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Let me try to put some FDR things into a perspective...

Discussion in 'Prelude to War & Poland 1939' started by brndirt1, Jul 20, 2011.

  1. brndirt1

    brndirt1 Saddle Tramp

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    As to a logical rationale why the Great Depression was extended in the second half of the thirties.

    Four years into Franklin Roosevelt's first presidential term, the worst of the Great Depression seemed behind him. Massive jolts of New Deal spending had stopped the economic slide, and the unemployment rate was cut from 22 percent to less than 10 percent.


    "People felt that there was momentum," U.S. Senate historian Donald Ritchie tells Guy Raz, host of weekends on All Things Considered. "Finally, there was the light at the end of the tunnel."

    So Roosevelt, on the advice of his very fiscally conservative Treasury Secretary Henry Morgenthau, decided to tackle the country's exploding deficits. Over two years, FDR slashed government spending 17 percent. (bold mine)

    "All of a sudden," Ritchie says, "after unemployment had been going steadily down, unemployment shot up, the economy stagnated, the stock market crashed again. And now it seemed we'd come out of the Hoover Depression to go into the Roosevelt recession."​ (underline emphasis mine)

    Goto:

    When A Turn Toward Austerity Turned To Disaster / ideastream - Northeast Ohio Public Radio, Television and Multiple Media

    While FDR had balanced the "regular" budget with his cuts and reforms, the new relief initiatives were funded by entirely by deficit spending. Unemployment almost halved during FDR’s first term in office, but in some areas was still at over 14%.

    It remained high until war conscription began, despite an average yearly job growth of over 5% during his administration. Income taxes were not increased prior to the war, but additional taxes to cover Social Security were implemented.
    (bold mine)

    FDR’s second term featured legislation that ended child labor, created a minimum wage and created the Housing Authority. He also pushed more stimulus legislation to counteract the beginnings of another downturn in the economy.

    He had several major clashes with the Supreme Court, who ruled that several pieces of New Deal legislation was unconstitutional, due to them overstepping presidential authority.
    (his major mis-step politically was trying that "packing" bill [my opinion] )

    Goto:

    President Franklin Delano Roosevelt

    From 1933 to 1937, the United States had been inching its way out of the Depression, but due to a sharp decrease in government money being injected into the economy, the country faced a sharp recession in 1937. Although Roosevelt again presented legislation to Congress that increased government spending, his magical hold over legislators had ended, and his proposed legislation was by and large rejected.

    By 1938, the New Deal had lost much of its momentum, and the results showed in the 1938 Congressional elections. Republicans, though still not in the majority, made great cuts in the New Deal Congress's power. By now, however, the President's attention was diverted by foreign affairs, and the Depression continued until the war began.

    Goto:

    SparkNotes: Franklin D. Roosevelt: The Second Term


     
  2. DogFather

    DogFather Member

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    While FDR's New Deal programs did help put people back to work and did help the large numbers of unemployed. FDR also
    raised taxes, which hurt the economy. Taxes for Social Security were some of the additional tax burden that slowed economic growth. I don't have the source in front of me, but the tax burden went up 3 fold during FDR's admin. This
    counteracted the deficit spending, of the New Deal and is why the US did not get out of the Great Depression until
    WW2 started. Social Security and its tax burden, had nothing to do with the economy or unemployment. In short FDR
    failed to end the Great Depression, it was WW2 that finally did that.


    This is from Wiki:
    Tax increases In 1935, Roosevelt called for a tax program called the Wealth Tax Act to redistribute wealth, in which he proposed to increase inheritance tax, a gift tax, a severely graduated income tax, and a corporate income tax scaled according to income. However, Congress watered it down, by dropping the inheritance tax and only mildly increased the corporate tax. (bold mine)

    A tax called the Undistributed profits tax was enacted in 1936. The idea was to force businesses to distribute profits in dividend and wages, instead of saving or reinvesting them. Business profits were taxed on a sliding scale; if a company kept 1% of their net income, 10% of that amount would be taxed under the UP Tax. If a company kept 70% of their net income, the company would be taxed at a rate of 73.91% on that amount. Facing widespread and fierce criticism, the tax was reduced to 2½% in 1938 and completely eliminated in 1939
     
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  3. OpanaPointer

    OpanaPointer I Point at Opana Staff Member WW2|ORG Editor

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    Dogfather, you preach the Republican party line from the 1940s. It's biased, unbalanced and one-sided.
     
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  4. Victor Gomez

    Victor Gomez Ace

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    In short....the economics of our lives today is digitally electronically fast. Using the Great Depression can teach us many things but almost nothing about our current economic condition. The biggest difference is a real lack of control for global industrial and financial strategies that can undermine the best efforts of any single economy. Our changes happen instantaneously compared to the 1920's and 1930's. Merrily we roll along thinking there are important "things" we should do from a political angle that is the "correct" free enterprise thing to turn loose forces to try to reverse our recession. Note how we change our values.....in the 1930's we learned to fear the monopoly and made laws to prevent companies from domination of a market. Today to stay in the race we allow monopolizing down to two or three major competitors to try to make them "Globally Competitive" whatever that may be. We pass a NAFTA law that exported our jobs even if it meant we had to compete with the slave labor of the societies of the world that have slave labor that produces for them. Now we wonder why our midwest manufacturing area has so few jobs in their vicinity. They themselves did the voting that brought us NAFTA. We must ask ourselves......are we going to be led to more votes like that one for our future laws? It was really good for the Global level of the corporate structure but not so good for our people who lost jobs. Now with our workers competing against the world Global workforce it is bound to lower our standards a great deal but who can complain because we voted for that! Our nation moves more every day to the "moneyed" interests and the "moneyed" lobbyists that get their way with our government. I do believe in the power of the free enterprise system to accomplish great things but it happens with innovation within rules and leadership of men with moral values. What we frequently turn loose is immorality in the driver's seat of our corporate system, when it only has values for more money. Watch out that the Great Depression is not just used to lay another layer of mis-information about what needs to be done because most of those lessons only applied to that era and the nearby era. We need to start understanding things Globally and more important is that we do so with moral values as well. Otherwise, we are moving towards Plutocracy and that is not Free Enterprise with a moral backbone. We always are quick to point out that we did not get out of the Great Depression with the government jobs that were used to stimulate and that is logically true....it was the war that changed things. However don't let it be lost in your logic that a great deal of suffering amongst our people was reduced and gave hope and a mode of survival for some very hungry people that were suffering a great deal in those days. That was a moral choice I admire FDR for making on behalf of our people who were truly suffering. Otherwise, would our government survive that level of suffering? I don't know what a family moving down the road with no job in site is going to be like to deal with today as compared to the migrant moving in the dust bowl days. It is highly likely the mover today is going to be armed and desperate beyond reason.
     
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  5. Takao

    Takao Ace

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    That leaves out quite a bit. The idea behind the Undistributed Profits Tax was to close a tax loophole of gigantic proportions. You see, profits that were put back into the company WERE NOT TAXED. This was done to encourage companies to reinvest some of their profits back into themselves, thus allowing said companies to expand at a much faster rate. However, this had been used as a tax loophole, with companies reinvesting much of their profits back into themselves and not having to pay dime one in taxes. Thus, the rich coporate owners could keep dumping their profits back into the company, thereby increasing their own personal wealth without ever having to pay taxes. It has been estimated that in 1936, the Government lost out on $1.3 billion in taxes on $4.5 billion in undistributed corporate earnings.

    An Undistributed Tax was nothing new, it was, IIRC first proposed by Woodrow Wilson's Secretary of the Treasury, David Houston, back in 1920, and It had been kicked around for sometime since then. FDR's Treasury Department had been working on this tax since about 1933.

    FDR believed that this tax should be the ONLY tax on coporate income, had it passed as it was, FDR inteded to do away with the corporate income tax, the capital stocks income tax, and the excess-profits tax. The tax was also thought to effect the fewest amount of voters(the rich), but benefit a much larger number(the poor). Well, In a perfect world anyway.

    While the bill breezed through the House Ways and Means Committee, it faced a much tougher battle in the more conservative Senate Finance Committee. Of the first 100 witnesses to appear before the Senate Committe, only one spoke in favor of the Bill. The arguments against the Bill were many and varied. The most persuasive was that it had the most detrimental effect on the small & medium business owners(they made up the much of the corporations by a sizeable margin), since it essentially prevented them from reinvesting money to expand their businesses. Thus, while the Bill ws intended to target only the large corporations, it would have a disasterous effect on the more numerous smaller corporations.

    In an effort to compromise a watered-down version of the bill was created that pleased no one. The Senate still wanted the tax done away with, the House members saw the proposed watered-down Bill as FDR's administration deserting them after they had passed the Bill the Treasury Depatment wanted, and even FDR's administration was divided on the issue. In the end, the compromise bill was passed, but was so ineefective that it was soon done away with.
     
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  6. texson66

    texson66 Ace

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    Like the democratic line is not being unbalanced and unfair???
     
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  7. OpanaPointer

    OpanaPointer I Point at Opana Staff Member WW2|ORG Editor

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    Sigh. I'm talking about Dogfather's slanted perspective on FDR in the 1930s and '40s. Not modern politics. Can we keep this thread out of the Stump? (If you want to start one there I'll be sure to drop by.)
     
  8. DogFather

    DogFather Member

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    You may call it the "Republican party line" if you like. But to me it's just common sense. You don't raise taxes and take money out of the economy, during difficult economic times. A smaller amount of money in the economy, was a large part
    of what was causing the Depression. People had lost a lot of money, in the stock market, in real estate and even in bank
    accounts. The Wealth Tax Act and the severely graduated income tax, were designed to redistribute wealth. This
    concept really had nothing to do with the high unemployment of the Great Depression. It was supposed to make things
    fair, it did not work and hurt the economy just had it had begun to recover. That is way unemployment increased to 20%
    in 1938 and stayed that high until orders from WW2 starting in Europe and the draft, reduced unemployment in 1940.
     
  9. Slipdigit

    Slipdigit Good Ol' Boy Staff Member WW2|ORG Editor

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    This thread started off precariously close to subject for discussion in The Stump. It looks as though it is going to end up there.

    To which I ask, was it created here to discuss the lead up to the involvement of the US in the war or to tie into current political events?
     
  10. OpanaPointer

    OpanaPointer I Point at Opana Staff Member WW2|ORG Editor

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    I'd much rather leave current events to their proper forum.
     
  11. OpanaPointer

    OpanaPointer I Point at Opana Staff Member WW2|ORG Editor

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    You simply have to do the reading to get sorted out, Dogfather. Treaties, Declarations, Insturments of Surrender
     
  12. texson66

    texson66 Ace

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    "severely graduated income tax"

    yes and today we have this "progressive" tax situation (thanks to FDR and RINOs):

    For 2008 Tax year (AGI= Annual Gross Income)

    % Ranked by AGI AGI Thresholds on Percentiles Percentage of Federal Personal Income Tax Paid

    Top 1% $380,354 38.02

    Top 5 % $159,619 58.72

    Top 10% $ 113,799 69.94

    Top 25% $ 67,280 86.34

    Top 50% $ 33,048 97.30

    Bottom 50% Less than $ 33,048 2.7


    So the evil rich in the top 25% pay 86% of the federal taxes! The top 1 % pay 38%. How is this fair?

    The producers are squeezed to redistribute wealth to the the "less fortunate"(Moochers). Meanwhile the poor pay little or no tax and receive all kinds of Federal freebies....free electric wheelchairs, free cell phones, rent subsidies..the list goes on.

    The producers of this nation are damn tired of hearing about how the rich must pay their "fair share" for the moochers. They already have paid their fair shareand a lot more too!

    </rant off>
     
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  13. OpanaPointer

    OpanaPointer I Point at Opana Staff Member WW2|ORG Editor

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    Perhaps a split would be a good thing?
     
  14. brndirt1

    brndirt1 Saddle Tramp

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    The Revenue Act of 1935, Title I, section 106, individuals with a net income falling between $50,000 and $56,000 had to pay $7,700, and a 31 percent tax on net income between $50,000 and $56,000. Net income refers to income after federal taxes have been taken, so a surtax is an additional tax charged against net income remaining after standard income is taken into account.

    The Revenue Act of 1935 became known as the Wealth Tax Act because it contained a provision to tax high-earning Americans, and closed loopholes that were allowing high-earners to legally avoid paying tax. (specifically) The Act imposed surcharges against individuals that the government considered to be high-earners. The surtax was progressive, meaning that the more an individual received in income, the greater the amount of surtax that was charged against each higher band of income. The highest rate of surtax imposed was the 75 percent rate charged against incomes of more than $5 million. This specific bracket had only a single taxpayer: John D. Rockefeller, Jr.

    The so called "Rockefeller Bracket", created by the Revenue Act of 1935, applied to income over $5 million, and he was the only one in it. Now that is a very specific tax bracket isn’t it?

    This Revenue Act also closed some loop-holes on charitable contributions for corporations, in that a corporation can not deduct an amount of more than 5 percent of its net income, even if its contributions amount to more than that.

    If individuals or families create corporations with the intention of avoiding inheritance tax, all benefits conferred on beneficiaries, or used to provide income for beneficiaries, are taxed at a rate of 80 percent, according to Title II, section 202 of the act.


    Goto:


    The Wealth Tax Act | eHow.com
     
  15. texson66

    texson66 Ace

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    from John Stossel on FDR and the Depression..

    Did you know that FDR's New Deal solved the Great Depression?

    Actually, it didn't. It's uncertainty, big spending, and regulation that prolonged the Depression. FDR's Treasury Secretary, Henry Morgenthau, admitted: "We have tried spending money. We are spending more than we have ever spent before and it does not work."


    Did you know that Herbert Hoover made the Depression worse because as president...he did nothing? The Washington Post believes that. In 2008, the paper claimed GW Bush was "today's Herbert Hoover" because of his "dogged resistance to assisting anybody."

    Actually, Hoover increased spending by 53.5% during his presidency. He signed bad big-government bills like the Davis-Bacon Act and the Smoot-Hawley Tariff. He started huge public works projects like the Hoover Dam. Hoover was a big spender -- like Obama.

     
  16. OpanaPointer

    OpanaPointer I Point at Opana Staff Member WW2|ORG Editor

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    If we can't keep current events out of this thread you can kiss it good bye, off to the morass of the Stump.
     
  17. mcoffee

    mcoffee Son-of-a-Gun(ner)

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    FDR's 4th year in office was 1936 and according to the Bureua of Labor Statistics, unemployement was 17.0%. It rebounded to 19.0% in 1938 and did not go below 10% until 1941 (9.9%).
    Compensation from before World War I through the Great Depression
     
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  18. brndirt1

    brndirt1 Saddle Tramp

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    As an engineer, with that background he started the investigation into the damn on the Colorado, but no funds were appropriated to actually start construction, only evaluation and surveying work were funded.

    Don’t hold the Smoot-Hawley Tariff up as a positive here, it might be one of the more driving forces of the Great Depression as it played out.

    Following World War I, however, U.S. business was particularly fearful that America would be flooded with the products of cheap European labor. Parts of Europe had been destroyed, nations had huge debts, and unemployment was rampant, thus, it's easy to see how costs could be lower than in the United States.


    The cry for protectionism was far and wide, but President Woodrow Wilson vetoed strict tariff legislation in March 1921, weeks before he relinquished the presidency to Warren G. Harding, saying in part:


    "If ever there was a time when Americans had anything to fear from foreign competition, that time has passed. If we wish to have Europe settle her debts, governmental or commercial, we must be prepared to buy from her."

    And how did the stock market respond initially to passage of the S-M tariff act?


    Sat., June 14?Dow Jones 244
    Mon., June 16?Dow 230
    Tues., June 17?Dow 228
    Wed., June 18?Dow 218
    Thurs., June 19?Dow 228? yes, no change.

    [By June 24, the market did fall to 211, but by July 18 the Dow was back to 240, so the immediate impact was negligible. Of course we were still on our way to a Dow Jones of a mere 41 by July 1932.]

    The business reality of Smoot-Hawley was far worse. 1,028 economists had earlier petitioned President Hoover to veto the bill, but with enactment, tariffs hit all-time levels on some 70 agricultural products and 900 manufactured items. The economists had warned that S-H would raise prices to consumers, damage export trade, hurt farmers, promote inefficiency and promote foreign reprisals. As to the issue of increased prices, you saw in a piece I did two weeks ago that consumer prices actually collapsed in the years 1930-32, a point that we will come back to.

    As for foreign reprisals, nations were outraged. Historian Richard Hofstadter called the tariff act, "a virtual declaration of economic war on the rest of the world." Within two years, 25 countries had retaliated and U.S. foreign trade took a huge hit. America had exported $5.24 billion in goods in 1929 and by 1932, the total was just $1.6 billion.

    In both "Wall Street History" and my "Week in Review" column, from time to time I use the phrase that "bad government can cause depressions." I'm referring to Smoot-Hawley, primarily, but while this particular act was undoubtedly a major contributor to the economic upheavals of the 1930s, to place all blame solely on its passage wouldn't be accurate. Nonetheless, it did play a major role in the Depression and should act as a lesson to those who argue for indiscriminate tariffs of any kind, without examining that which history teaches us.

    Sources:

    "The New York Times Century of Business," Floyd Norris and Christine Bockelmann
    "America," George Brown Tindall and David E. Shi
    "A History of the American People," Paul Johnson
    "Freedom From Fear," David M. Kennedy
    "American Heritage: The Presidents," ed. Michael Beschloss
    "The Presidents," ed. Henry F. Graff
    "The American Century," ed. Harold Evans
    "The Growth of the American Republic," Commager, Morison, Leuchtenburg
    "The Great Game," John Steele Gordon
    "Irrational Exuberance," Robert Shiller

    Brian Trumbore

    Goto:

    Educate Yourself - Smoot-Hawley

    President Herbert Hoover resisted calls for government intervention on behalf of individuals. He reiterated his belief that if left alone the economy would right itself and argued that direct government assistance to individuals would weaken the moral fiber of the American people. Hoover further believed that during hard times the government should adopt austerity measures, that is, cut spending even further.

    Forced by Congress to intervene, Hoover did so reluctantly, concerned about both unbalancing the federal budget, and, even more importantly, violating his laissez-faire principles. Hoover's efforts consisted of spending to stabilize the business community, believing that returning prosperity would eventually "trickle down" to the poor majority.

    The poor majority proved unwilling to wait. Branded by his many detractors as cold and uncaring, Hoover was easily defeated in the presidential election of 1932 by Democrat Franklin D. Roosevelt.


    Goto:


    http://iws.collin.edu/kwilkison/Online1302home/20th%20Century/DepressionNewDeal.html

    (
    don't ask me why so much of my second addition ended up blue tinted. I have tried to alter it, but am failing at the task.
     
  19. Takao

    Takao Ace

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    Those are the yearly averages. If you check the monthly rates, You will find that NPR is essentially correct in their research. Early 1937 unemployment rates were in and around the 10% ballpark.
     
  20. syscom3

    syscom3 Member

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    The nadir of the depression happened under Hoover when the banking system essentially came to a halt. It was FDR who got it working again and began the rehabilitation of a completely discredited yet vital sector of the economy.

    As history has proven, it was FDR's actions that saved this country. Hoover waited way to long, often with an indifferent attitude. FDR was spot on when he said action, whether it worked or not was far more important than inaction. The course of actions he took in his first term brought the country away from socialism or communism.

    It is pitiful to look at the events of the 30's through the lenses of today, 80 years later. The world was different then and the economic realities and forces are impossible for us to understand.

    As for his policies extending the depression? Not likely. When nearly everyone in the country had their savings wiped out and were impoverished, economic growth was going to be painfully slow one way or another.

    I find it amusing that only a few economists say the new deal extended the depression. Yeah right. What if the new deal didn't happen? Civil War. Hungry bellies and people with no hope see their salvation at the point of a gun. And those economists simply fail to understand or appreciate the human dimension.

    FDR was the greatest president of the 20th century. Try to argue otherwise.
     

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