The New Deal Did Not End the Great Depression

The New Deal Did Not End the Great Depression
AP Photo/J. Scott Applewhite

Although progressives constantly claim that President Franklin D. Roosevelt’s “New Deal” solved the Great Depression, the exact opposite is the case. In reality, FDR’s New Deal did not help end the Great Depression, it exacerbated the worst economic downturn in U.S. history.

This is especially relevant because in recent years, progressives have touted the “Green New Deal” as a solution to a wide variety of economic, social, and environmental issues. As was the case with the original New Deal, the Green New Deal (GND) would actually do more harm than good.

Before addressing the pitfalls of the GND, it is necessary to correct the historical consensus that FDR’s New Deal was the elixir for the economic malady that devastated America in the 1930s.

In 1932, when  Roosevelt was elected president, the unemployment rate was a staggering 23.6 percent. Immediately, FDR signed into law a plethora of programs that were intended to stop the economic freefall. During FDR’s first 100 days in office, he demanded “broad executive power to wage a war against the emergency, as great as the power that would be given me if we were in fact invaded by a foreign foe.”

In his first 100 days in the Oval Office, FDR signed 15 major bills that would become the backbone of his New Deal. This legislative onslaught included so-called alphabet soup programs such as the Emergency Banking Relief Act, Federal Emergency Relief Act, Homeowners Loan Act, Glass-Steagall Act, Agricultural Adjustment Act, National Industrial Recovery Act, Tennessee Valley Authority Act, and several others.

For context, these bills fundamentally transformed the role of the federal government. Before the New Deal, the federal government was miniscule and mostly uninvolved with social and economic engineering. However, FDR’s New Deal shattered the traditional role of the federal government by increasing its size and scope under the notion that only the federal government, in a massive intervention, could solve the Great Depression.

But did the New Deal actually abate the suffering and alleviate the poverty? The answer is no.

As mentioned above, when FDR was elected, the unemployment rate was 23.6 percent. In 1933, it rose to 24.9 percent. By 1937, it had dropped to 14.3 percent. However, by 1938, the unemployment rate had skyrocketed up to 19.3 percent. In the same year, U.S. GDP contracted by 3.3 percent. In other words, as FDR’s New Deal programs took hold, and more were passed, the economic situation deteriorated.

Could it be coincidental that the Great Depression worsened as additional New Deal programs were passed and the federal government tinkered more and more with the economy? Possibly, but then wouldn’t that dispel the myth that the New Deal, on its own, saved the United States from the ravages of the Great Depression?

According to economist Stephen Moore, who has written extensively on the Great Depression, “After seven years of New Deal-era explosions in federal debt and spending, the U.S. economy was still flat on its back, and misery could be seen on the street corners. By 1940, unemployment still averaged 14.6 percent. That’s some recovery.”

Making matters worse, not only did the New Deal not solve the Great Depression, it also gave birth to several programs that are driving the United States into bankruptcy and continue to hinder economic growth. For example, Social Security is on the verge of insolvency. And the Fair Labor Standards Act, which paved the way for the federal minimum wage, impedes job creation. Keep in mind, these are but two examples of the unintended consequences courtesy of the New Deal.

To be fair, many will argue that the New Deal, although far from perfect, was better than doing nothing. This is a fallacy. We simply never will know what would have occurred in the absence of the New Deal. Yet, if history is any guide, the United States would have recovered in due time without the massive intervention of the New Deal, which many historians and economists argue actually made things worse, not better.

The moral of the story here is that government intervention to alleviate economic downturns and all sorts of other problems is not the only solution. The Green New Deal will not and cannot “solve” all the problems its supporters claim it can. If it were that easy, then the government would be able to do practically anything, as long as it has enough power and spends enough of our tax dollars.

Yet, we know this is far from true. Heck, the government has a difficult time delivering the mail and processing drivers licenses. The last thing we should do is give the government more, almost unfettered power, which is exactly what the Green New Deal would do.

Chris Talgo ([email protected]) is an editor at The Heartland Institute.

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