FDR’s New Deal Policies

FDR’s New Deal policies were a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1936.

FDR’s New Deal Policies

In 1932, Democrat Franklin Delano Roosevelt defeated Hoover in a landslide. Along with Washington and Lincoln, FDR is routinely listed in polls as among the “great” presidents. Many Americans believe his New Deal programs rescued the country from the grips of the Depression. In fact, under FDR new deal programs, unemployment averaged a whopping 18 percent from 1933 to 1940.

One biographer said that there was no one more ignorant of economics than FDR. It showed. FDR knew nothing about how wealth was created. The legislation he called for was a patchwork of absurdities, sometimes at odds with each other, and sometimes even at odds with themselves.

Seeking prosperity through central planning

The National Industrial Recovery Act (NIRA), which established the National Recovery Administration, was an enormous contradiction. On the one hand, it sought to keep wage rates high to give the consumer greater “purchasing power.” On the other hand, it established hundreds of legally sanctioned, industry-wide cartels that were allowed to establish standard wages, hours of operation, and minimum prices. The minimum prices meant that businesses would be largely prevented from underselling each other; everyone’s price had to be at least the prescribed minimum. The artificially high wages meant continuing unemployment, and the high prices meant hardship for nearly all Americans. Some strategy for recovery.

Unfortunately, massive government intervention in agriculture never went away. Even in the 1980s, a decade people associate with government entrenchment and a commitment to market principles, farm programs were eating up $30 billion annually, two-thirds of which took the form of subsidies and the other third in higher prices to consumers. The principal device behind these programs is the price support: The federal government offers to pay farmers a certain amount per product and at that price will buy whatever amount the farmers are willing to sell. Farmers, therefore, will not sell on the market if the price offered by the federal government is higher than the market price. So the government often winds up with enormous amounts of various agricultural products on its hands. It then has to figure out how to get rid of them without driving prices back down. Often, the government simply destroys them. FDR’s legacy in agriculture continues to be felt today. In the 1980s, the USDA ordered the annual destruction of:

• 50 million lemons
• 100 million pounds of raisins
•  1 billion oranges

Quotas on peanuts have had the effect of doubling the price of peanuts and peanut butter. Dairy subsidies are still more absurd, with every dairy cow in America subsidized to the tune of $700 per year—“an amount greater than the income of half the world’s population,” Professor Eric Schansberg points out. Indeed, for most of the twentieth century the price of sugar to Americans was 500 percent higher than the world price, thanks to government price supports. This is certainly a boon to sugar producers, who receive an average of $235,000 a year from the policy. But it costs consumers well over $3 billion per year, and it puts all American industries that use sugar at a competitive disadvantage vis-à-vis foreign producers who are not forced to pay such an inflated price for sugar.

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