This particular fireside chat occurred during the Easter Week of 1938. You can download it and listen to it here. I urge you to take 30 minutes of your day and listen to it. The parallels to today are stunning.
Some background: It’s spring, 1938. The New Deal lay in shambles. The country was in what can only be called the Great Depression II. The graph (that you can download/view here) shows unemployment had risen to near 1933 levels and was still rising. The massive government spending during the first four years had run its course, and no real permanent economic foundation had been established. At the 12:56 mark, FDR gives his reason why this slide into recession happened: It was a failure of consumer demand due to lack of buying power (aka: massive unemployment had reduced consumer demand) Sound familiar?
FDR proposed his “Three Rounds of Ammunition” to fight the new depression. Here they are:
1)Round One: At the 13:34 mark: Government unemployment benefits and more government funds invested in government make work programs (can you say AmeriCorps/Acorn?)
2)Round two: At the 14:33 mark: Make credit available to banks, easy money for easy loans ( More TARP?)
3)Round three: At the 15:22 mark: Pork barrel spending: Government slum clearance, Public works infrastructure, federal aid to highways, flood control; Build federal buildings (can you say Porkulus?)
As you continue to listen to the speech, here are other points where the similarities between then and now are eerily alike:
At the 21:34 mark: FDR notes the banks have plenty of “idle money” (sound familiar?)
At the 21:50 mark FDR states it is the government’s job to get that money into the economy and get government work moving again (TARP anyone?).
At the 22:17 mark: FDR begins making the claim that the government led efforts will eventually pay for itself by getting the private sector back on its feet (GM/Chrysler takeover folks? When TARP recipients re-pay the money back, we will make money)
At the 22:44 mark: FDR blames Hoover for the country still being in the dumps. Remember, this is 1938! FDR was entering his sixth year and the economy had tanked again during his second term. The remarkable thing is, people bought this line of reasoning. (Sound familiar? Never ever expect Democrats to take responsibility for his actions if things go sour on their watch… hell they are still blaming Hoover every now and then.)
At the 23:08 mark: FDR mocks the people who fear the deficit spending and Public works would be a drag on the economy and not work to establish true economic recovery. Now remember, FDR is speaking at a time the country had dipped back into what we today would call a depression and it occurred after the government spending of 1933, the original New Deal… and FDR brazens it out, touting all the alleged good he has done! Sounds like Hans Solo from Star Wars: “It’s not my fault!” He then ups the ante with more of the same policies. (Aren’t we hearing the calls for a “second round of stimulus?”)
At the 24:51 mark: FDR claims it takes the federal government to trigger economic activity.. (sound familiar?)
At the 26:26 mark: FDR argues for redistribution of wealth (FDR always argued to keep profits for private enterprises to a minimum and would hide behind the phrase “fair profit for business” throughout his years as president. Sound Familiar? Windfall Profits tax, Raise capital Gains tax?)
At the 27:09 mark: FDR more or less says “I tried to reduce the debt but we got to spend more because the previous spending didn’t work…. Don’t worry, we will get it back in payment of loans and increased tax revenues.” (Obama is parroting, for all practical purposes the same thing)
At the 29:55 mark: FDR states only government can get the economy moving, but once it does, then we can start reducing the deficit. (sound familiar? Obama triples the debt, but says he is concerned with the deficit and will make it a priority once government spending takes hold)
The rest of FDR’s speech is that all must get behind his plan (or else) and he is merely a humble public servant.
What Happened? There was a slight dip in unemployment, but a great deal of that can be attributed to the massive arms build-up in preparation for WWII. Remember, we didn’t just gear up the arms industry starting on December 7th 1941. FDR did see the threat of Hitler and Japan and had the foresight to initiate our military build-up, plus push through assistance to Great Britain once the WWII started. (Give credit where credit is due, but also give credit to one of the great unsung heroes of American Politics: FDR’s future Presidential Opponent, Republican Wendell Wilkie who also backed the arms build-up and was crucial in convincing Congress to help the British, thus making FDR’s effort “bipartisan”). In addition, don’t underestimate the draft that started in 1940 and its major impact on the jobs numbers.
What were the final results of FDR’s “New Deal” and “New New Deal?” FDR’s own Secretary of the Treasury, Henry Morgenthau, Jr summed it up best in his testimony to congress in 1939:
“We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get jobs. 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.”
It took WWII to drag us out of the Depression. Here is a link to my own analysis as to how that happened. Bottom Line, we took 16 million people in their prime and put them in uniform; We spent billions in defense; invoked rationing and savings and as soon as WWII was over we still had another recession in 1947-48 as we reabsorbed and re-focused on a consumer-based economy. As we had little economic competition for the next 30 years, it was easy to leave the FDR progressive tax system in place. It wasn’t until the late 1960’s and 70’s that the world caught up and the result was the great stagflation of Jimmy Carter. It took Ronald Reagan and his MASSIVE tax cut to reverse 50 years of FDR policies to make us competitive in a global economy once again.