Authors: Glenn Beck
Liars (13 page)
Compounding these problems was FDR's undermining of property and contractual rights. One of his earliest acts was to end banking in gold, expropriating privately owned gold and ordering the abolition of all contractual clauses calling for payment in it. The federal government itself reneged on these obligations.
FDR's reasoning was devious. According to Treasury Secretary Henry Morgenthau Jr., Roosevelt wanted to “keep things on an unsettled basis” until the Supreme Court ruled on the constitutionality of his gold legislation. The more chaos for the Court and financial markets, the greater the chance the public would throw up its hands and demand that
FDR be given control over the currency.
Meanwhile, with the dollar off the gold standard,
FDR could set the price himself, which he did, often over breakfast with Morgenthau. Just how arbitrary was this process (which was aimed at raising prices)? Morgenthau revealed that Roosevelt suggested a price increase from nineteen to twenty-one cents one morning because “It is a lucky number . . . because it's three times seven.”
When FDR set the gold price to thirty-five dollars per ounce by law, he devalued the currency by more than forty percent, wiping out savings with a pen stroke.
Many of the most harmful of Roosevelt's policies were struck down by the Supreme Court, which was led by FDR's old friend, Chief Justice Charles Evans Hughes. But FDR wasn't about to take it lying down.
In February 1937, fresh off reelection, FDR proposed what would become known as
the “court-packing” scheme. Alleging that the Court was flouting the will of the executive and legislative branches in its “activism,” he chided the Court for “making law from the bench.” He argued that
modern conditions demanded action.
His plan called for federal judges to be given the option to resign and accept a pension upon reaching the age of seventy. If they refused, FDR would get to appoint additional judges. Since six judges on the Supreme Court were older than seventy, Roosevelt would have the power to potentially expand the Court to fifteen judges, thereby ensuring a favorable majority.
In spite of Democratic control of Congress, a series of events conspired to kill Roosevelt's bill, including a flurry of Court decisions upholding parts of the New Deal that hinged on the defection of one judge from the “conservative” side to the “liberal” side, the retirement of another judge, and a
shift in public opinion against FDR.
Although Roosevelt lost this battle, he won the war. William Rehnquist, who became chief justice five decades later, argued that by breaking with the two-term tradition to win four terms in office, the power-hungry FDR was able to appoint eight Supreme Court justices,
shaping decisions for decades to come.
Court actions notwithstanding, much of FDR's agenda continued to surge ahead. He tripled taxes; created more government entities such as the Federal Communications Commission (FCC), the National Labor Relations Board (NLRB), and the Securities and Exchange Commission (SEC); created a new entitlement in Social Security; and doubled federal spending.
The FCC's regulation of the communications industry, designed to protect a limited resource, also gave it the power to regulate the content of communications. The FCC threatened anti-FDR stations with license revocation and
restricted all “partisan” broadcasts, Roosevelt's own notwithstanding.
The NLRB “protected” labor by forcing employers to bargain collectively with unions and by mandating minimum-wage floors that
dramatically increased unemployment. Strike activity doubled from fourteen million days to twenty-eight million days from 1936 to 1937. But FDR's “pro-labor” policies did have a positive political effectâat least, for him and future Democrats. Between 1933 and 1945, union membership grew
to fourteen million from less than three million,
most of them loyal FDR Democrats. By this time, union members now accounted for thirty percent of the entire labor force.
The SEC, designed to protect investors by regulating securities, imposed costly disclosure requirements on businesses, preventing them from raising more capital
to expand and create new jobs. Studies showed that rates of return on stocks before and after the SEC's creation were indistinguishable, which should not have been the case if their job was
actually to prevent frauds. The SEC mandated price fixing, sustaining a cartel of Wall Street firms. The little guy received the same investment returns
but paid more for them.
Speaking of frauds, Social Security, which is, in effect, a legalized Ponzi scheme, has been on a path to insolvency since the day it was signed.
Roosevelt spent and regulated like a drunken sailor in spite of criticizing President Hoover on those very same grounds
during the 1932 presidential race. And perhaps worst of all, he paid for it all by vastly expanding and steeping the tax code. What was only four hundred pages at the start of FDR's administration ballooned to more than
eighty-two hundred pages by the end of it. While designed to make individuals and businesses pay their “fair share,” it had the effect of stifling economic growth and completely reshaping the economic promise of America from one of individual achievement into one of redistributive equality.
The New Deal was designed to relieve suffering and put America on a sustainable and equitable path. But
designed
is the key word there. The actual effect was something else entirely.
FDR, in fact, turned what would otherwise have been a Depression into a Great Depression through his attempts at social and financial engineering. From 1933 to 1940, the average
annual unemployment rate averaged 18.6 percent. The economy went on a “capital strike,” as private investment
did not return to 1929 levels until 1941. FDR's constant “experimentation” created uncertainty, and there is nothing that private companies and stock markets hate more than that.
Business was paralyzed as a result. In 1937 and 1938, after brief gains from the depths of the Great Depression, the economy collapsed into a double-dip recession. From 1937 to 1938, industrial production declined by thirty-three percent. National income hemorrhaged thirteen percent. Wages went down by thirty-five percent. All of
this unsurprisingly added up to an unemployment rate that rose by roughly five percentage points.
An estimated four million workers lost their jobs.
C. S. Lewis, in
God in the Dock
, could have been speaking for millions of demoralized Americans when he wrote:
Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive . . . those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier
to make a Hell of earth.
Treasury Secretary Henry Morgenthau Jr. may have summed it up best when he said that “after eight years of this administration we have just as much unemployment as when we started. . . .
And an enormous debt to boot!”
Everyone seemed to be a loser, except for Roosevelt himself. After all, if his primary mission was to consolidate and retain power, his agenda would have to be deemed a rousing success.
But a simple rousing success was not what he had in mind. He wanted to be thought of as an all-time great.
And a world war would be exactly
the thing to get him there.
In peacetime, spending and regulation were FDR's tonics for fixing what ailed America. But war provided him with an excuse to plan centrally on a far greater scaleâthe free world depended on it. If America didn't reform, it would be occupied by Hitler's storm troops. Hitler himself was known to fantasize about “
the downfall of New York in towers of flames.” In March 1942, before the United States
had even entered the war, FDR warned journalists: “Nazi forces are not seeking mere modifications in colonial maps or in minor European boundaries. They openly seek the destruction of all elective systems of government on every continent,
including our own.”
Fear of Nazi occupation, of losing everything we loved. But of course, there was hope. We could avoid war if only we'd get our own economic house in orderâwhich, in FDR's telling, meant giving more power to the federal government to regulate business and confiscate private property.
Given this context, it shouldn't be too surprising that FDR conferred upon himself unprecedented executive powers after Pearl Harbor, including the right to ignore tariffs, close radio stations, order the military to take over any plot of land, close financial exchanges, and alter labor regulations.
The federal bureaucracy boomed.
The War Production Board (WPB) was created to direct production and allocate materials and fuel. It converted civilian industries into wartime ones, rationed basic materials, and regulated everything down to even the
quantity of fabrics used in dresses.
Vice President Henry Wallaceâthe former agriculture secretary who supervised the hog-slaughtering AAAânow headed the Board of Economic Welfare (BEW),
which procured raw materials. Although the BEW
spent $1.2 billion during the war, it was never authorized by law, nor did the Senate ever affirm Wallace's appointment to lead it.
Under the BEW, Wallace sought to kill two birds with one stone by internationalizing the New Deal in service of the war. For example, he built rubber plantations in Haiti and Brazil, while subsidizing the natives' “general welfare.” This sounds great until you look at the math. Private industry produced rubber for $0.30 per pound;
the rubber from Haiti cost $546 per pound.
HENRY WALLACE'S 1944 TRIP TO THE SOVIET UNION
H
e looked out over the plains of Kolyma toward the snowcapped mountains in the distance. The tall man from Iowa probably did not expect to find himself feeling at home in the stark landscape of northeastern Russia, yet Vice President Henry Wallace, visiting this remote corner of Soviet Siberia as part of a tour of the Far East in May 1944, sensed that he was visiting a land of bounty not so different from America's own heartland.
“The vast expanses of your country, her virgin forests, wide rivers and large lakes, all kinds of climate,” he said to the Soviet officials who greeted him, “from tropical to polarâher inexhaustible wealth.
It all reminds me of my homeland.”
Among Wallace's official Soviet guides was Sergei Goglidze, who was introduced as a civil official. Wallace told Goglidze that he saw him as a very fine man and
very understanding with people. In reality, however, Goglidze was the top commander of the Soviet foreign intelligence services in the region and had arranged for a number of his agents to be placed among
Wallace's welcoming committee.
Shepherded by Goglidze and other Soviet handlers, Wallace spent several weeks visiting the region's farms, mines, and factories. He chatted amiably with the seemingly cheerful workers he met along the way.
Of course, it was all a ruse. They were literal Potemkin villages to charm and impress credulous visitors like the American vice president.
What Wallace was actually touring was a massive prison complex where hundreds of thousands of political prisoners from all over the Soviet Union and beyond labored as slaves of Stalin. The gulag archipelago of Siberia stretched for thousands
of miles in each direction. Wallace would have had no way of knowing. Soviet officials had seen to that. According to Elinor Lipper, a prisoner in the camp who was originally from Switzerland and was later released, “in honor of Mr. Wallace the wooden watchtowers
were razed in a single night.”
Also hidden away were the prisoners themselves, who were prohibited from even venturing into the camp yard during Wallace's visit. Instead, guards, other camp staff, and members of local Communist youth groups were corralled into masquerading as miners, farmers, and workers for Wallace to meet with.
The charade worked. Wallace went home and two years later published an enthusiastic account of the trip, describing the efficient, prosperous workforce he had encountered. But back in Siberia, in the words of Lipper, “the watchtowers were put up again, the prisoners sent out to work again.”
“Wallace,” she said, “saw nothing at all of this frozen hell with its
hundreds of thousands of the damned.”
Wallace was a progressive who was, at a minimum, a proud socialist. Many argued that he was actually an outright Communist. Like so many others in FDR's employ, Wallace hired Communists, dupes, and useful idiots under him. (
Thirty-five BEW Reds were later identified by the House Committee on Un-American Activities.)
Wallace fancied himself an expert on Russia. He had studied Marx and Lenin and even taught himself the language. In 1944, he traveled to Siberia as FDR's vice president. When it became clear that Soviet dictator Joseph Stalin had less-than-peaceful plans in eastern Europe and elsewhere, Wallace steadfastly argued for appeasement, offering to relinquish the atomic bomb in exchange for a deal with the tyrant.
Roosevelt created the Office of Price Administration (OPA) to fight price inflation. The OPA could freeze rents and set prices for goods and commodities. Rationing soon followed. Labor unions, however, did not see their wages frozen, nor did FDR
take action to
break up strikes. (It's probably not a coincidence that union members were a key source of Roosevelt votes.)
All of this central planning only made the economic dislocations of war worse. Aside from the rationing, price inflation and
mass shortages of basic goods such as rubber and flour also followed.
The distorted war marketplace created labor shortages resulting in a job freeze of twenty-seven million workers issued in April 1943. Strikes that year numbered 3,752, including those in vital war industries like steel and coal. This amounted to
thirteen million man-days of labor lost at a time when the country couldn't afford any.