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FDR’s Austerity Rhetoric and the Experimentation of the New Deal


Above: Enough of his reckless taxing and spending!


Steve is right here to argue that the comment of djw’s that I highlighted is an oversimplicifaction. FDR’s 1932 campaign was a contradictory one, hitting Hoover from both right and left. I don’t agree at all, however, that FDR just straightforwardly campaigned on the New Deal as it was ultimately implemented and everybody knew what they would be getting, not least because FDR himself did not know what the New Deal would ultimately consist of in 1932.

Obviously, if one looks at FDR’s support for greater federal intervention in isolation, it looks like was running squarely to Hoover’s left. But I don’t think the austerity rhetoric can just be hand waved away. For example, from earlier the nomination speech:

Just one word or two on taxes, the taxes that all of us pay toward the cost of Government of all kinds.

I know something of taxes. For three long years I have been going up and down this country preaching that Government–Federal and State and local–costs too much. I shall not stop that preaching. As an immediate program of action we must abolish useless offices. We must eliminate unnecessary functions of Government–functions, in fact, that are not definitely essential to the continuance of Government. We must merge, we must consolidate subdivisions of Government, and, like the private citizen, give up luxuries which we can no longer afford.

By our example at Washington itself, we shall have the opportunity of pointing the way of economy to local government, for let us remember well that out of every tax dollar in the average State in this Nation, 40 cents enter the treasury in Washington, D. C., 10 or 12 cents only go to the State capitals, and 48 cents are consumed by the costs of local government in counties and cities and towns.

I propose to you, my friends, and through you, that Government of all kinds, big and little, be made solvent and that the example be set by the President of the United States and his Cabinet.

An even better example is his Forbes Field economic address:

We all know that our own family credit depends in large part on the stability of the credit of the United States. And here, at least, is one field in which all business — big business and little business and family business and the individual’s business — is at the mercy of our big Government down at Washington, D. C.

What I should like to do is to reduce, in so far as possible, the problem of our national finances to the terms of a family budget.

The credit of the family depends chiefly on whether that family is living within its income. And that is equally true of the Nation. If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the people’s power to pay and continues to pile up deficits, then it is on the road to bankruptcy.

For over two years our Federal Government has experienced unprecedented deficits, in spite of increased taxes. We must not forget that there are three separate governmental spending and taxing agencies in the United States the national Government in Washington, the State Government and the local government. Perhaps because the apparent national income seemed to have spiraled upward from about 35 billions a year in 1913, the year before the outbreak of the World War, to about 90 billions in 1928, four years ago, all three of our governmental units became reckless; and, consequently, the total spending in all three classes, national, State and local, rose in the same period from about three billions to nearly thirteen billions, or from 8 1/2 percent of income to 14 1/2 percent of income.

“Come-easy-go-easy” was the rule. It was all very merry while it lasted. We did not greatly worry. We thought we were getting rich. But when the Crash came, we were shocked to find that while income melted away like snow in the spring, governmental expense did not drop at all. It is estimated that in 1932 our total national income will not much exceed 45 billions, or half of what it used to be, while our total cost of Government will likely be considerably in excess of 15 billions. This simply means that the 14 percent that Government cost has risen to has now become 33 1/3 percent of our national income. Take it in terms of human beings: It means that we are paying for the cost of our three kinds of Government $125 a year for every man, woman and child in the United States, or $625 a year for the average family of five people. Can we stand that? I do not believe it. That is a perfectly impossible economic condition. Quite apart from every man’s own tax assessment, that burden is a brake on any return to normal business activity. Taxes are paid in the sweat of every man who labors because they are a burden on production and are paid through production. If those taxes are excessive, they are reflected in idle factories, in tax-sold farms, and in hordes of hungry people, tramping the streets and seeking jobs in vain. Our workers may never see a tax bill, but they pay. They pay in deductions from wages, in increased cost of what they buy, or — as now — in broad unemployment throughout the land. There is not an unemployed man, there is not a struggling farmer, whose interest in this subject is not direct and vital. It comes home to every one of us!


To make things clear, to explain the exact nature of the present condition of the Federal pocketbook, I must go back to 1929. Many people throughout the land — rich and poor — have believed the fairy story which has been painstakingly circulated by this Administration, that the routine spending of our Federal Government has been kept on a fairly even keel during these past five years. It was perhaps easy to give this impression because the total outlay each year up to the emergency appropriations of this year did not increase alarmingly. But the joker in this is that the total outlay includes interest and sinking fund on the public debt; and those charges were going down steadily, right up to this year.

On the plain question of frugality of management, if we want to compare routine Government outlay for 1927 with that for 1931 for example — four years later — we must subtract this so-called “debt service charge” from the total budget in each year. If we do this, we find that the expenditure for the business of Government in 1927 was $2,187,000,000, and in 1931, $3,168,000,000.

That represents an increase of actual administrative spending in those four years of approximately one billion dollars, or roughly, 5o percent; and that, I may add, is the most reckless and extravagant past that I have been able to discover in the statistical record of any peacetime Government anywhere, any time.

Not only did he hit Hoover as an irresponsible spendthrift unable to balance the budget, he did it using the favorite bullshit argument of austerity proponents everywhere, comparing the finances of the federal government to household finances. (To be Scrupulously Fair, it was not nearly as cheap for the federal government to borrow money in 1932 as it is now.) Does this sound like someone who would clearly oversee a massive permanent expansion of the federal government? It pretty clearly does not.

FDR, in other words, did not run straightforwardly to Hoover’s right or left. He ran to offer something to everyone distressed about the economic distress. If you thought that government intervention was the answer, he did offer relief in multiple respects. If you thought that Hoover had caused the Depression through reckless taxes and spending, he spoke to you plenty. Which was a shrewd campaign tactic! But FDR certainly didn’t lay the groundwork for the New Deal by running an uncompromising left-wing campaign. And like most non-Trump campaign rhetoric, the austerity rhetoric wasn’t just pandering — as I said yesterday, FDR did support austerity measures after being re-elected, measures that helped the conservative coalition of Republicans and Southern Democrats that effectively ruled Congress from 1939-LBJ take over.

It’s also worth noting that two of the programs that we most associate with the New Deal — the Wagner Act and the Social Security Act — were not passed until 1935, and the FSLA was the major domestic accomplishment of his second term. The first New Deal did involve major public works spending — I would argue a much greater scale and scope than his campaign rhetoric implied, but certainly not out of the blue either. But another key cornerstone was the National Recovery Act, an unsuccessful attempt at state-corporate joint management that was ultimately struck down by a (unanimous, as opposed to more typically decided) Supreme Court.

None of this meant as a criticism of FDR per se. He was above all an experimenter, and a bold one, in a period in which this was particularly necessary. Some of his ideas were smashingly successful and some were bad, but he reacted to events; he wasn’t dogmatic. It’s a credit to him that the New Deal went well beyond what he promised in 1932, and that until his re-election he ignored the more conservative elements of his campaign rhetoric. But the latter were most definitely president, and as his second term would show they weren’t merely cosmetic either.

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