76. What Was the New Deal?

Many people regard FDR’s “New Deal” as having saved the American economy from the Great Depression. But was it really so great? Today Brittany and Connor talk about the New Deal and how it had disastrous impacts on our economy that we still see today.

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Here’s a transcript of our conversation:

Connor: Hey, Brittany. Hey

Brittany: Hey Connor.

Connor: I was listening to the radio the other day and the person was talking about the Green New Deal. And you know, for any kid out there, or frankly a lot of adults listening to that, it’d be like, why is it called that? Why? What is this green new? Why not a purple? You know new opportunity. Like why those words?

Brittany: I want a Pink New Deal. Really.

Connor: Exactly right. So, you know, they, it’s green cuz they’re dealing with like the environment and stuff like that. But they called it that because it’s based on something called The New Deal that’s basically, oh, I’m trying to think. It’s almost a century ago at this point.

Brittany: was it really? I say that like, I was there, I was not there.

Connor: It’s been so long. and so, you know, this was done a long time ago. And so that’s what they’re patterning the Green New Deal after. It’s, people like Alexander Ocasio Cortez and Bernie Sanders, a lot of socialists wanting these really big government programs, and they want to tax people a ton more and have the government spend a lot more. And so I wanted to take a minute today to talk about what is this new deal? And so the the brief history, we’ll leave this to the parents to dig in more. If you’re interested, go look up, you know, YouTube videos or Wikipedia page or whatever to learn more about these people in this period of American history. But we had what was called a depression. The government had been involved in the economy for a long time. They had been manipulating things and so things got really bad. And we talk a little bit about this in, the TuttleTwins and the creature from Jekyll Island where the Federal Reserve is kind of changing the money, the interest rates and causing problems. If you remember at the end of the book, there’s a drawing of all these homes and, the Federal Reserve Building is like casting a shadow, an ominous shadow on everything. And, we talk about how there was this, I think it’s like a husband and wife hugging and the wife is crying and the book is talking about how it harms real people like that. Like these people bought some homes and then they couldn’t afford them anymore, and they lost them and they had these problems. So that’s kind of what the government can do when it gets involved in the economy. And so there was this depression about a century ago. A lot of people lost their jobs. People were struggling to survive, to get loans, to start a new business, to, find a job. It was a really rough time for a lot of people. And so at the time, there was a president in place, president Herbert Hoover, and, he was a Republican and he was trying to help and he was trying to, I think, keep the government out of things a lot. He was trying to let the market kind of fix things as Republicans sometimes like to do. But then he was up for reelection and there were a lot of people who were, were not happy with his kind of more hands off approach. They wanted a much more vigorous government. They wanted the government to solve their problems. And so they elected a Democrat instead his challenger, who was Franklin Delano Roosevelt, or as he is more commonly known by his initials, FDR. And so when FDR became president, he, you know, was in the middle of the depression and he was telling everyone, you know, I have all these plans and I’ll, you know, fix this problem. And so during the first hundred days, basically his, of his term in office, he pushed for a whole bunch of federal laws and did a whole bunch of executive orders. We’ve talked in the past about the role of the president. We talked about these executive orders, how the president kind of bosses people around inside the executive branch. He can kind of order them to do things. And so, FDR had all these plans. He did all these executive orders. And so collectively, all of these things that he did, trying to kind of manipulate the economy, tell people what to do, and we’ll talk about some of these items collectively, that’s what’s called, the New Deal. He was trying to provide, you know, relief and recovery, trying to help people. And you know, as Ronald Reagan once said, I’m gonna butcher the quote, but he said, you know, the most terrifying words in the English language are, I’m from the government and I’m here to help. And you know, not that I love all of Ronald Reagan’s policies and everything he did as president, but he is got some great zingers like that. Because when the government comes up to you and says, I, have all these programs, they’re gonna make your life better. Brit people like you and I and a lot of our listeners, we understand history enough to know that throughout history, when the government has done things to help, it’s actually created a lot of problems. We talked, for example, about Frederick Bastiat and, the principle of that which is seen and that which is not seen. And so here comes FDR and he sees all these problems. He sees opportunities to fix it. He sees what his proposed laws and his executive orders are gonna do to kind of like, pieces on a chess board, right? I’m gonna move this hair and it’ll do this. But what he didn’t see, what people like him don’t see is all the unintended consequences when you boss people around and they start going, say on the black market, or they start trying to find new opportunities to do things, to circumvent your laws. all of these other things they can’t control, they don’t foresee. So let’s dig into it a little bit. Brittany, what do you know about the New Deal? What do you want to share that it did?

Brittany: So I think the biggest thing is it, is, and, and maybe I’m wrong on this cuz it wasn’t just welfare, there was a lot involved in it, but I think of it as like the biggest welfare package ever. And maybe I’m wrong on that, but, that is how I’ve always looked at it. Looked at it, and it wasn’t even just for individuals, right? It was also, bailouts for like we’ve seen in almost every financial crash that we’ve ever had. Also bailouts for people who are, what do they call them? Them too big to fail, right? People who had special interests test ties to government. So it was one of the most damaging things. Now what really bothers me about the New Deal is that in the brief time I did spend in college, I didn’t graduate, but I did go to college for a little bit. I did not have one history professor that did not stand in front of me and tell me that the New Deal was the best thing that ever happened to America. And this is actually how I switched political or how I, I don’t wanna say switch political views, but this is how I figured out what my political views were. It was about the New Deal because I, was challenged by a friend of mine who said, you know, the New Deal was the worst thing that ever happened. And I said you can’t be right about that because my professor is a professor and she said that it was the best thing that ever happened, therefore it is the best thing that ever happened. And he challenged me to go try to prove him wrong. And as I started researching what it did to us and how all this spending, because all these programs cost money, money does not just, you know, come out of thin air even though the Federal Reserve would like to pretend it does. So what happened is we were spending ourselves further into a crisis. So the more programs that were started, the more we set ourself back. And that’s what I think is so scary about it. So it’s praised. And so people will think like, oh, maybe today we need another new deal. Maybe we need the Green New Deal. But we already saw what happened, it didn’t work, but somehow history has been painted differently. Now people think it worked. It’s kind of mind boggling to me.

Connor: It is. And it, shows that people who don’t understand their history, they’ll go off of just a little sound bite, right? They heard on TV or they heard from a professor that the New Deal saved us from the Depression and they don’t study it anymore. They don’t fact check that claim. They don’t try and investigate. That’s why for the kids out there listening, I, think for my own kids, what’s called like a healthy skepticism is really important. In other words, being skeptical of when other people are making claims, being willing to investigate, and not just immediately believe whatever, someone tells you. Cuz oftentimes they don’t know they’re just saying it cuz someone else told them. It’s like that telephone game, right? Have you ever played that Britney Bird

Brittany: Or were you, like I used to at sleepovers where you say something to the person, and then by the time it gets to like the fifth or sixth person, the message is completely different?

Connor: Exactly. And so someone might have said, you know, maybe, someone wasn’t a college class and the professor was correctly, you know, explaining things, but then someone in class didn’t really listen and so they then told one of their classmates who wasn’t in, you know, school that day that oh yeah, no, the summary of what we learned in class is the New Deal saved, you know, us from the Depression and then maybe that person goes on to become a parent and that’s what they teach their kids and then those kids tell their peers. So it’s kind of like that game where people don’t really learn, they don’t go back and investigate. They just kinda listen to what it was saying. I’d like to share a story that I think, this is a fairly well known story and it puts a face on the New Deal, right? So as you pointed out, Britney, there were a lot of welfare things, but a lot of economic things where FDR was as president trying to boss around business owners and tell them what they could or couldn’t do. putting caps on prices like you’re not allowed to charge more than this amount or you have to charge this amount or you can only produce this much and no politician is able to like think of the miraculous pencil book where they’re learning all of the people involved in making a pencil. There’s no pencil president, there’s no czar. And so having some politician come in and start trying to, rather than having spontaneous order, which was the idea we learned about in that book where it all just kind of works out when people are left free to work together rather than spontaneous order to have control, to have some politician who doesn’t know economics and he doesn’t know what millions of people all want for themselves and so forth. When he comes into control, there’s gonna be a lot of problems. So here’s a story that illustrates it. There was a farmer in Ohio, his name was Roscoe Filburn, which I think is a pretty awesome name. you know, Roscoe, I’ve never really heard of that name, but that was, he’s

Brittany: The first name to again, what was the first name?

Connor: Roscoe.

Brittany: Oh, The first name was Roscoe.

Connor: Yeah. Yeah. Roscoe Filburn. We’ll say, Mr. Filburn. So he was growing some wheat to feed animals on his farm. He was a farmer, as I said, in Ohio. And under the New Deal, FDR in the government, they set limits on how much wheat people could produce on their own farms cuz they were trying to quote unquote to stabilize the price of wheat. They were trying to manipulate it and control it. So they were telling farmers how much wheat they could, oh no, you can’t grow too much because then the price will go down. If you remember like supply and demand, right? Like if there’s a ton of pencils, then pencils are gonna cost like 5 cents each, right? Oh, but we don’t want them to be that cheap. Let’s go tell pencil producers that they shouldn’t produce as much that way there will be scarcity, there will be fewer pencils. Right? So

Brittany: They were kind of trying to orchestrate scarcity like they were trying to make it themselves.

Connor: Exactly. Exactly. Because just like pencils, if there’s not as many pencils, but a lot of people still need pencils, the price is gonna go up. Think of during, when, Covid first started, do you remember when toilet paper was hard to find

Brittany: Yes, I Do.

Connor: and some people were willing to pay a lot more money for toilet paper because there wasn’t as much supply. So that’s what was happening with wheat. They were trying to make the prices stay up so that, you know, you know, and in their view, that’s how they could kind of help the economy because if wheat was too inexpensive, that would be a problem. And so, Filburn the farmer, he grew more wheat than he was permitted. And so he was ordered to pay a fine, but he tried to argue that because he wasn’t even selling his wheat, he wasn’t selling it. Which is the craziest part of this story. This shows how far-reaching the new deal was. If they were trying to control the prices, you should probably confine the order and the law to the people who are openly selling it. Cuz that’s kind of where it comes into play. Filburn wasn’t even selling it, he was growing it to feed, his animals. And so that was kind of his argument, but what the government said, and it went all the way to the Supreme Court. So he sued, and he fought it in court and went all the way to the Supreme Court. And what they ended up saying is that, well, and there’s all kinds of other stories here. For example, FDR he packed the court. In other words, he put in a bunch of judges that were very friendly to his kind of government intervention. And so they then said, oh yeah, everything FDR is doing is a constitutional right, And so in this particular case, when Mr. Filburn was fighting, he didn’t really have a lot of sympathy on the court, but the court said, look, even though Mr. Filburn is not selling his wheat, he would have been buying some wheat had he not grown it. And that would’ve been something like participating in the market, which would manipulate the prices. Therefore, the Government can go ahead and tell him, even if he’s not selling it, because the government wants to control prices, then they’re allowed to control even what someone grows on their own farm to feed their own animals. Because since he’s feeding his own animals his own wheat, he’s not buying it. And that’s manipulating the price too. And, it’s just staggering to think here in the United States of America, the so-called land of the free, this farmer was told that he couldn’t grow the wheat he needed for his own animals because

Brittany: That’s nuts

Connor: it’s totally nuts. And there’s other issues at play here. There’s something in the Constitution called the Commerce Clause, you know,

Brittany: That doesn’t do a lot of trouble. In fact, we could probably do a whole episode discussing that cuz that’s been a really big issue for us over the

Connor: Years. Why don’t we do that? We’ll do a future episode about the Commerce Clause, and we’re gonna bring up this case again because this court case really changed things when it comes to the Commerce clause. And it really empowered the government because, for decades since now, the government is able to basically do any law they want that affects prices or the market because they point back to this court case and say, oh, well look, even if you’re not buying things, even if you’re not moving them across state lines, you know, then we can still control you. And, it just really made the federal government a lot more powerful and a lot more controlling. But in my mind, Brittany, it shows, it puts a face on how far-reaching the new deal was in trying to respond to a crisis. The Depression, which most people don’t understand, was caused by the government in the first place, And so the solution was more government and it led to problems like this.

Brittany: No, I think you’re absolutely right. And one thing that really scares me is so Covid has kind of struck a blow to the economy. We’ve all kind of seen this happen and it hasn’t even gotten to the worst of it yet. My fear is that our politicians have not learned their lesson and that we’re going to see this happen again. Especially since even within the first couple months we saw, you know, we all got, or most of us, some of us got the Trump stimula, I don’t know what he’s calling it, Trump check or whatever, that they’re already trying to pass all these new, you know, stimulus bills and all these things to do essentially what the New Deal did. And it worries me that this is going to be something that, you know, causes maybe the next great depression. I hope I’m wrong, but it worries me.

Connor: I hope you are too. This is such an important topic to learn about, especially how the government in the United States of America has changed. How more power has been taken by the Government, how fewer freedoms are, still available to us. and the New Deal was a big part of the problem. And so, something for you guys to, learn more about. We will include some resources to help you on the show notes page today to point you, in a direction to learn a little bit more about this topic. So head to Tuttletwins.com/podcast, make sure you’re subscribed, and share the podcast with a friend. We’d love to get even more families like you listening as well. Until next time, Brittany, as always has been great chatting and we’ll talk to you next time.

Brittany: Talk to you next time

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