Friday, June 8, 2012

The Problems with the New Deal

President Franklin Roosevelt's famous New Deal programs caused, and still cause, controversy. Although well-intentioned, they were plagued by a number of problems: they limited freedom, they were unconstitutional, and they simply didn't work. FDR's initiatives actually lengthened and worsened what would have been a relatively mild and short-lived economic setback. Historian Robert Murphy writes:

Despite his undeniable rhetorical gifts and his cozy "fireside chats," FDR did not charm everyone. Many business leaders feared and loathed him, considering the New Deal to be a dangerous lurch towards the collectivism that was sweeping other industrialized nations. Roosevelt also butted heads with the Supreme Court, which in 1935 threw out the National Industrial Recovery Act as an unconstitutional expansion of federal (and in particular executive) power over free commerce in the Schechter Poultry case. In another major setback to the New Deal, the Supreme Court threw out the Agricultural Adjustment Act in 1936 in United States v. Butler, on the grounds that the federal government did not possess the authority to micromanage agricultural production. Incensed at what he considered the Court’s interference with the clear will of the American people, in early 1937 Roosevelt famously threatened to "pack the Court," meaning he wanted the authority to appoint more Justices than the traditional nine. Realizing the danger this plan posed to the checks and balances designed by the Founders to restrain the tyranny of the executive branch, many of Roosevelt’s allies deserted him. However, at the same time the Supreme Court became much more compliant, and upheld new legislation that replaced the voided components of the original New Deal. In particular, the Court surprised many business owners by upholding the constitutionality of the National Labor Relations Act in April 1937. A month later the Court gave its blessing to the Social Securities Act as well, and Roosevelt decided to drop his controversial plan. The spirit of his New Deal survived, and a costly constitutional crisis had been avoided.

We can see two of the several strands of opposition to FDR's New Deal, and more particularly opposition to the National Recovery Administration (NRA) created by the National Industrial Recovery Act (NIRA): opposition from the business community, which saw that the program would hurt the economy and stifle job creation, and opposition from the Supreme Court, which saw that Roosevelt had exceeded the constitutional authority given to the office of the president. Roosevelt, in turn, responded to each of these: among business leaders, he supported the crony capitalists against the free-market capitalists; against the Supreme Court, he used threats and bullying. To what extent FDR succeeded is debatable: although some of his programs were nixed, he succeeded in creating more debt than had every been imagined, and he succeeded in allowing government to interfere with the daily life of ordinary citizens to an extent imagined only perhaps by Woodrow Wilson. Historian John Steele Gordon writes:

When the new Supreme Court building opened in 1935, the New Yorker magazine praised its architecture, saying it was "a magnificent structure, with fine big windows to throw the New Deal out of." But even Justice Louis Brandeis, hardly a member of the court's then-dominant conservative wing, told members of the administration, "This is the end of this business of centralization, and I want you to go back and tell the president that we're not going to let this government centralize everything." Free enterprise, and its sine qua non, competition, had been rescued by the court.

The tug-of-war between Roosevelt's desire for government control and the Supreme Court's desire to preserve individual freedom had mixed results. The Supreme Court was able to preserve some economic liberty, although not as much as Americans had enjoyed before 1933; Roosevelt increased the government's intervention into the economic choices of ordinary Americans, but not to the extent he wanted. This tension continues in American politics today.