After President Obama signed a law last week authorizing the United States Treasury to borrow an additional $1.9 trillion….

They reveal startling facts, says Jeffrey:

• When calculated by the average annual percentage of the gross domestic product (GDP) that he will spend during his presidency, Obama is on track to become the biggest-spending president since 1930, the earliest year reported on the OMB’s historical chart of spending as a percentage of GDP.
• When calculated by the average annual percentage of GDP he will borrow during his presidency, Obama is on track to become the greatest debtor president since Franklin D. Roosevelt.
• Obama will outspend and out-borrow the admittedly profligate George W. Bush, a man Obama and his lieutenants routinely malign for fiscal recklessness and who, when in office, was often hailed even by his allies as a Big Government Republican.
• Obama will even outspend — but not quite out-borrow-his fellow welfare-state liberal FDR, who had to contend with both the Depression and World War II.

To read more…

So back to the point of this post, The Great Depression and more specifically FDR’s “New Deal.” Numerous books have come out lately challenging the so-called Liberal or Progressive point of view (that goes something like this): Franklin D. Roosevelt’s New Deal policies were responsible for ending the Great Depression and that the causes of the depression were over-production, under-consumption, and unequal distribution of wealth.

The Books that I have been reading are: New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America by Burton W. Folsom Jr., FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression by Jim Powell, and The Forgotten Man: A New History of the Great Depression, by Amity Shlaes. Each book has basically the same take and none are perfect. They are at the least “skeptics” of FDR’s New Deal policies, and probably they are best described as fiscal Conservatives who downright loathed the big government shift of the 1930s.

My students will first read their textbook Out of Many: A History of the American People, which ignores most of the major issues the above authors point out with FDR’s policies.

The belief that unhindered capitalists brought the country down (thus leading to the Great Depression) due to greed (sound familiar?) is incorrect, according to the noted sources above. The major causes of the Great Depression, for example, as outlined by Mr. Folsom: 1) Negative consequences of WWI spending left the country with a national debt of $24 billion ( today its trillions) when it was before the war $1.3 billion. But most importantly, $10 billion was lent to European nations and most balked at repayments during the 1920s; 2) the Hawley-Smoot Tariff Act that crippled American businesses and production; and 3) poor performance by the Federal Reserve, which was designed to stop precisely what happened, a banking collapse. The Fed raised interest rates sharply in 1928 and 1929 that made it harder for money to be borrowed and slowed the flow of money. Mr. Folsom contends that inflation in the 1920s was low, not high, and that the 1920s was a decade of overconsumption than underconsumption. FDR latched onto the “underconsumption” analysis and allowed it to drive a majority of his economic policies.

OK, lots of issues, but the bottom line is, like most major historical events, the Great Depression is complex. Mr. Folsom is for my practical purposes here and in the classroom no more correct or incorrect than those others who would disagree.

Questions to be addressed: Was the Great Depression prolonged by FDR’s policies? Did FDR “save” jobs and save the economy enough to keep it afloat? Many of Roosevelt’s policies failed or at least produced such meager long-term results that it is hard to point to them as successes. A couple of programs that Mr. Folsom viciously attacks are the New Deal’s National Recovery Act and the Agricultural Adjustment Act. Both of which (and more) I will address in part II of this series on the Great Depression.

To be continued….