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Deal or No Deal?

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
July 6, 2009
Time Magazine


Seventy-five years ago, Harold Ickes tried to explain to a New York City audience the special bond between the President and the American people. Franklin Roosevelt, the Secretary of the Interior said, was "the leader you have been looking for - for more years than you would like to remember." This was a President, Ickes told the crowd, who would fight for America's forgotten man - the hungry, the senior citizens, the laborers - even as he waged a wider offensive against the Depression.

As it turned out, F.D.R.'s tenacity did not suffice to get the economy back to where it had been before the Great Depression began, in 1929. Today we know that actions Roosevelt took to resolve the crisis may actually have perpetuated it. Especially during the period from 1935 to about 1939, Roosevelt's moves kept recovery at bay.

The first bleak years of the Depression were no fault of his. After the historic market crash of 1929, his predecessor, Herbert Hoover, through a misguided sense of charity, took steps that kept the economy down. By insisting that companies continue to pay high wages at a time when they could ill afford it, Hoover made employers slow to rehire. He signed into law a tariff, Smoot-Hawley, that set off a global trade war. He also joined Congress in pushing the top income tax rate from 25% to a confiscatory 63%.

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