 21. And he realized that he was not going to be able to solve the economy.”

Economists say opposite: FDR's “conservative course” reversed economic progress during Great Depression

Krugman: Roosevelt “eager to return to conservative budget principles ... precipitating an economic relapse that drove the unemployment rate back into double digits.” In a November 10, 2008, New York Times column, Nobel economist Paul Krugman criticized “a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse,” and stated:

The New Deal brought real relief to most Americans.

That said, F.D.R. did not, in fact, manage to engineer a full economic recovery during his first two terms. This failure is often cited as evidence against Keynesian economics, which says that increased public spending can get a stalled economy moving. But the definitive study of fiscal policy in the '30s, by the M.I.T. economist E. Cary Brown, reached a very different conclusion: fiscal stimulus was unsuccessful “not because it does not work, but because it was not tried.”

This may seem hard to believe. The New Deal famously placed millions of Americans on the public payroll via the Works Progress Administration and the Civilian Conservation Corps. To this day we drive on W.P.A.-built roads and send our children to W.P.A.-built schools. Didn't all these public works amount to a major fiscal stimulus?

Well, it wasn't as major as you might think. The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren't felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.

And F.D.R. wasn't just reluctant to pursue an all-out fiscal expansion -- he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections.

What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy's needs. [New York Times, 11/10/08]

Baker: FDR “worried about the whining of the anti-stimulus crowd ... when the proper goal of fiscal policy should have been large deficits to stimulate the economy.” In a January 6 column, Dean Baker, co-director of the Center for Economic and Policy Research, wrote: “In reality, any careful reading showed that the New Deal policies substantially ameliorated the effects of the Great Depression for tens of millions of people. The major economic failing of the New Deal was that President Roosevelt was not prepared to push the policies as far as necessary to fully lift the economy out of the Great Depression.” Baker continued:

Roosevelt was too worried about the whining of the anti-stimulus crowd that he confronted. He remained concerned about balancing the budget when the proper goal of fiscal policy should have been large deficits to stimulate the economy. Roosevelt's policies substantially reduced the unemployment rate from the 25 percent peak when he first took office, but they did not get the unemployment rate back into single digits. [Alternet.org, 1/6/09]

DeLong: "[M]ore 'orthodox' economic policies" and attempt “to move the budget toward balance ... provide ample explanation of that downturn.” In a November 17 post on his personal blog, University of California-Berkeley economics professor Brad DeLong wrote, “Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect. The interruption of the Roosevelt Recovery in 1937-1938 is, I think, wel [sic] understood: Roosevelt's decision to adopt more 'orthodox' economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn.”

Morris undeterred by time: FDR's 1940 re-election was “only because” of World War II

Morris claims FDR “got re-elected only because there was a war going on.” Morris claimed that Roosevelt “got clobbered in the '38 congressional election and got re-elected only because there was a war going on.”

FDR re-elected: November 1940. In the 1940 election, Franklin Roosevelt defeated Republican Wendell Willkie with 449 electoral votes and 54.7 percent of the popular vote. [UC Santa Barbara American Presidency Project]

U.S. enters World War II: 1941. The United States declared war on Japan December 8, 1941, after the bombing of Pearl Harbor; the United States declared war on Germany December 11, 1941 -- a full year after Roosevelt won his second re-election.

Transcript

From the October 21 edition of Fox News' The O'Reilly Factor:

MORRIS: Now, Afghanistan -- not going well; economy -- 10 percent unemployment; health care -- still chaotic. He doesn't have any accomplishments in nine months. There are no accomplishments. Am I wrong?

MORRIS: No, you're -- well, he passed the stimulus bill --

O'REILLY: What are the accomplishments?

MORRIS: -- that screwed up the federal budget.

O'REILLY: Yeah, there's no accomplishments yet.

MORRIS: He doubled -- tripled the deficit. Does that count?

O'REILLY: So rather than expending all of this energy and all the currency and all the time on cultivating the left-wingers, attacking Fox News, Rush Limbaugh, whoever it may be, why not try to solve one of these problems?

MORRIS: Let me -- let me give you -- let me go back in history a little bit. In Franklin Roosevelt's first term, he really tried to solve the Great Depression and followed a largely conservative course. And he lowered the unemployment from 23 down to 13.

Then in his second term, he figured, you know, I'm not going to get it below 13. And a new depression came on the country. It went back up to 21. And he realized that he was not going to be able to solve the economy.

So what he did was embark on a strategy of attacking his enemies. I quote him: “The economic royalists hate me, and I welcome their hatred. The economic royalists have met their master.” Those are quotes.

And he went after locking in the elderly, the labor unions, Jews, blacks, labor union members, on a class warfare kind of a basis, because he knew he couldn't do it based on the achievements of the administration.

He got clobbered in the '38 congressional election and got re-elected only because there was a war going on.

Obama is essentially following that trajectory. He's given up on the notion of lowering the unemployment rate significantly. He doesn't think he can do that. He probably can't do it. Come down maybe a little by '12. Certainly not by '10. And he knows he's in a mess in Afghanistan and he can't get out. He wants to pass his legislative program, and he wants to cultivate a do-or-die solidarity among the Democratic Party that resists all enemies and is a one-party government. It's the Harold Ickes method of governing that he brought to the Clinton administration.

O'REILLY: All right, Dick Morris, everybody. I think that's pretty interesting. I really do.