In the many years that I have known him, I have always liked and respected Larry Kudlow. I think he was an excellent chairman of the National Economic Council, and the overwhelming success of President Trump’s economic policies reflect well on Larry: He undoubtedly influenced the selection of some of them and very plausibly and accurately explained the effects of all of them. Though Trump received practically no credit for this, under his administration, the United States became the only serious jurisdiction in the world in which the lowest 20 percent of income earners were gaining income in percentage terms more quickly than the top 10 percent. The administration’s tax policies as well as its reduction of 90 percent of the illegal entries of unskilled immigrants spurred increases of lower incomes and led to the condition in which, before the onset of the coronavirus, there were 750,000 more positions to be filled than unemployed people in the United States. All of this associates Larry Kudlow with success and adds to his distinguished previous career as a commentator and both a practical and an academic economist.
Having got that cordial salutation off my chest, I must once again express my horror at his assertion to Judge Jeanine Pirro on Fox News on Saturday that after the first two terms of President Franklin D. Roosevelt, unemployment in the United States stood at 19 percent. When Roosevelt came into office in March 1933, unemployment statistics were compiled by the states and were incomplete, but estimates of unemployment ranged from 25 to 33 percent, which amounts to 13 to 17 million members of the workforce in a population of 125 million, and there was no direct federal relief for them. Banks were closed in 46 states and had been for some time, and withdrawals in the other two states were confined to ten dollars per day. Every stock and commodity exchange in the country was closed sine die and there were machine guns at the corners of the great federal buildings in Washington on Inauguration Day, the first inauguration with a major armed presence since the Civil War.
FDR delivered the first of his famous fireside chats announcing that banks would be merged where appropriate, under the authority of Federal Reserve districts around the country. The federal government would become a temporary preferred shareholder where appropriate; special currency would be provided to deal with runs on banks if necessary; and bank deposits would be guaranteed, a reform that was enacted a couple of months later. The banking crisis ended abruptly. Very soon afterwards, the administration unveiled a series of what would today be called workfare conservation and infrastructure projects. The Civilian Conservation Corps (CCC), the Public Works Administration, and the Works Progress Administration absorbed up to 10 million of the unemployed at wages below the customary lowest wage of private-sector employed people, but the incomes of participants were supplemented by food and shelter and in many cases the money was sent directly to their families. Young men joined the CCC and achieved a great range of commendable objectives, from the rescue of the whooping crane to massive projects of reforestation and fish stocking.
The public-works operations under the supervision of the Army Corps of Engineers created the Intracoastal Waterway, the Triborough Bridge, the Lincoln Tunnel, the Midway waterfront in Chicago, the state capitol at Helena, Mont., the Grand Coulee Dam in Washington, thousands of miles of roads, scores of airfields, and dozens of national parks. Near the end of the 1930s they shifted to defense production, including what soon became the world-famous aircraft carriers Enterprise and Yorktown. The greatest single project was the Tennessee Valley Authority, which brought electricity to the rural South, as well as a vast plan of irrigation and flood and drought control.
Roosevelt added to these projects legislation reducing the work week and raising most pay scales, as well as promoting responsible collective bargaining and allowing employers to operate cartels as long as they raised prices sensibly to reverse the deflation of the preceding five years and did not significantly reduce industrial competition. It was a very complicated program to deal with a collapsed economic system and a condition of severe national demoralization. At the same time, Roosevelt managed a grave agricultural crisis in which the farmers of America produced a vast surplus of almost all farm products, for which they received a price that in the case of approximately half the farmers was inadequate to meet their basic living expenses. He produced a system of reduced production, conservation of fallow land, and, by free voting among categories of farmers, settling upon the amount to be produced and the price, which would ensure financial survival. This replaced the Hoover restrictions in which the surpluses were bought artificially cheaply, impoverishing the American farmer, and then sold overseas, for deferred payments that were generally the subject of default.
This was the New Deal. There were many things wrong with it, and Roosevelt said at the outset that there would be mistakes and there would be changes. The key to understanding it — and it must be said that even pro-Roosevelt historians such as Doris Kearns Goodwin and the late Arthur Schlesinger and William Leuchtenburg have not understood this — is that the workfare participants should have been counted as employed rather than unemployed. The reason that the comparative numbers from the economies of the major Western European countries and Japan looked better than those in the United States is that the huge numbers of people conscripted through the ’30s into the armed forces and defense-production industries of those countries were counted as employed. But they were employed no more legitimately, and less usefully, than the New Deal workfare participants. If this revision is taken into account, America’s unemployment numbers were superior to those of its competitors. Even without counting them as employed, the unemployment rate in the United States was not 19 percent in January 1941: it was approximately 7 percent, and less than 1 percent on the day of Pearl Harbor. The New Deal worked, though it had its failings, especially in tax policy, where Roosevelt overreacted to the threat of Huey Long and other third-party demagogues.
Franklin D. Roosevelt was in fact, as he said to Justice Felix Frankfurter, “the greatest friend American capitalism ever had,” and Larry Kudlow and Mark Levin, who is generally sensible on other political subjects but has a pathological hatred of FDR, should get their facts straight. Levin has portrayed the entire New Deal as unconstitutional vote buying, and he had the effrontery to tell one of his television guests a couple of months ago that “Roosevelt was playing footsie with Hitler right up to Pearl Harbor.” In fact, he pulled his ambassador from Berlin after Kristallnacht in 1938, resupplied the British Army with rifles and artillery as they returned from Dunkirk in May 1940, loaned the British 50 destroyers in the middle of the 1940 election campaign at considerable political risk to himself, extended American territorial waters in the Atlantic from three miles to 1,800 miles, and ordered the United States Navy to attack any German ship on detection. And he pushed through Lend-Lease, under which the British and Canadians could have any war supplies they wished and pay for them when they were able, starting with 26,000 aircraft. This was an idiosyncratic version of neutrality (and of “playing footsie”). I’m generally in policy terms on the same side as Kudlow and Levin, but they are not doing our side any favors by continuing this generations-old slanging match against the man upon whose shoulders and those of Winston Churchill alone depended from 1940 to 1944 the survival and future of our civilization, a burden they discharged with immense success and distinction, even if they were gratuitously criticized for non-collegiality 70 years later by that most unworthy critic, Barack Obama. Roosevelt today would prefer Trump to Biden, and he is being slagged off unjustly by people who should know better. In today’s terms, he was one of us.