Americans Didn’t Need The Original “New Deal”

Authored by Laurence Vance via The Future of Freedom Foundation,

We have heard much this year about how much the country needs a Green New Deal to reverse the negative effects of climate change, ensure economic security, revamp the nation’s transportation system, restore damaged ecosystems, secure a sustainable environment, and achieve justice and equality. Overlooked in all of the analyses of the Green New Deal is that Americans didn’t need the original New Deal.

The Green New Deal

On February 7, newly elected Rep. Alexandria Ocasio-Cortez (D-N.Y.) introduced in the U.S. House a resolution (H.Res.109) “recognizing the duty of the Federal Government to create a Green New Deal.” On the same day, the veteran Sen. Edward Markey (D-Mass.) introduced a companion resolution (S.Res.59) in the U.S. Senate. According to the U.S. Senate, “A simple resolution addresses matters entirely within the prerogative of one house,” is “also used to express the sentiments of a single house,” or may simply give “advice.” Simple resolutions require neither the approval of the other House of Congress nor the signature of the president, as they do not have the force of law.

Prior to the introduction of her Green New Deal resolution, Representative Ocasio-Cortez issued a “Green New Deal FAQ.” A similar FAQ sheet was sent to the media on the day the resolution was introduced. The Green New Deal “is a 10-year plan to create a greenhouse gas neutral society that creates unprecedented levels of prosperity and wealth for all while ensuring economic and environmental justice and security.” The Green New Deal achieves this “through a World War 2 scale mobilization that focuses the robust and creative economic engine of the United States on reversing climate change by fully rebuilding our crumbling infrastructure, restoring our natural ecosystems, dramatically expanding renewable power generation, overhauling our entire transportation system, upgrading all our buildings, jumpstarting US clean manufacturing, transforming US agriculture, and putting our nation’s people to work doing what they do best: making the impossible possible.” The Green New Deal also “calls for an upgrade to the basic economic securities enjoyed by all people in the US to ensure everybody benefits from the newly created wealth.” This “upgrade” builds on “FDR’s second bill of rights” by guaranteeing to every American:

• A job with family-sustaining wages, family and medical leave, vacations, and retirement security

• High-quality education, including higher education and trade schools

• High-quality health care

• Clean air and water and access to nature

• Healthy food

• Safe, affordable, adequate housing

• An economic environment free of monopolies

• Economic security to all who are unable or unwilling to work

And that is just the beginning: “The economic securities and programs for justice and equity laid out in this Green New Deal resolution are a bare minimum of what we need to do to successfully execute the Green New Deal.”

And how will the Green New Deal be paid for? It will be paid for “the same way we paid for the original New Deal, World War II, the bank bailouts, tax cuts for the rich, and decades of war — with public money appropriated by Congress.” But also, “the Federal Reserve can extend credit to power these projects and investments,” “new public banks can be created to extend credit,” and the government can “take an equity stake in Green New Deal projects so the public gets a return on its investment.” In the end, the Green New Deal is not an expenditure; it is “an investment in our economy that should grow our wealth as a nation.”

It’s not just the Democratic Party that is pushing the Green New Deal. Not at all surprising, the Green Party also supports a Green New Deal. Although the centerpiece of the Green New Deal “is a transition to 100% clean energy by 2030,” it also “includes an Economic Bill of Rights, which ensures all citizens the right to employment through a Full-Employment Program that will create 20 million jobs by implementing a nationally funded, but locally controlled direct-employment initiative.” Unemployment offices will be replaced “with local employment offices offering public sector jobs that are ‘stored’ in job banks in order to take up any slack in private sector employment.” The Green New Deal “will provide assistance to workers and local communities that now have workers employed in the fossil fuel industry and to the developing world as it responds to climate-change damage caused by the industrial world.” It will “end unemployment in America once and for all by guaranteeing a job at a living wage for every American willing and able to work.” Once implemented, the Green New Deal “will revive the economy, turn the tide on climate change and make wars for oil obsolete.”

And how will the Green Party’s Green New Deal be paid for? “We will need revenues between $700 billion to $1 trillion annually for the Green New Deal,” says the Green Party. Cutting the military budget by 50 percent and subsequently saving “several hundred billion dollars per year would go a very long way toward creating green jobs at home.” The revenue from a carbon tax “will provide funding for the Green New Deal as well as safety nets for low-income households vulnerable to higher prices on certain items due to rising carbon taxes.” A tax “on the assets of oil and gas companies” will “help deal with the effects of climate change and smooth the transition to a low-carbon economy.” Wealthy Americans “should pay increased taxes to help with the cost of transitioning to a green economy.” The top income tax rate and the estate tax should both be raised. And on top of all that, “the Green New Deal largely pays for itself in healthcare savings from the prevention of fossil fuel-related diseases, including asthma, heart attacks, strokes and cancer.”

The Green Party’s Green New Deal invokes Franklin Roosevelt’s New Deal several times: “building on the concept of FDR’s New Deal,” “establish a Renewable Energy Administration on the scale of FDR’s hugely successful Rural Electrification Administration,” “this would include a WPA-style public jobs program.” “So it’s like the New Deal that got us out of the Great Depression, but it’s a Green New Deal so it also solves the crisis of the climate,” says Jill Stein, Green Party presidential candidate in 2012 and 2016.

The cost of the Green New Deal has been conservatively estimated in the tens of trillions of dollars — and that is the case even if only the costs of guaranteed jobs, universal health care, affordable housing, and food security are considered. Indeed, according to Robert Murphy, senior economist with the Institute for Energy Research (IER), “The Green New Deal is simply a wish list of standard progressive social goals, rather than an actual blueprint for fighting the technical problem of (alleged) human-caused harmful climate change.” The underlying philosophy of the Green New Deal is that government intervention in the economy and society is absolutely essential to effect the change that is needed to right every wrong and fix every problem.

The original New Deal

Much as conservative politicians invoke the name of Ronald Reagan when they want to hoodwink grassroots conservatives into believing how “conservative” they are, so liberal and progressive supporters of the Green New Deal invoke the original New Deal. Just as the unregulated free market and unbridled capitalism caused the Great Depression and Roosevelt’s New Deal cured the Great Depression, so only the “massive investment” of government akin to the original New Deal can save the planet and eliminate economic injustice and inequality. The New Deal is viewed as the model for what government should do for the poor, needy, and vulnerable members of society in times of economic instability, crisis, and uncertainty.

As explained by journalist and New Deal historian Michael Hiltzik, “The New Deal instilled in Americans an unshakable faith that their government stands ready to succor them in times of need. Put another way, the New Deal established the concept of economic security as a collective responsibility.” The only reason the radical goals of the Green New Deal can even get a hearing is that most Americans — of any political persuasion — look favorably on the original New Deal. After all, not only did it (eventually) end the Great Depression, it gave us Social Security — the most popular government program in history, and which is defended by conservative Republicans to this day. Yet it was government intervention by Presidents Herbert Hoover and Roosevelt that exacerbated and prolonged the Depression. The New Deal made the Depression the Great Depression.

After heading the federal Food Administration during World War I, Hoover concluded, in the words of Jim Powell, author of FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression,“that the vast power of the U.S. government could do wonders during an emergency.” He thought that government could spend its way out of a depression. Hoover supported dramatically increased subsidies to business and agriculture and massive public-works projects. To pay for this spending, he backed both higher tariffs and higher taxes. In 1930, he signed into law the Smoot-Hawley tariff — the most protectionist legislation in U.S. history — that crippled international trade. In 1932, he signed into law the Revenue Act — the largest peacetime tax increase in history — which revived wartime excise taxes, imposed new taxes, restored eliminated taxes, reduced exemptions and credits, raised the corporate income tax, and doubled the estate tax and personal income tax.

The 1932 Democratic Party platform, as summarized by Lawrence Reed, president of the Foundation for Economic Education, in Great Myths of the Great Depression “called for a 25 percent reduction in federal spending, a balanced federal budget, a sound gold currency, the removal of government from areas that belonged more appropriately to private enterprise and an end to the extravagance of Hoover’s farm programs.” Throughout the 1932 election campaign, “Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions on the dole.” He accused Hoover of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate charged that Hoover was “leading the country down the path of socialism.”

During a speech on July 2 from the floor of the 1932 Democratic Convention in Chicago, Roosevelt said, “I pledge to myself a new deal for the American people.” The phrase was not original to Roosevelt, but he made it his own. Once elected, he did everything he accused Hoover of and more. His remedies, which were inspired by European socialist or fascist models, were, in the words of Rexford Tugwell, one of the architects of the New Deal, “extrapolated from programs that Hoover started.”

The New Deal greatly increased the power of the presidency. In his first inaugural address, Roosevelt asked for “broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.” He got it. He issued 3,728 executive orders, including one that ordered Americans to surrender their gold to the government or face a fine of $10,000 and ten years in prison. The New Deal’s National Recovery Administration (NRA) forced most manufacturing industries into cartels with codes that regulated prices. The New Deal’s Agriculture Adjustment Act (AAA) paid farmers to destroy crops and livestock. The New Deal’s National Labor Relations Act (NLRA) empowered labor unions to organize strikes, seize plants, and commit violence with impunity. The New Deal’s Works Progress Administration (WPA) gave rise to the term “government boondoggle.” No one who valued any degree of individual liberty, private property, free markets, and limited government would ever invoke the New Deal to give credence to any social or economic proposal.

Laissez faire

The alternative to a socialist or fascist economy — elements of which can still be found in our interventionist economy in the twenty-first century — is a laissez-faire economy; that is, an economy where exchange, commerce, business, and trade between individuals, groups, companies, and corporations are free from government intervention, whether such intervention takes the form of regulation, mandates, oversight, management, control, licensing, certification, privilege, tariffs, or subsidies. I want to explore three key issues in the context of a laissez- faire economy.

Trade. In a laissez-faire economy, trade is absolutely free. It is neither managed by the government nor distorted by protectionism. There are no government trade agreements or trade treaties with other countries. There are no government memberships in trade organizations or associations. There is no 3,700-page Harmonized Tariff Schedule of the United States. There is no government trade representative or Export-Import Bank. The government doesn’t calculate a meaningless trade deficit and, even worse, seek to remedy it by intervening in the economy. Managed trade is not free trade. It is a misnomer to call thousand-page trade agreements “free-trade agreements.” The World Trade Organization (WTO) is a globalist bureaucracy.

It is not the proper role of government to protect domestic industry from foreign competition. Protectionism is not just tariffs; it can also take the form of quotas, barriers, sanctions, or dumping rules. Calls for protectionism are actually calls for Soviet-style central planning. All forms and levels of protectionism require central planning. Government economists and bureaucrats must determine which industries to protect, against which countries to impose protectionist measures, which items should be subject to tariffs, how much the tariffs should be, and what the duration of the tariffs should be. Trade is fair when it is not subject to government interference, regulations, or restrictions.

Free trade is fair trade. Trade cannot be made more fair by making it less free. Protective tariffs and retaliatory tariffs are counterproductive. Raising tariffs will not make the country great again. Trade is not a zero-sum game in which one party gains at the expense of the other. Trade does not result in winners and losers. In every exchange, both parties give up something they value less for something they value more. Each party to a transaction anticipates a gain from the exchange or it wouldn’t engage in commerce with the other party. Tariffs are no different from taxes. Any way you look at it, a tariff is a tax. American importers suffer when they have to pay a tariff to the U.S. government, just as American exporters suffer when they have to pay a tariff to a foreign government.

Commerce. In a laissez-faire economy, commerce is unrestricted and free enterprise and the free market are truly free. There is no National Economic Council or Council of Economic Advisers. There is no Small Business Administration, Securities and Exchange Commission, Federal Communications Commission, Federal Trade Commission, Consumer Financial Protection Bureau, or Commerce Department. All businesses handle their own security. Private industry delivers the mail, provides utilities, and collects garbage. No place of business is forced to provide handicapped parking spaces or is prohibited from selling alcohol after a certain time of day or on Sunday. No industry is singled out for special protection or provision by the government.

The banking, education, housing, transportation, and health-care sectors of the economy provide services just like any other business. There are no government grants, subsidies, vouchers, loans, or loan guarantees to any individual, group, organization, profession, occupation, business, or industry. There is no Federal Reserve to manipulate interest rates and distort the money supply.

There is no AMTRAK or public transit, no government deposit insurance, no rent-control laws, and no government accreditation of educational institutions. There are no departments of Health and Human Services, Agriculture, Transportation, Education, or Housing and Urban Development.

The free market allows buyers (who want to acquire goods at the lowest price possible) and sellers (who want to sell their goods at the highest price possible) to come together in harmony. Market forces of supply and demand allocate goods and resources and determine prices. Unhampered competition keeps prices in check. There are no government regulations to stifle businesses or anti-trust laws to “protect” consumers. Government intervention is not necessary to ensure competition or prevent
monopolies. There are no price-control, price-gouging, predatory-pricing, price-discrimination, or usury laws. The just price is the market price.

Not only is it not the business of government to regulate how people engage in commerce, attempts to regulate markets by governments always have unintended consequences that are often worse than the problems that regulations were meant to cure. Government interference in the market cannot make the market fairer or more competitive; it can only distort or disrupt the market.

Employment. In a laissez-faire economy, employment is strictly a contract between employer and employee. The government doesn’t interfere in the employer/employee relationship in any way. There is no Bureau of Labor Statistics, Department of Labor, National Labor Relations Board, Americans with Disabilities Act, Family and Medical Leave Act, or Equal Employment Opportunity Commission.

There are no government job- training programs. There is no government unemployment-compensation program. Unemployment insurance is private, voluntary, and purchased on the free market just like any other form of insurance. There are no government occupational-licensing or certification requirements to prevent people from working. There are no minimum-wage or overtime-pay laws. Regular wages and overtime pay are set entirely by agreement between employers and employees, as are employee fringe benefits, since there are no other government-mandated employee benefits. Employers can hire anyone regardless of his citizenship or immigration status. Affirmative Action policies are not only voluntary, they can be based on anything, not just race. Union membership and participation in collective bargaining is voluntary, and employers are free to mandate or disallow either. Subject to any restrictions in an employment contract, striking workers can be summarily fired and replaced for the simple reason that any employee can be fired and replaced at any time and for any reason.

Discrimination in hiring, pay, or promotions on any basis and for any reason is perfectly lawful. No one deserves to have a particular job, even if he is fully qualified for it. No one has the right to a “living wage” or a particular rate of pay. No employee is entitled to pay equal to that of any other employee. Workplace dress codes, hairstyles, headwear, appearance, and religious accommodations related to these things are solely the prerogative of employers.

Americans don’t need a Green New Deal any more than they needed the original New Deal. Each of them is a grab bag of progressive social and economic goodies with horrific consequences for liberty and property. Americans need laissez faire. They need it now, just as they needed it in the 1930s.

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