The New Deal: The Most Undeservedly Deified Chapter In U.S. History
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The New Deal: The Most Undeservedly Deified Chapter In U.S. History
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As we await fall semester grades, the end of my oldest daughter’s high school career is now in sight.  For all intents and purposes, the spring semester will have muted effect.

Still, I was happy to hear recently that her economics teacher apparently “hates” talking about the New Deal.  It’s no more an economic concept than is “trickle down,” both being more governmental in nature.

It’s also one of the most undeservedly deified chapters in American history.  Jacqueline L. Angel and Juan Fernando M. Torres-Gil, writing for the San Antonio Express-News, remain enthralled by it. 

They recently added their names to the list of those who believe we need a 21st century version, ostensibly to “build a sense of social solidarity.”

This would be done with a “substantial financial investment that would mitigate the effects of a possible double-dip recession.”  That self-fulfilling prophecy doesn’t have to happen any more than did the impetus for the original New Deal. 

What President Hoover faced early in his only term was a routine, cyclical downturn.  Painful though they are, recessions are a necessary cleansing, much like a hangover after tying one on the night before.  An economy gets purged of its excess and bad practices, and resources are consequently redeployed to more valuable endeavors. 

When left alone, an economy is much more likely to snap back strongly, quickly.  See the recession of 1920-21.

Hoover should have known that given that he was commerce secretary at the time.  Alas, as president, he succumbed to the typical politician’s urge to “do something!”  After steep hikes in tariffs, spending and taxes, he had pounded the economy into submission.  Voila: the Great Depression.

He had teed it up for FDR to be the savior.  Except government isn’t a savior for anything but more government and well-connected cronies.

The New Deal served those people well by instituting price controls, facilitating industry collusion, greasing the skids for union strikes, etc.  Price signals were distorted, uncertainty reigned, investment tanked, and people continued to suffer. 

One of the biggest defects in the American DNA that mutated from the New Deal is that the state can cure what ails us.  Sometimes FDR disciples take this literally, as when Ms. Angel and Mr. Torres-Gil assert that “all Americans” should be “assur(ed) access to basic health care coverage.”

An earlier devotee proved this to be a dicey proposition.

Following in the tradition of FDR’s New Deal was LBJ’s Great Society, which, in addition to wresting poverty from its freefall by declaring war on it, created health insurance for senior- and lower income citizens: Medicare and Medicaid, respectively. 

By this time, insurance as we know it, conjured up to provide hospitals with a steady cash flow, had matured.  Baked into it though, were the seeds of the inflationary problems we see today: the third-party payer, which clouds consumers’ view of the price of health care services. 

Introducing into this mix a sloppy entity like the government, unmoored by any spending discipline, added fuel to the fire.  There’s no reason to believe giving Uncle Sam a firmer grip on the reigns will improve things. 

It’s difficult to know if prognosticating academics simply have a blind spot, are being disingenuous, or worse.  Assuming their heart is in the right place, one would be inclined to give them the benefit of the doubt.  They don’t make it easy though.  How else to explain the alleged need to “design a new social contract” to ensure “a minimum income in old age?”

Isn’t that what social security is for?

Since its first payout in 1940, there has been an almost twenty-year swing in the difference between life expectancy and the first year of eligibility then (63 and 65 years, respectively), and now (79 and 62).  Attaching more claims to it, like helping puppies find their mother, hasn’t helped. 

Are they attempting to sweep under the rug the precarious position their forebears have put it in, and move on to the next monorail?  That the state, not subjected to competitive market pressures, would furthermore be able to “help small business” as Ms. Angel and Mr. Torres-Gil claim, is confounding. 

Unlike central planners “assuring … useful jobs even if federally-provided” (an oxymoron if ever there was one), small businesses were part of a record-setting jobs-creating machine the last few years.  While the mere presence of the coronavirus might indeed have slowed that down, shutdowns have compounded the problem in a Hoover-like fashion. 

The only help these heroic risk-takers need from state and local officials is for them to back off.

People who spend their lives in an “ivory tower” seem mentally inoculated from how things work in the real world.  They’re too busy moving the rest of us around on their modeling chessboards, waiting to be called up to the big leagues to show smooth-talking, bright-smiling politicians how to make all this government largesse work.

This farm system failed miserably in the 1930s, and it’s unlikely to work any better a century on.

Christopher E. Baecker manages fixed assets at Pioneer Energy Services, teaches economics at Northwest Vista College, is a board member of the Institute of Objective Policy Assessment, and is a member of the San Antonio Business & Economics Society.  He can be reached via email or Facebook

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