How FDR Screwed the Poor

While looking for damning criticisms of the New Deal to counter the overwhelmingly and pathetically pro-New Deal and leftist articles for my comparative history seminar I came across this article by historian Jim Powell. Powell, author of FDR's Folly, wrote about how the New Deal hurt the people it was supposed to help. According to Powell, the New Deal's main source of revenue came in the form of excise taxes which fell disproportionately on the lower classes.

Though the article is from 2003, I feel it can serve as a warning to the current economic situation. The $700 billion dollar bail out was shot down yesterday by the House of Representatives. The news is already being spun by Democrats that it failed because of heartless Republicans despite the fact that 95 House Democrats voted against the bail out. I am not sure how I feel about the plan, but I am beginning to think that maybe the economy would be better off without the bail out. I'm sure that those who favor the bail out have good intentions, but, as Powell concluded, "we should evaluate government policies according to their actual consequences, not their good intentions."

Here is an excerpt from Powell's article:

"Democratic presidential candidates as well as some conservative intellectuals, are suggesting that Franklin Delano Roosevelt's New Deal is a good model for government policy today."

"Mounting evidence, however, makes clear that poor people were principal victims of the New Deal. The evidence has been developed by dozens of economists -- including two Nobel Prize winners -- at Brown, Columbia, Princeton, Johns Hopkins, the University of California (Berkeley) and University of Chicago, among other universities."

"New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion in 1940. Excise taxes, personal income taxes, inheritance taxes, corporate income taxes, holding company taxes and so-called "excess profits" taxes all went up."

" The most important source of New Deal revenue were excise taxes levied on alcoholic beverages, cigarettes, matches, candy, chewing gum, margarine, fruit juice, soft drinks, cars, tires (including tires on wheelchairs), telephone calls, movie tickets, playing cards, electricity, radios -- these and many other everyday things were subject to New Deal excise taxes, which meant that the New Deal was substantially financed by the middle class and poor people. Yes, to hear FDR's "Fireside Chats," one had to pay FDR excise taxes for a radio and electricity! A Treasury Department report acknowledged that excise taxes "often fell disproportionately on the less affluent.""

"Until 1937, New Deal revenue from excise taxes exceeded the combined revenue from both personal income taxes and corporate income taxes. It wasn't until 1942, in the midst of World War II, that income taxes exceeded excise taxes for the first time under FDR. Consumers had less money to spend, and employers had less money for growth and jobs."

"New Deal taxes were major job destroyers during the 1930s, prolonging unemployment that averaged 17%. Higher business taxes meant that employers had less money for growth and jobs. Social Security excise taxes on payrolls made it more expensive for employers to hire people, which discouraged hiring."

Full article.