President Biden’s new $1.8 trillion plan to “expand the safety net” is just more Keynesian spending, on steroids. Along with the $2.3 trillion infrastructure boondoggle, it brings to $6 trillion the amount that will be spent this year. But anyone who thinks that swollen federal spending and much bigger government will help the economy return to “normal” after the virus is delusional.
Not surprisingly, the media are doing strenuous PR work on Biden’s behalf. In particular, a spate of recent articles liken Biden to the late President Franklin Delano Roosevelt. A recent New York Times piece carried the headline “How FDR’s Heir Is Changing The Country,” matched in sycophancy only by CNN’s opinion piece “The three striking similarities between FDR and Biden.”
Overseas media caught the FDR bug as well, with the British Guardian asking: “Biden’s FDR moment? President in New Deal-like push that could cement his legacy.”
This, after an earlier attempt to make Biden the second coming of LBJ and the Great Society fell flat. No one but fat-cat D.C. politicos think back fondly on LBJ’s tenure, which was marred by riots, the Vietnam War, and massive expansions in spending and regulation.
Just as with LBJ, likening Biden to FDR does him no favors. Roosevelt is remembered through a sepia-tinted haze of memory as a great president, largely because of his unquestioned leadership during World War II.
But the economy’s another matter entirely. FDR’s record was spotty at best, despite having 13 years in office and almost unquestioned authority to do as he pleased.
The result wasn’t good. We’ve cited before the landmark study by economists Harold L. Cole, now of the University of Pennsylvania, and Lee E. Ohanian, of UCLA, that found that FDR’s misguided attempts at “stimulus” and government-imposed wage hikes during a downturn prolonged the Depression for seven years.
When FDR entered office in 1933, the economy was indeed in a deep Depression, with plunging output and prices, and soaring unemployment with nearly a third of the workforce out of a job.
FDR’s National Industrial Recovery Act (NIRA) of 1933 was intended to give American industries antitrust exemption in exchange for signing deals with organized labor to raise wage and benefits for workers.
Sounds great, except, by raising prices, it acted like a tax on American consumers. The Supreme Court found NIRA (partly modeled on Mussolini’s fascist economic experiments in pre-war Italy) unconstitutional in 1935. But the damage was done. The Cole-Ohanian study found 60% of the economy’s weakness during the mid- to late 1930s came from that one act.
The irony is that, just as with Biden, the economy was already improving when Roosevelt entered office. It was only FDR’s attempt at quasi-nationalizing the economy that sabotaged a strong comeback, and postponed the recovery from 1936 to 1943.
When it became obvious his plans were failing, in 1936 FDR foolishly embarked on a program of vilifying both business leaders and political foes, while also trying to weaken our justice system and continuing to meddle directly in the economy.
It set off what economists call the “Depression within the Depression,” from 1937 to 1938. Indeed, nominal GDP in the U.S. didn’t achieve its 1929 level again until 1941.
“The President’s shrill denunciations of businessmen in 1936 and 1937, his attempt to pack the Supreme Court and reorganize the government, his administration’s stream of tax proposals aimed at fleecing investors, and the New Deal’s many economic regulatory ventures — particularly the Securities and Exchange Commission and the National Labor Relations Board, among many other menacing developments — generated what I call ‘regime uncertainty,’ which helps to explain the extraordinary collapse of investment, especially long-term investment, in 1937 and 1938,” wrote economist Robert Higgs of the Foundation for Economic Education in 2010.
Like FDR, Biden wants to pack the Supreme Court, a terrible signal to send to both businesses and workers. He wants sharply higher taxes and more direct government involvement in and regulation of the economy, including unconstitutional racial and ethnic mandates on business hiring, promotion and pay policies.
And he wants to replace private-sector economic activity with vastly expanded federal spending, actually paying people not to work and taxing those who do to pay for it. That means fewer jobs, more welfare.
As we’ve noted, the economy was rebounding smartly under President Trump, growing at an annual rate of 33.4% in the third quarter and 4.3% in the fourth quarter, even as Democrats like Biden talked down the booming recovery and pretended we were mired in a Depression.
Now, as with FDR, Biden wants to administer wholly unneeded medicine to a patient that doesn’t really need it.
His so-called “American Families Plan” includes $225 billion for child care, $225 billion for a national family and medical leave program, $200 billion in funding for universal pre-K schooling, along with 109 billion for two free years of community college, along with more subsidies for health insurance.
To pay for it all, he will largely reverse President Trump’s tax cuts, and levy new punitive taxes on capital. It includes an income tax hike from 37% to 39.6% for those who earn more than $400,000, big increases on capital gains and dividends for those earning over $1 million, and elimination of current tax rules that let those with capital gains pass those gains on to their heirs tax-free.
These and other punitive taxes may seem like they’re sticking it to the wealthy, but in fact, the poor and middle class will have fewer jobs and lower incomes as a result. And eventually small businesses and the middle-class will have to pay higher taxes too, as more than one analysis has noted.
Likening someone of Biden’s shady political past to FDR is bad enough; but to do so on the very thing that FDR failed at, the economy, is not flattering at all. Maybe America’s foolishly fawning journalists — who should know that FDR’s reputation as an economic savior was a mirage, despite the left’s delusions to the contrary — should go back and read some history. They might learn something.