Then, as now, the New Deal was heavily criticized. Conservative critics complained that Roosevelt was creating an “alphabet soup” of new programs and agencies that was turning the United States into a bureaucratic state. They also complained that the jobs created by the Civilian Conservation Corps and other agencies were merely “leaf-raking jobs” that undermined the character of America’s worker.
Conservatives also complained that funds were being spent not simply with the idea of providing relief for the destitute but also with the idea of maximizing political support for the New Deal. This criticism has received considerable attention from economic
Historians because it is subject to empirical investigation. Leonard Arrington (1969) was the first to study the issue systematically. Arrington found that New Deal per capita spending was higher in the West even though the South was the region in greatest need. Later, other scholars, including Gavin Wright (1974) and Gary Anderson and Robert Tollison (1991) confirmed that the New Deal appeared to be allocating funds to maximize its political support. John Wallis (1987), however, pointed out that some of what appeared to be political allocation could be explained by the provision in many New Deal programs that required matching grants from the states. This provision tended to reward people living in wealthier states. Nevertheless, it appears that even when considering matching grants, some evidence supports the political allocation theory. Even though political considerations influenced spending, it is still true that many disadvantaged people benefited. Recent research shows that New Deal relief programs typically had positive effects. Price V. Fishback, Michael R. Haines, and Shawn Kantor (2007) show that New Deal relief spending lowered infant mortality rates, suicide rates, and other forms of premature mortality. And Ryan S. Johnson, Shawn Kantor, and Price V. Fishback (2010) show that relief spending lowered crime rates in America’s cities.
Potentially the most damning conservative criticism was that the Roosevelt administration’s policies, although intended to help the poor, in fact prolonged the depression. Many critics at the time, including Joseph Schumpeter (1939), one of the leading economists of the day, argued that Roosevelt’s antibusiness rhetoric and his constant addition of new regulations and taxes had discouraged private investment, and that lack of investment had created fear and uncertainty that discouraged private investment and inhibited recovery. Without this break on private investment they argued, the economy would have recovered as quickly as it had in 1921 under conservative Warren Harding and his regime of tax cuts and laissez-faire. This criticism remains controversial because determining the effect of a political regime on private investment is extremely difficult. Michael Bernstein (1987) showed that investment spending was depressed during the 1930s, but argued that this owed little to New Deal rhetoric—after all some sectors recovered quickly—and more to changing patterns of investment demand. Thomas Mayer and Monojit Chatterji (1985) used econometric methods to examine the determinants of investment spending in the 1930s and concluded that there was no evidence that the antibusiness rhetoric and actions of the Roosevelt administration had reduced investment. Their results were challenged by Anthony Patrick O’Brien (1990), to which they replied (Mayer and Chatterji 1990), reasserting their basic claim. Robert Higgs (1997) reinvigorated the Schumpeterian criticism, citing both opinion polls and financial market data to show that New Deal policies had discouraged investment. This argument will be familiar to anyone observing the political scene following the financial crisis of 2008. Conservatives maintained that legislation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Patient Protection and Affordable Care Act (Obama Care), both of which left many details to be determined later, and the rhetoric of the administration, created a regime of uncertainty that slowed economic recovery.
The New Deal was criticized from the left as well as the right. Dr. Francis E. Townsend, a California physician, attracted a considerable support for his plan to give everyone over the age of 60 a federal pension of $150 per month ($5,000 in today’s money). Sung Won Kang (2006) showed that Social Security was influenced by the Townsend movement: Members of Congress who voted against the Townsend plan then voted for the liberalization of Social Security to remain in good standing with constituents who supported the plan. Reverend Charles E. Coughlin, a radio priest, advocated Populist monetary reforms, including abolition of the Federal Reserve. An early supporter of the New Deal, he later became a bitter opponent. Perhaps the most influential of the left-wing radicals was Huey Long, the political boss and senator from
Louisiana. His “Share Our Wealth” plan would have presented every American family with a $5,000 house, a $2,000 annual income (about $67,000 in today’s money), and other benefits, financed by a capital levy on great fortunes.
The critics from both the right and the left, however, were in the minority. There can be no doubt that a large majority of the public approved of the administration’s aggressive and experimental yet constrained response to the crisis, as revealed by Roosevelt’s overwhelming reelection victories in 1936 and 1940.
World History
