The New Deal Myth

Any political strategist, lawyer, or salesman will tell you that the secret to winning public confidence is a compelling narrative. Tell a story, they urge.

No one has done this with more success for longer than the political Left over the last century of American politics. One of the great fictions twentieth-century historians have foisted upon us is that Franklin Delano Roosevelt and his New Deal programs rescued America from the economic ravages of the Great Depression.

The New Deal was a menagerie of federal programs and bureaucracies based on the Keynesian economic theory that increased government spending would stimulate the economy. This theory necessitated more government intervention in and control over the American economy. This dovetailed nicely with the Left's political agenda.

The prevailing historical narrative of the New Deal casts FDR as champion of economic justice through "bold" and "dynamic" government regulation of the economy. Of course, every good story needs a villain, and critics of the Keynesian approach were cast as greedy, self-interested capitalist thugs. FDR's cosmopolitan, forward-looking approach was meant to draw a sharp contrast to the outdated and unjust laissez-faire economic model. This was progress.

The Left routinely constructs these modern mythologies. First, a message is created which serves their political agenda. The media eagerly disseminate that message with little critical thought because it sustains their worldview. Historians go on to lend credibility to and even romanticize the flawed account.

Political talking points become the premises upon which historians and opinion-makers rely. It becomes common wisdom; it becomes history.

The truth is that the experimentalism of the New Deal was an ineffective mess that further tangled the knot of the Great Depression.

After years of unprecedented economic intervention by Roosevelt, competition was stifled, investment plummeted, restrictive cartelization abounded, industrial production stagnated, and budget deficits skyrocketed. Wage controls and new union contracts limited the number of new workers private-sector employers could hire, leaving unemployment to hover around 20%.

Government being government, the New Deal was plagued by staggering inefficiency and red tape. Many New Deal programs were to be administered by local officials with agendas, constituencies, relationships, and governing philosophies of their own.

Roosevelt's lack of imagination was also startling. He governed as though a new agency or bureaucracy were tantamount to a new solution. The federal government took on a new role in the 1930s as insurer against poverty, recession, and even human want itself -- a sharp deviation from Jeffersonian principles of freedom from government. The result was an exponential growth of government, a restriction of economic freedom, and an economic downturn lasting far longer than usual.

A full six years after the New Deal was implemented, Treasury Secretary Henry Morganthau, Jr. testified before Congress:

We are spending more than we have ever spent before and it does not work. I say after eight years of this administration we have just as much unemployment as when we started.

Even Keynesian economist Alvin Hansen observed,

Every attempt at a solution involves it in a maze of contradictions. Every artificial stimulant saps its inner strength. Every new measure conjures out of the ground a hundred new problems.

Such is the lament of the collectivist. They just can't understand why it didn't work this time. (Sound familiar?)

Yet the myth of New Deal success has been canonized in glowing accounts masquerading as history. A stroll through the stacks of any public library reveals a clear picture. Dreamy-eyed titles such as The Crosswinds of Freedom, A Rendezvous With Destiny, The Lion and the Fox, The Beckoning of Destiny, and The Triumph are common. Even more critical studies of Roosevelt such as After Seven Years, Roosevelt in Retrospective, and The End of Reform strike a clinical and even apologetic tone. (Unsurprisingly, works on the Reagan administration include Visions and Nightmares, Grave New World, Our Long National Daydream, Sleepwalking Through History, and so forth.)

How was this mythology created?

Newsmen during the Roosevelt administration sometimes had difficulty containing their adoration for the president, actually breaking into spontaneous applause at his first press conference upon taking office. Political cartoons commonly depicted Roosevelt as a swashbuckling hero rescuing family farms from foreclosure or as a medieval knight slaying dragons.

The narrative was set -- FDR as superman, champion of the workingman, fearless leader boldly blazing a new trail.

Historians and FDR biographers elevated the narrative further. Distinguished authors such as Arthur Schlesinger, Jr., James MacGregor Burns, Doris Kearns Goodwin, and Jonathan Alter have worshiped at the New Deal altar to a near-comic degree. Their accounts solidified the New Deal-as-savior illusion.

Fast forward to today's history books, where the message to students is clear: the New Deal revitalized, modernized, and strengthened America's economy. Balance had been infused into our capitalist system. A compelling narrative, to be sure. From Depression-era newsmen to New Deal historians to the classroom, this meme has been lodged in the American consciousness.

The good news is that critical thinking on New Deal history has gained ground in recent years. No longer do liberal historians have a monopoly on history. They are now called upon more than ever to defend their premises and engage criticism. The success of New Deal historians Amity Shlaes and Burton Folsom are examples.

The New Deal is acutely relevant to today's public policy debates. Not only is history a reliable predictor of the future, but the New Deal largely established the authority of the federal government to regulate the economy and, therefore, everything. Indeed, New Deal precedent is the most common defense of current overreaches in health care, energy, financial regulation, and so forth.

We've been doing it for years, so it must work, right?

The narrative that the New Deal saved America from the Great Depression has passed down the decades as though indisputable fact. We would do well to understand that the prevailing historical perspective on the New Deal is just that -- a perspective, not history.

Jay Wiley is an Austin attorney and editor of The Austin Conservative