The New Deal did enormous damage
to our freedom while prolonging the
Great Depression.
As if the oh-so-delicious scandal enveloping Illinois Governor Rod Blagojevich over the apparent attempt to auction off President-Elect Barack Obama's old U.S. Senate seat weren't enough of a peek at the heart of government, the Ludwig Von Mises Institute publishes a review of a new book on the impact of FDR's New Deal, just in time to serve as a warning about the incoming administration's New New Deal. In his balanced but overall positive assessment of New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America, by Burton Folsom Jr., David Gordon writes:
One of his best insights is that the New Deal programs were financed in large part by the poor. At Roosevelt's behest, excise taxes were imposed on many popular items of consumption; and these weighed especially heavily on the impoverished. "In the first four years of Roosevelt's presidency, revenue from excise taxes exceeded that of income and corporate taxes combined" (p. 126). (I do not think it right, though, to call excise taxes "regressive," as Folsom does. Everyone paid the same rate; the poor were not charged more.)
This was far from the only way in which New Deal programs hurt the poor. Blacks fared very badly under Roosevelt, the supposed great exemplar of enlightened modern liberalism. Minimum-wage laws proved a stumbling block to efforts by blacks to secure jobs. These laws prevented employers from undercutting unions by offering lower wages to nonunion members. Since blacks faced exclusion from many of the powerful unions, they were in effect frozen out.
Since union empowerment and massive spending are both on the agenda once again, this is an important take on policies that may well be dusted off and reused.
Folsom isn't alone in his negative conclusion about the New Deal. Two UCLA economists, Harold L. Cole and Lee E. Ohanian, studied FDR's economic policies for a 2004 paper (PDF) published by the Federal Reserve Bank of Minneapolis. They concluded that the New Deal made matters worse and prolonged the Great Depression.
The New Deal analysis comes as part of a handy matching set with a Reason magazine article by Michael T. Flynn on the causes of the financial crisis that is being used to justify the revival of activist government. In "Anatomy of a Breakdown," Flynn writes:
It's hard to overstate the role Fannie Mae and Freddie Mac played in creating this crisis. Chartered by Congress, Fannie in 1938 and Freddie in 1970, the two government-sponsored enterprises provided much of the liquidity for the nation's housing market. Because investors believed—correctly, it turns out—that Fannie Mae and Freddie Mac were backed by an implicit guarantee from the federal government, the companies were able to raise money more cheaply than their competitors. They were also exempt from federal, state, and local taxes. ...
But Fannie and Freddie by this point were political powerhouses. When the accounting scandal first emerged, Fannie's chairman was Franklin Raines, former director of the Office of Management and Budget under President Bill Clinton. Its vice chairman was Jamie Gorelick, a former Justice Department official who had served on the 9/11 commission. The two companies provided tens of millions of dollars in annual campaign contributions and spent more than $10 million a year combined on outside lobbyists.
The whole piece is worth a read to discover how government intervention in the market causes the problems that are then used as arguments in favor of more government intervention in the market, which then causes more problems.
Folsom's book and the UCLA economists' research effectively describe the evil impact of the New Deal at the macro level, but it was a brutal thing to endure at the personal level, too. The Schechters, a family of butchers, are often (and correctly) rated as heroes for their ultimately successful battle to overturn some of FDR's more egregious regulations. But they were ultimately victims, too, since the legal effort destroyed their finances. The roots and victims of the New Deal are documented in Amity Shlaes's The Forgotten Man: A New History of the Great Depression, a book which deserves more recognition right now.
But what was the New Deal like on the enforcement end? John T. Flynn told that tale in The Roosevelt Myth back in 1948:
The NRA was discovering it could not enforce its rules. Black markets grew up. Only the most violent police methods could procure enforcement. In Sidney Hillman’s garment industry the code authority employed enforcement police. They roamed through the garment district like storm troopers. They could enter a man’s factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant. Night work was forbidden. Flying squadrons of these private coat-and-suit police went through the district at night, battering down doors with axes looking for men who were committing the crime of sewing together a pair of pants at night. But without these harsh methods many code authorities said there could be no compliance because the public was not back of it.
Obama and company seem sincere in their claims that they want to bring back the heady, big-government days of the New Deal. Let's take them out their word and closely analyze their justifications for doing what they intend, and just what it is they plan to visit upon us.
You might also enjoy these:
You can discuss hot topics with other readers, click through a regular feed of Civil Liberties Examiner headlines, and check out categorized compilations of stories. Join now!
Or follow me on Twitter: Libertywriter
Contact J.D.: civilliberties (at) tuccille.com
Comments
Why Obama’s Next
I. FROM THE BLAGOJEVICH INDICTMENT
35. As described more fully in the following paragraphs, Mercy Hospital, which sought permission from the Planning Board to build a hospital in Illinois, received that permission through Rezko’s exercise of his influence at the Planning Board after Rezko was promised that Mercy Hospital would make a substantial campaign contribution to ROD BLAGOJEVICH. Rezko later told a member of the Planning Board that Mercy Hospital received the permit because ROD BLAGOJEVICH wanted the organization to receive the permit.
36. Levine’s criminal activities included his abuse of his position on the Planning Board to enrich both himself and Friends of Blagojevich. The Planning Board was a commission of the State of Illinois, established by statute, whose members were appointed by the Governor of the State of Illinois. At the relevant time period, the Planning Board consisted of nine individuals. State law required an entity seeking to build a hospital, medical office building, or other medical facility in Illinois to obtain a permit, known as a “Certificate of Need” (“CON”), from the Planning Board prior to beginning construction.
37. Levine, as well as Planning Board members Thomas Beck and Imad Almanaseer, testified under oath at the Rezko Trial.9 Beck testified that he asked Rezko to reappoint him to the Planning Board and that Beck thereafter followed Rezko’s directions regarding which CON applications Rezko wanted approved. Beck testified that it was his job to communicate Rezko’s interest in particular CONs to other members of the Planning Board, including Almanaseer, who were loyal to Rezko. Beck testified that he understood that Rezko spoke for the Blagojevich administration when Rezko spoke to Beck about particular CONs. Almanaseer testified that Beck instructed him that Rezko wanted Almanaseer to vote a particular way and that Almanaseer should follow Levine’s lead in voting on CONs. Almanaseer testified that before certain Planning Board meetings, he received notecards from Beck indicating how to vote on certain CON applications. Beck testified he provided these notecards to Almanaseer and certain other members of the Planning Board to communicate Rezko’s directions about certain CON applications.
38. During his testimony, Levine described a plan to manipulate the Planning Board to enrich himself and Friends of Blagojevich. The plan centered on an entity commonly known as Mercy Hospital (“Mercy”) that was attempting to obtain a CON to build a new hospital in Illinois. Levine knew the contractor hired to help build the hospital. In approximately November 2003, on behalf of the contractor, Levine checked with Rezko to determine whether Rezko wanted Mercy to obtain its CON. Rezko informed Levine that Mercy was not going to receive its CON. According to Levine, he asked Rezko whether it would matter to Rezko if Mercy’s construction contractor paid a bribe to Rezko and Levine and, in addition, made a contribution to ROD BLAGOJEVICH. Levine testified that Rezko indicated that such an arrangement would change his view on the Mercy CON.
39. Levine’s testimony regarding Rezko’s actions to change the Planning Board decision concerning Mercy’s application for a CON based on contributions for ROD BLAGOJEVICH is confirmed by attorney Steven Loren. Loren testified at Rezko’s criminal
trial and, before that, in the grand jury.11 According to Loren, in approximately December 2003, Levine informed Loren that Rezko was against the Mercy CON. According to Loren, Levine relayed to Loren a conversation between Rezko and Levine during which Levine asked Rezko whether a political contribution to ROD BLAGOJEVICH would make a difference for Mercy’s CON, and Rezko responded to Levine that such a contribution might
make a difference.
40. Thereafter, and confirmed by the testimony of Levine, Beck, and Almanaseer, as well as recorded conversations, Rezko switched his directions to Beck and informed Beck that Mercy was to receive its CON. According to Almanaseer, although he previously had been told by Beck that Rezko did not want Mercy to receive its CON, he was later told that there had been a change and that Rezko now wanted Mercy to receive its CON.
41. Mercy received its CON as a result of a controversial and irregular vote at a public Planning Board meeting.12 The vote brought significant publicity to the Planning Board and ultimately led to the disbanding of the Planning Board. Almanaseer testified under oath in the grand jury that not long after the Planning Board vote on Mercy’s CON he saw Rezko at a fundraiser. According to Almanaseer, he was still embarrassed about what had occurred at the Planning Board vote on Mercy’s CON and Rezko’s role in the vote. Almanaseer testified that he asked Rezko why Rezko had switched the vote on the Mercy CON. According to Almanaseer, Rezko stated: “The Governor wanted it to pass.”
II. FROM EVELYN PRINGLE’S “CURTAIN TIME” ONLINE ARTICLES
Tony Rezko is a private citizen. Therefore, the evidence presented in the trial focused on his influence over officials in getting members appointed to the Boards. Prosecutors did not discuss how the legislation got passed that enabled the Planning Board to be set up in a way that allowed for the appointment of members to rig the votes to begin with.
That part of the scheme will likely be detailed in future indictments, probably starting with Blagojevich. Blagojevich signed the Illinois Health Facilities Planning Act with an effective date of June 27, 2003. However, before he could sign the act, a bill had to be passed by the Illinois House and Senate. As discussed fully in Curtain Time Part II, Obama was the inside guy in the senate who pushed through the legislation that resulted in the Act.
Obama was appointed chairman of the Senate Health and Human Services Committee. The minute the bill was introduced, it was referred to his committee for review. The sponsors of the bill also served on this committee with Obama. Within a month, Chairman Obama sent word to the full senate that the legislation should be passed.
On May 31, 2003, Senate Bill 1332 passed and specified that the “Board shall be appointed by the Governor, with the advice and consent of the Senate." The legislation reduced the number of members from 15 to 9, paving the way for the appointment of a five-bloc majority to rig the votes.
The corrupt members appointed included three doctors who contributed to Obama. Michel Malek gave Obama $10,000 on June 30, 2003 and donated $25,000 to Blagojevich on July 25, 2003. Malek also gave Obama another $500 in September 2003.
Fortunee Massuda donated $25,000 to Blagojevich on July 25, 2003, and gave a total of $2,000 to Obama on different dates. After he was appointed, Dr Imad Almanaseer contributed a total of $3,000 to Obama. Almanaseer did not give money to Blagojevich.
When the first pay-to-play scheme was put in play, and the application for approval of a new hospital was submitted, the Department of Human Services, along with four other Illinois agencies, sent recommendations that the project should be approved even though experts said the hospital was not needed.
During the trial, Rezko’s attorney presented an email exchange to the jury that hinted at Obama's role in setting up the scheme. The exchange showed that Obama and seven other top Illinois politicians consulted on the legislation passed in 2003 and were involved in recommending the members for the board.
Matthew Pickering wrote the memo to Blagojevich’s general counsel, Susan Lichtenstein, on behalf of David Wilhelm, a former chairman of the Democratic National Committee, who headed Blagojevich's 2002 campaign for governor.
Pickering said he and Wilhelm had “worked closely” over six months with state legislators. The memo recommended the appointees listed above and stated, “our attached recommendations reflect that involvement” with the political leaders.
The persons appointed to rig the votes, including those who contributed to Blagojevich and Obama, are cooperating in exchange for immunity or lighter prison sentences.
Feds shut down pay-to-play schemes
Only two pay-to-play schemes succeeded before the Feds swooped in and shut them all down. Blagojevich did not receive the $1.5 million from the Planning Board deal because the hospital was never built.
But Obama received $20,000 from the first kickback paid in the pension fund scheme and the straw donors used to funnel the $10,000 payments, Elie Maloof and Joseph Aramanda, also made $1,000 contributions to Obama's failed run for Congress in 2000.
In addition, Aramanda gave $500 to Obama's senate campaign on June 30, 2003. In the summer of 2005, Aramanda's son landed an intern position in Obama's Washington office.
Obama also received contributions for his senate campaign from the two persons appointed to rig the vote on the pension fund board. On June 30, 2003, Jack Carriglio contributed $1,000, and the other appointee, Anthony Abboud, donated $500 on June 30, 2003, $250 on March 5, 2004, and $1,000 on June 25, 2004.
The person chosen to funnel the kickback in a future scheme, Michael Winter, donated $3,000 to Obama on June 30, 2003.
All these people are also cooperating in exchange for immunity or lesser prison sentences but prosecutors pointed out during closing arguments that people who entered into agreements with the government are required to tell the truth or all deals are off.
Got something to say?
Examiner.com is looking for writers, photographers, and videographers to join the fastest growing group of local insiders. If you are interested in growing your online rep apply to be an Examiner today!