good evening my name is Katie Batchelder and I am a freshman from Hillsdale Michigan it is my privilege to introduce you our speaker for this evening dr. Burton for Folsom junior studied at Centre College before receiving his BA from Indiana University dr. Folsom holds a master's degree from the University of Nebraska and a PhD from the University of Pittsburgh he is taught at Murray State University Northwood University and currently holds the Charles Cline chair in history and management at Hillsdale College he also worked for several years at the Mackinac Center for Public Policy and the center for the American idea he is currently a guest scholar at the Heritage Foundation senior historian at the foundation for economic education and writes a quarterly column for the freeman his articles have appeared in The Wall Street Journal Business History Review investor's business daily and The Washington Times among others he has made numerous radio and television appearances including the Glenn Beck show Fox & Friends and c-span he has published six books including myth of the robber barons and New Deal or rajul how FDR's economic legacy has damaged America please join me in welcoming dr. Folsom thank you very much thank you Katie and thanks to dr. Colt off and my colleagues in the history department thank you to Tim Kaspar and Doug Jeffery for inviting me to this CCA which is entitled FDR and the New Deal lovefest at least that's what its entitled so far actually I think it's delightful to get different points of view on a subject that is am important is this subject and especially admire the civility and the courteous behavior that we always show at Hillsdale College to our guests whether we agree with the guests and speakers or not I've learned my lessons actually on civility from FDR himself Franklin Roosevelt was kind of a practiced in the art of civility because he would hold these cabinet meetings or conferences and often he would be in a situation where people would say do you like this idea or do you like this person to be promoted or to hold a particular position and Roosevelt yet he didn't want to be a position say no this guy's a jerk because then somebody surely would take it out of that meeting and go tell the guy that that's what Roosevelt said right and so I mean you didn't you don't want anything like that so he didn't want to make any negative comments that might be taken and Andry quoted later and so Roosevelt had a way when he would be in these kinds of meetings if anybody would make a suggestion you know we did would you do you think this person ought to be promoted to this position if he didn't think so or didn't like him he would just do this and that pretty much got the message of cross can conveyed what he was thinking and that way he didn't have to be have anybody say that he'd said anything so in that tradition regarding some of the things that have been said in the New Deal CCA so far my attitude a little bit is this but don't quote me on you know it is fun to tell you that we can laugh about ideas on something this important this is one of the most important times in American history the ideas that come out of the New Deal are absolutely exciting absolutely important to study and here at Hillsdale College we bring in both sides there are campuses all over America that if they would have a similar event such as this or any other kind of event it would be one totally dominated by political correctness they would not have someone from the other side in I have occasionally been invited to some of these to be the one person presenting the free market perspective and I can say this as I was as I was watching the events as they've taken place today never have I been treated as well on those campuses all around America is our campus here at Hillsdale treats people who come in here who may not be expressing ideas that the audience would be completely in agreement with and I like that when I was speaking for example one recently at UCLA you know a very liberal campus and the audience you know they had a rough look to them they didn't have suits and ties and all of this in name cards and always and so I I was trying to pump myself up backstage you know you could do it the person who is organizing the event came up to me and introduced me to Manuel here you know this big guy and he said Manuel he's your bodyguard and he was with me the entire event until the time I left and got in a cab to leave I had a bodyguard with me speaking on that campus now at Hillsdale College needless to say I don't need a bodyguard well except at the end of the semester when I'm delivering my grades different it's a central hall and then sometimes I might need one but it's a much more civil atmosphere in Hillsdale College and for that I appreciate you know getting into this subject of the New Deal and the ideas which we're talking about I'd like to make two points right off and the first point is if when we talk about the Great Depression one of the points we need to get straight right off is that the government was heavily responsible for the damage that created the Great Depression now some of that our speakers have already gotten into with the problems with the Federal Reserve with raising interest rates and the disappearance of 1/4 to 1/3 of our money supply was very damaging Milton Friedman of course eventually winning the Nobel Prize and largely for his work on the Great Depression and the Federal Reserve and the problems that it caused also another problem was the smoot-hawley Tariff we had the highest tariffs in United States history that was passed in 1930 and this tariff raised prices heavily on over a thousand items and we had significant tariffs on over 3,200 items and the problem that creates is this if we're going to charge say say if Swiss watches are going to be four dollars and if we're going to tell the Swiss because that's their major export hey we won't buy your watches except we'll pay you the four and then we'll put a four dollar tariff on those watches so they'll cost eight dollars over here then we're not buying as many and so we just closed off our our export-import market and then Switzerland in turn and acts retaliatory tariffs and they used to buy our products and if you look at the auto industry for example we were selling five million cars mostly out of Detroit here in Michigan in in 1929 and that was down to 1.5 million in 1933 now there were a variety of things involved with that but the smoot-hawley Tariff was a critical factor in that so the tariff is a factor in causing the Great Depression and also Herbert Hoover then proceeded to enact with Congress's cooperation of course the highest peacetime set of taxes income tax rates excise taxes in US history and so that is going to make it so investors are going to have are not going to have incentives to invest they're gonna have incentives to retreat from investment to put their money into tax-exempt bonds foreign investments this sort of thing and you see the economy contracting and we do indeed see the rate that has been mentioned by some of our speakers of twenty five percent unemployment which we had in 1932 in 1933 so my first point is that government was heavily involved in the causing of the Great Depression that's first point write-off in our second point that needs to be made is that if we're going to talk about the New Deal and we're going to look at was the New Deal successful to some extent and our main measurement is going to be unemployment did to the extent that were resolving the unemployment problem then we have to say the New Deal was a failure the New Deal was a failure up until the time of the Great Depression we had never in our history had unemployment higher than seventeen percent that was the worst rate we'd ever had in US history toward the end of Roosevelt's second term he could no longer really blame Hoover at that point in 1939 toward the end of his second term unemployment in April was twenty point seven percent roughly twenty one percent four points higher ten years after the Great Depression had started and in the Roosevelt seventh year in the White House four points higher than had ever been in the history of the United States and this was an absolute disaster I begin the book my book new dealer audio with this quotation from his Secretary of Treasury Henry Morgenthau who's just pulling his air Rome organized a great friend of Roosevelt the two of them they'd been friends for decades Roosevelt put Morgenthau into the Treasury Department because he wanted a friend there and Morgenthau had been active in the political camp political campaigns of Franklin Roosevelt their two wives were both named Eleanor and Morgenthau and Roosevelt they'd sometimes passed notes back to one another during cabinet meetings they would have lunch regularly together Eleanor one time said Henry Morgenthau was one of the two people who could tell Franklin Roosevelt to his face he was wrong and get away with it and Henry Morgenthau is saying this right after the unemployment statistics come in at almost 21% in 1939 he says and if this is a commentary on the New Deal we have tried spending money we are spending more than we have ever spent before and it does not work and I have just one interest and if I am wrong somebody else can have my job I want to see this country prosperous I want to see people get a job I want to see people get enough to eat we have never made good on our promises I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot which is true we had doubled the national debt in Roosevelt's years in office at that point into his seventh year and what I'm saying is this we have 21% unemployment four points higher than it had ever been in United States history before the Great Depression and we had doubled the national debt and that's our recovery program measured by unemployment and getting out of the Great Depression the New Deal was a colossal failure now I it sure it suggests government solutions do not work well it suggests that the ideas of John Maynard Keynes do not work well he had written his book the general theory of employment interest and money he'd even had an interview with Franklin Roosevelt and he came to the conclusion that we needed to spend lots of money on public works they called it aggregate demand management that you would increase the amount of government spending of course you have to tax people to do often to get those dollars or go into debt and then you'd spend that and it would that you'd have a multiplier effect and then you would be able to get out of a depression or a recession through that now I say this is what Keynes seems to be saying because if you read Keynes you quickly learn that there's Keynesian English and there's a militia English I'm trying to summarize Keynes let me quote him on unemployment quote men are and this is from his book men are involuntarily unemployed if in the event of a small rise in the price of wage goods relative to the money wage both the aggregate supply of labor willing to work for the current money wage and the aggregate demand for it at that wage would be greater than the existing volume of unemployment hey the interpretation that was given to his writings was that we needed to invest and we needed to invest heavily public works this sort of thing Keynes himself said boy if we pulled all the houses down in South London and then rebuilt a medical lots of people to work well let's look at how we applied some of these ideas they were in the air Keynes wasn't the only one who had them this is part of the progressive impulse of the early 1900's as it had evolved by the 1930s and we let's look at some of these programs we've been reluctant to discuss some of them in a little bit of detail we have the triple a for farmers the Agricultural Adjustment Act well that's an interesting law what we're gonna do here because we have an overproduction of farm products and farmers have low wages so the ideas that we come up with and this is a battle of ideas is the idea is that we pay farmers not to produce now if we pay farmers not to produce and take part of their land out of circulation in return then then the the supply will be lower because we're taking land out of circulation and the farmers will have more money because we're paying them not to produce we also have a parity system to help raise the price of their crops but the fundamental idea will pay them not to produce and then that will help alleviate the farm crisis I'm sorry to have to say this only an academic could come up with an idea professor John Dee black economist to Harvard that was his brainchild and there were others involved too and it just was such a wonderful idea we'll pay people not to produce and we it's interesting to look because this is again the progressive impulse the optimism that we can solve the problems of humankind and here's how you first of all have a deal ok we're gonna let them take a quarter of their land out of circulation will pay them roughly $10 an acre that which would be $100 an acre so today for each acre of land they take out of circulation and then we and them and then we won't have as much over overproduction well the first thing we find out is that farmers once you tell them to do that and they agree to do it some of them do it and some don't I mean they all take the money they all agree to that it's just some relief maybe don't take their land out of circulation so we have to send inspectors with measuring equipment to go by and measure all of their land to make sure they're really taking 1/4 of it out of circulation and then we discover I hate to say this to the ears of Hillsdale students some of the farmers bribed the inspectors and you weren't gonna fool our AG department and so we had to send inspectors by to inspect the inspectors we figured the cost of double bribing would be too high and therefore it would make them honest you know this is my first year when I got out of graduate school I was a new professor I was teaching at us at a regional campus in Kentucky and there were a lot of old Southern gentlemen on the faculty it was my first year and I wanted to get in good with them because I was hoping to get tenure and I'm not a southerner and I was wanting to get in good with him and one of the the chairmen of the tenure committee was going to go to a conference and I was asked if I'd like to just come along and I thought hey this is a real opportunity you know and I came along and I thought maybe I could I didn't even know if he knew my name you know at least I can get to know him maybe and so we were talking and he he was asking me what I had done in my life I asked him what he had done in his life and he well when I was in college I worked as an inspector for the triple-a and I just burnt did you take any bribes he may have thought I was really anxious for tenure I think that may have been rights trying to find out but you know I just blurted it out and he was funny he says know the best offer I had was a new set of tires anything I really mad because I had a friend and he got all the good bribes well we go through the inspectors who are coming on the land here and that doesn't work real well so then we have a bright idea to do aerial photography so we're gonna do aerial photography of all of this land to make sure they've taken the land out of circulation so now look at this we've got inspectors inspectors inspecting the inspectors aerial photographs to make sure we take all of this land out of circulation we take it out of circulation and sure enough in 1935 two years later we have crop shortages the United States has to import 34 million bushels of corn in 1935 and of course we had our own global warming back then in the Midwest and then the cooling and then warming and so we didn't have good crops in the Midwest and 34 million bushels of corn we had to import 13 million bushels of wheat and but it was even in the south this was going on we imported 36 million pounds of cotton what I'm telling you is we're going on to the end of the south on the cotton plantations pain the people on those plantations not to produce and then turning around and paying for imports high-priced imports from foreigners to make up the difference and that's our farm policy we could go on to the National Recovery Act the NRA I don't want to talk too much about that IIIi thought professor Brinkley was right he it was a disaster if we got businessmen together and said why don't you set the prices you want to charge for your products you think you ought to charge and then we'll make those prices legally binding and just to make sure anybody who sells below that we'll send them to jail and so I mean there's a section of my book dealing with these people who went to jail and it's really a very set for giving discounts to customers one of them Jacob majid was a tailor and he the NRA code for pressing a pair of pants was 40 cents and his shop was off of Main Street in Jersey City New Jersey so see he couldn't he couldn't get people to come to his shop if he charged what everybody else was charging the 40 cent rate so he was giving discounts at 35 cents to press a pair of pants so that they walk a few blocks to get to his shop well the NRA closed him down sent him to jail and we got a variety of comments on this he's in jail and he says well he says you can't tell me how to run my business well they did tell him how to run it they put him in jail I like this though the Washington Post said this it didn't matter the Washington Post said if maguet had to charge less than the bright shiny tailor shop up the street if he wanted to continue to exist the law said he couldn't and I like this for a parallel the New York Herald Tribune said for a parallel it is necessary to go to the fascist or communist states of Europe and we finally had the Supreme Court strike down the NRA National Recovery Act in 1935 and it's going to be off the books but that was the plan for business and we have those NRA papers in the Library of Congress and some day you know Hillsdale where we are represented as you know now in Washington DC I think it would be fun to have some students do some papers right out of those original archives and see what else can be found on the National Recovery Act let's look at the big prop the pump priming Act the WPA one was Works Progress Administration you build roads you build bridges you build airports you build schools doesn't this sounds good in theory doesn't you have unemployed people and you put them to work building those roads and schools a lot of roads and you you have that then that will reduce unemployment is the idea but what we got we have to realize is four point eight billion dollars which doesn't seem like a lot now when trillion is the only word that seems meaningful but four point eight billion was the largest investment in a domestic program that we had ever had in the United States before like this it was four billion eight hundred thousand or four billion eight hundred million dollars and so what this does is it gives Roosevelt this humongous pile of cash and he ends up because he has tremendous control over it divvying it up into areas that he wants to capture the votes in that are politically expedient who have congressmen or senators in those districts who will do what he says and so this makes it an incredible program to subsidize much of the New Deal I have some quotations just gives you a flavor here of how a lot of Democrats were looking at the WPA V G Copeland the Democratic County chairman of Indiana said this quote what I think will help is to change the WPA management from top to bottom put men in there who are in favor of using these democratic projects to make votes for the Democratic Party that is the heart of a lot of the New Deal James Doherty the New Hampshire Democratic read quote it is my personal belief that to the victor belongs the spoils and that Democrats should be holding most of those wpa positions so that we might strengthen our fences for the 1940 election I like one WPA director in New Jersey I have in my book a corrupt but candid man answered his telephone quote Democratic headquarters so you have the chairman of the WPA and Serena's phone Democratic headquarters they have a file in the National Archives on WPA slash political corruption and it's huge in its bi-state and if you look at that you you find things like this Frank towie of New Jersey announced at a democratic rally in Newark New Jersey quote in this county there are 18,000 people on the WPA with an average of three people in a family you have 54,000 potential Democratic votes can anyone beat that if it is properly mobilized do you see here how Franklin Roosevelt is winning elections see one of the problems in analyzing the New Deal is the program programs didn't work but the fallback position of Roosevelt's defenders often as well yes but he must have given people hope hope and change and and we know that because he was winning elections and winning on Big C in other words he would have his fireside chats and people would listen and he would give them hope and look at these jobs and these people working on these jobs so he was trying he was doing his best and you have to therefore give him credit for that but what you have to see is that this money which you can understand why the founders were so specific in article 1 section 8 not letting all of these programs be part of the federal government to federalize all this is to put into the hands of a president a huge political war chest it's interesting to listen to the these are Democrats who voted for Roosevelt these are his friends who are saying this I don't quote as enemies because at Hillsdale College we believe in G and P G lectures and so I'm quoting his friends and here's what his friends say the Democratic senator from Virginia Carter glass says this the 1936 elections would have been much closer had my party not had a four billion eight hundred million dollar relief bill as campaign fodder in other words you target congressional districts you target key states Pennsylvania was a swing state very important the Democrats had not carried it in decades and decades Roosevelt wanted it lots of wpa money into Pennsylvania you target the key states you tell the people running as Democrats to mention all the programs that are coming into the states and then you say if you would like this to continue vote for Roosevelt in both the Democratic ticket and as one Republican said after the election apparently you can't beat Santa Claus and that's what happened in the 1936 election a tremendous victory for Roosevelt and I don't mean it was just the WPA there are a whole lot of programs that just sometimes get missed in the textbook for example how many have heard of the Silver Purchase Act you know a few yeah we were busy Lee purchasing silver it was a subsidy to six western states to get their votes which Roosevelt did what you do is the normal price of silver which is a main industry in those western states it was roughly the market price was about 40 cents an ounce the Silver Purchase Act which Roosevelt signed would pay silver miners sixty four and a half cents an ounce say in order to it pay him almost 50 percent more than the market value of silver it's so the law of unintended consequences comes in and there's a huge outpouring of silver in the West in fact it wasn't just in the West we had people in Mexico smuggling silver across the border yet because you buy it at 40 and you can sell it at 64 and a half so we had issues of silver imports coming in and according to the rule so the Silver Purchase Act you had you couldn't get rid of it I mean sure you were making some silver for industrial uses but this had to be stockpiled after eight years of stockpiling silver we had forty two thousand tons of silver according to that act the federal government had I mean I just don't know what kind of shape this is in I mean it's almost like the Tower of Babel you know going up there we're like where God says don't do this don't do this as it goes up up up let me try everybody close your eyes from it everybody close your eyes I get it Amelia makes you wrap their knuckles if they're not closing don't fall asleep on me promise that pleasure he imagine try to imagine a mountain of 42,000 tons of silver imagine what it looks like 42,000 tons okay I had you do that because so much of the defenders of Roosevelt approach the problem this way they say think of it this way lots of people having jobs and they're working on the jobs and he's trying to get us out of the Great Depression well one way to get around to say yeah look at the tax dollars going out of a lot of people's wallets into those jobs which are doing things like piling 42,000 tons of silver into a big pile I hope someone here you know when you write your essays on the CCA draw the most imaginative diagram of 42,000 tons of silver I listen I'll give a copy of my book to the most imaginative drawing a 42,000 tons of silver how that looks like and how that was so what you have to have a vision here is money see dollars going out of the wallets of all everybody all over the country flowing over there into the western states and then see in Washington 42,000 amount of 42,000 tons of silver which constitutes 2% almost 2% of the entire national debt oh it's 2 percent our entire national debt in a big mountain of silver which we're not allowed to get rid of and this is what was supposed to get us out of the Great Depression it didn't do it there's no silver lining in that cloud you know some of this is tragic because in World War two we finally got to spend the silver because I mean we had to for industrial and then Roosevelt was worried he wouldn't be able to carry those western states and we some of this is very tragic because that's when we began rounding up the Japanese 110,000 Japanese once you begin to centralize power and increase it in the state then we get the rounding up of Japanese which is very popular with a lot of the same people who are now mad because you you're using up their silver now they're happy because they've got the Japanese out of the circulation it's sad to read Eric Muller and his book recent book American Inquisition documents how Roosevelt knew in 1942 1943 those Japanese were loyal but many of them were fighting overseas in a very loyal way to the United States but he would not let them out because he said if I they come out in the 1944 election which I plan to run for a fourth term what will happen is that they'll be mad at us in those western states and that becomes a reason you have to see the politics of all of this the politics of federal programs centralizing power the use of those programs to in effect bribe or buy votes then win reelection and change American politics forever because the other side land and poorer blend and running against Roosevelt said oh this Triple A is terrible and then they said Roosevelt said well what are you gonna do you know a lot of farmers said you're gonna take our subsidy away no no no I will take your subsidy away he's I'll manage it better so what you get a choice in thirty Six's do you vote for the guy who gave you your subsidy or the guy who alleges that he will manage it better and that's been part of the dilemma of the Republican Party ever since how to respond to that this has to be paid for with taxes you almost never see a New Deal book that discusses taxes it has to be discussed if you're gonna discuss the programs and you're gonna you're going to talk about those and some were better than others and some were worse than others then you've got to talk about how we're going to spend for those programs and we need to make a statement right off that we had very high taxes on the wealthy people Roosevelt raised the top rate on the federal income tax to 79 percent in 1935 in other words we're asking investors this is a marginal rate the top rate to give up four-fifths of all their income past a certain level to invest in companies and then we find lo and behold they don't do it and Roosevelt is angry and he builds his 1936 campaign against these people and he said they hate me and I welcome their hatred that's what Roosevelt said during the campaign and in 1937 you know we hear talk attacks well Roosevelt cut spending and that was no good first of all we need to make a point it's true after the 36 election in 237 we slightly cut spending it was not big and we still were running a big deficit why did we cut spending slightly because we always cut spending slightly after an election Roosevelt had just been reelected reelected so the WPA dropped in numbers because we don't need those people anymore so we did have sort of a drop in spending but what we also have that is not often mentioned is we an unrestricted profits tax and special tax on corporations we had Roosevelt with encouraging to some extent mandatory collective bargaining which is going to take place and we're going to get the unionization of the auto company auto companies and others and we're going to get a minimum wage law that's passed which is with us today and that minimum wage law is going to prevent employers from hiring people who cannot add enough value that the minimum wage demands to hire them in their company and that's going to contribute to unemployment and then FDR turns the IRS loose against people Andrew Mellon he turned it loose against Moses Hannah Berg Moses Annenberg edited the Philadelphia Enquirer in the Philadelphia Inquirer ran editorials condemning Roosevelt so what Annenberg discovers whoa the IRS investigation is there he owes money he goes to prison and then we find the editor of the Philadelphia record who was which was a democratic paper they're getting a loan from Roosevelt the reconstruction Finance Corporation for somewhat the same amount is that is an America was having to pay back in tax liabilities and so now we have the Democrats getting a subsidy the Republican being put in prison on an IRS investigation Roosevelt then said in 1938 and thirty-nine of Morgenthau we need to go after all of these rich people with an IRS investigation of Morgenthau said well wait a minute here why do we do that and Roosevelt said and I quote because it can gain us 10 million votes we condemn the rich we blame them for not hiring people we go over to unemployed people and say it's their fault and then when they don't hire we can blame them then that justify starting a public works program from the taxes which we're taking from them so that they can't expand their factories this is the heart of the New Deal and it raises a question in the last one I want to get at and then we'll take open this up for questions and because we've had this issue of what ends the Great Depression yeah what ends the Great Depression that's that's a tough one and I don't want to pretend as though we have absolute answers that there's research still in ress on this but i would like to say a couple things you can't very well end a depression you could ask dr. Wolfram here on campus by building stuff and bombing them people and and say that that's getting you out of it a great depression I really urge you to take econ 105 and you'll get the full story on that but let me give you the abridged version you have here 12 million people were sending overseas now that's good and from an unemployment since that's good because we had a little bit less than that who are unemployed so we're sending 12 million overseas and then we have 12 to 15 million people working then in the defense industry so I think you can see therefore unemployment goes way down by the way which is interesting cuz the WPA for a while is still going in the midst of this because Roosevelt still had elections going on here and but in any case put that aside we've got 12 million people overseas in the military we have 12 to 15 in defense industries that's well and good but as we've had pointed out by speakers already the national debt then goes from 40 billion dollars to 260 billion so see what we've in effect done is we've taken all those people subsidized them while they go dropping bombs on places and now we have a debt of 260 billion we increase the national debt by a by 6 fold in other words we started the war with about 40 billion national debt then we're up to 260 billion my goodness the interest rate on the 260 billion is almost as much as the whole national debt was before that I mean not quite it's that the debt was a little bit higher than that but I mean it gets you thinking my gosh this is a huge national debt so we didn't solve the Great Depression in fact the issue is what are we gonna do after the boys come home and many new dealers said hole we need a new New Deal they call it the New Deal revival we're gonna get a host of new federal programs to bring them back they were not successful in fact they were distinctly unsuccessful and you had and I quote from Congress here senator Walter George in October 24th 1945 talks about a bill to cut tax rates to get us out of the Great Depression he says you're right we're gonna get into a great the drake depression is gonna go on after the word if we continue the New Deal he says there are people out there want to rebuild our stockpile of silver and so he said we need tax cuts because that's what we tried the 1920s when the top rate was 25% and that is what worked then Andrew Mellon said in the 1920s our Secretary of Treasury in the 20s and I quote it seems difficult for some to understand that high rates of Taxation do not necessarily mean large revenue to the government and that war revenue may often be obtained by lower rates in other words he's saying if you cut the rates it may in addition to encouraging investment it may actually increase revenue he was right on both counts Calvin Coolidge had the lowest inflation and unemployment rate of any president of the 20th century we had budget surpluses every year of the 1920s we chopped off almost a third of the national debt and we had senators who remembered that in 1945 and said let's go back to that and try that because the spending stuff isn't working here's what senator Walter George another Democrat who had had been enlightened on this issue and here's what he says he's talking about this bill to cut tax rates and I might add just so I describe this bill specifically it cut the big they cut the income tax rate because after the war the income tax rate was 94 percent on top incomes so I was like cite to FDR that six percent was money left on the table you know but it was it was 94 percent on top incomes the corporate rate was the top rate was 90% this bill was going to lower the the top income tax rates um but the big lowering was the corporate rate because we're removing this excess profits tax and we were cutting it from ninety percent to thirty eight percent as a top rate that was the proposal Senator George says this this bill is properly a tax rate reducing bill it will not necessarily reduce the amount of revenue coming in indeed if it has the effect which is it is hoped it will have it will so stimulate the expansion of business as it to bring in a greater total revenue I think if one will look back to World War one he will understand precisely what I am trying to say senator from new jersey albert hawks who was a businessman in the senate said this the repeal of the excess profits tax in my opinion may raise more revenue for the united states than would be raised if it were retained those bills come into effect and indeed we do over a period of three or four years see a sharp increase in revenue to the government but more than that we sent a message to business people we're cutting your taxes we want you to invest again in the american economy and they did in tremendous amounts and we had only three point nine percent unemployment 1946 in 1947 the tax cuts i think played a big role in getting us out of the Great Depression now some people say well you've dug this up and congressional records you know how can people understand and get at that well the reason I have these quotations is they were given to me by my research assistant here at Hillsdale College Jim des but who went home and over the break and Cincinnati Ohio went into the University of Cincinnati dug up this information brings it in and now I'm quoting it I think if Hillsdale students can do it that my fellow historians can do it too I regret that the New Deal failed it was an abysmal failure it sent us on the wrong direction but we were able to overcome pieces of it definitely and that tax cut going into effect producing more economic growth is a remarkable example of that President Reagan is you know President Kennedy even in the 60s and then Reagan in the 80s also cut taxes and they saw a tremendous economic growth and a lowering of unemployment and I would like to suggest not stimulus packages and not priming the pumps with WPAS and certainly not the Keynesian argument that we absolutely need to have vast public works but cutting taxes and don't let central planners to train presidents determine what politically good districts they're going to send the money into what business people and American people invest startup businesses expand existing ones put people to work invent and develop television and those things after the war and send the American economy on a prosperous route with relative freedom and limited government thank you thank you very much thank you I couldn't have done it without senator George and Senator Hawkes they're the ones who deserve the ovations without them we would not have good arguments and good answers to this difficult question of dealing with the Great Depression and getting out thank you very much dr. Folsom dr. volson will be available after our questions for a book signing in the lobby and his book New Deal or raw deal will be available for purchase thank you doctor Folsom um I just had one question about the tax cuts you're talking about Sean what was Roosevelt's opinion on those did he support them or was he against them the interesting thing is he was against I mean he was in the grave he always was against he was always against tax cuts and he would have opposed them he he never had a tax cut he never never had a tax cut and he his idea was that if you take this money and you centralize it that he and other central planners and others politicians would be able to spend it and help the American economy better than people would be able to spend their own money in effect that's his philosophy and so he was not in favor of tax cuts he did die before the end of the war and so he didn't personally get involved which in many ways was good because Truman was not as good a manipulator as Roosevelt and I say that to Truman's credit II it's ruined is a very honest person he agreed with Roosevelt but Truman would be right honest with you you know he wouldn't call up and say I like this bill and if you don't like it I mean I have an IRS investigation on you that wasn't his approach and so he honestly said well I'm just going to oppose this and then the other senators favored it and they passed it and it became the New Deal horror story you know my mom brought me up on was was the confiscation of the gold do you have anything to say about that episode my grandfather father was very disappointed that it didn't start a civil war yeah I do talk about that in the book all we could say is Roosevelt did indeed confiscate gold he had to because he was manipulating the currency in the price of the currency if he had not confiscated the gold if he didn't Flay to the currency and the US had committed to pay a certain price for gold people would just take the inflated currency and then buy doll and he couldn't have that and so we had he felt he had to take it it's a good example where you try one intervention and it leads you to have to do another intervention and pretty soon you are really damaging individual liberty and I think you see that with the with the gold confiscation and the whole us getting off the gold standard yes well sure okay Tyler reminded you of your class Tyler you look so good in that beard aye aye well anyway I don't want to take up people's time with Jesse trace your speech greatly I greatly enjoyed it but there was one issue with the silver the 42 tons was it forty two thousand twenty two thousand tons right I had never heard of that before and I'd be very interested to know why where it actually went and the details behind it well I mean you have a point Tyler it's not the sort of thing that Morgenthau over and treasury could say well let's just stop put this in the closet we had a lot of it apparently at the mints in San Francisco and in Denver and in Philadelphia and apparently as I understand it in Fort Knox we had some - we had some in Washington I'm not sure the various amounts it's a question I'm interested in - because it's hard to hide that quantity of silver and by the way I devote divided Roosevelt's programs into two categories the bad programs and the worse programs and I haven't even given you the worst programs tonight the worst programs have death rates such as his attempt to say no the commercial airlines are making obscene profits with the with airmail travel so we'll take it from them have the army deliver the mail and then the army delivers the mail in crash crash crash we have 12 pilots killed then he says well let's go back to having the airlines deliver the mail the commercial you know we had those programs that are in the mix - Tyler we don't hear a lot about New Deal programs I focused on the WPA and the triple-a and the NRA though that's the heart of the New Deal and I feel that's where the battle ought to be fought rather than going off on these side programs but I just want you to know like the silver effect if it's part of Roosevelt's effort to be re-elected the silver fits with the WPA their targeted subsidies to special interests to get the votes to get reelected dr. Paulson thank you very much for your speech and I'd like to hear something about contextualizing a solution for today I mean our tax cuts going to get us out of twenty trillion dollars of debt is the rise of or the problem North Korea the rise of Islam China the tricky trade imbalance all of these serious problems we're facing today are they can they even be compared do you have a do you have any idea of what would be a good course even if it may be difficult to accomplish in in the coming years and last question is what is your web address for campaign finance spending I'm not campaigning but I do have a blog at Burt Folsom dot-com and I try to apply history to current events often with the New Deal when I discuss contemporary issues so so I do that at Burt Folsom doc.com you're welcome to subscribe free I I'm an optimist you know your question implied pessimism and I think historians oddly enough in some ways if they'll think through it they tend to be optimistic because every period that we study if you read the newspapers and contemporary accounts they wish like oh my gosh this is a crisis it's unsurmountable and and you see this especially 1930 studying the New Deal where people are just they say my gosh it's up taxes at 90% look at all the power this guy has look what he's doing with the silver what he's doing with the WPA the civilization is over and it wasn't good ideas had a way of prevailing they didn't prevail right away but they did eventually we tried tax cuts in the 1920s we had high unemployment after World War one Harding and Coolidge came in with Mellon and there were people who wanted a stimulus package then and they said no cut the taxes they did and we went from 12% unemployment in 1921 to 2 percent unemployment two years later it was that quick and the 20's ended up being a great economic decade it looked hopeless there in 1921 it wasn't later the despair I see by many free-market thinkers in the 1920 1930s is pitiful and yet look what happened we get the tax cuts pretty soon we go through the 1980s we get the rates down to 28% so I mean here they were at 94% and now the top rates at 28% in the 1980s we get that then we have a boom another historical example of giving people more freedom produces more prosperity for them the lesson proved again and so I'm satisfied that the history one of the things history helps us with is that good ideas have a way of coming back and being successful over time not right away but over time and good ideas that we've had in the past will be applied again and we have people trying to do that and therefore I believe we will see an improvement in the situation economic situation we have today um I I was curious why does it seem like so many academia and politicians ignore these facts and what do you think the best way to communicate these ideas is yes the first question is one that really is a why do so many academics in for the for the for the you know what we might call the liberal argument that we need to spend a lot I think somewhat I mean here yeah it's careful because I don't want to get in people's heads it's easier to describe what happened and what the consequences are rather than saying why are they doing what they're doing say which which puts you on a little more speculative ground but I do know that s you know being around academics they don't like the idea that in free markets an underwear salesman can earn more than they do and the truth is that that capital is distributed in such a way that if you can market products that have value it gives it creates jobs and it creates economic development and wealth for the people who develop them and the idea that no no we can plan the economy turn it over to the experts who are highly trained in economics and that they will come in and tell us what to do will produce better it's very compelling and attractive to many academics and I and I think that's that explains a lot of it what we can do I mean we do what we can do one thing that I that excites me teaching here at Hillsdale College is that we have a lot of people here who really get it and they're gonna go out there and I'm gonna be gone and and and go off to my great reward and you guys are still gonna be here and it gives me pleasure to say hey I'm helping develop the human capital as are many of my colleagues in the history department political science economics and other places in the in the college here to provide you with the information and the evidence to fight this battle for the next generation I had to fight it I'm a baby boomer I had to fight the battle and the issues that Roosevelt gave us you know you sort of it's like you go back and you fight the wars that the last war the in the last war when I was growing up was the FDR Warren you're fighting that one and lo and behold it's to say more that we're fighting now and so these ideas of providing more freedom and individual liberty freeing up the economy and lowering taxes that that in reducing regulations that that will produce and help the economy more than the high tax rate and the centralized government that idea is alive and well here at Hillsdale College I believe that in the next generation there are people at Hillsdale College that will be fighting that battle and fighting it very effectively if I didn't believe that I wouldn't be here but I do believe really curious it was asserted earlier that in the 30s the first countries to get out of the depression were Germany Britain because of the armament programs so I'm really curious as to what your opinion is on that well yes there are two points first of all you're back - okay you're building for defense some of that was but then you have the question what do you do when the war is over say you're back then are you gonna argue to use freedom or not are you gonna go with high taxes the defense industry is only a temporary measure until the war is over because otherwise you get a national debt that rises too high and you go bankrupt you inflate the currency it's worthless so you can't make it completely on defense that that's not going to work the second thing is defense didn't become big in most European countries except for Germany until the later 1930s it's interesting the League of Nations conducted data and collected it on what countries had what rates of unemployment and it's interesting that when the United States in 1938 had 20% unemployment which I've been telling technically was not at that time was 19.8 rounded off to 20% the average that the League of Nations collected for all the other European nations was 11% most of that was not through defense it was in Germany what I'm telling you is the United States was not only bad it was disproportionately bad compared for the rest of the world and that the question needs but needs to be asked is why was the u.s. performance distinctively bad against that of the other nations of the world and that's because our government programs were more disastrous than their government programs because we had the undistributed corporate profits tax we had all those IRS audits we had a minimum wage law we had the discussion of Social Security which is good because we were collecting as Professor Brinkley said we're collecting taxes on it all throughout the late 30s but we're not paying anything out that takes money out of circulation we were doing distinctively things bad that other nations weren't doing or cert hello sorry yes hi hi my name is Sarah and I am a student from a school in Southwest Michigan and I wanted to say thank you for your presentation and for all the other presentations we've we've endured so far was really wonderful sure I would like to ask the question and that is I think it's very easy for us to look back 60 years ago and make all these claims of what FDR and the New Deal did wrong and we have all of this knowledge and this amazing retrospective perspective but I want to know if the historian I'm sorry if the conservative politicians of that day we're thinking the same things that we're thinking today yeah good question some were in some weren't there were some who had it figured and many who didn't but the main thing were the ones who opposed him who tended to be in the Republican Party we're getting tossed out of office left and right because with these subsidies see the Republicans were down to 88 seats in the house and that means the Democrats had what 360 roughly and so when you're losing seats at that proportion a lot of more having to think and I understand this you know politicians have to be re-elected they can have good ideas but if they go out of office with those ideas not implemented their success is is not great even though they may have advanced an idea they need to be around to accomplish it we just simply didn't have too many people who were opposing Roosevelt who were able to hang on to office and so that was part of the problem I do want to say too and I want to give Roosevelt some credit he did reduce the tariff rates from that smoot-hawley Tariff with the reciprocal tariff act he at Cornell Hall as Secretary of State had the authority to do some nation-to-nation reducing in that aisle so I mean we did have a couple things here and there that were useful but by and large it was not it was harmful and it was hard for politicians to oppose it because you start opposing it the next thing you know you're running against a candidate who's just been given huge subsidies to run against you and he's promising if he's elected he'll bring projects into that district and you're sitting there saying no we ought to do it privately and you are in a tough reelection campaign and this is the dilemma that those who opposed Franklin Roosevelt had then and it's the dilemma that those who propose big government have today as well just a reminder that dr. Poulsen will be available for a book signing after questions and we thank you dr. Folsom talk was great thank you I won't be able to cut your class but I know my brother will he's a history major I had a question for you I grew up in rural Indiana on a farm and my grandpa started our farm but he grew up in the Great Depression and basically the way he describes it as you know after 1929 the prices of grain and things just fell off the face of the earth you know and they were reduced to eating you know he basically just hate cabbage and things like that he still wouldn't touch cabbage when I knew him he hated the thing so my question is for you is um times were bad and a lot of farmers were losing their farms and yeah the Triple A might not have been a good solution but what what would be a proactive solution to solve that problem during that time because people are suffering and they are losing their farms and just losing everything they have and obviously that isn't good and a lot of free market people would say that's the flow of the system but is there a more proactive solution that you would be in favor of yeah I mean obviously paying farmers not to produce and building a mountain of silver isn't through I won but I nonetheless you asked a good question you say well what sorts of things can we do one of the reasons I like the idea of relative freedom is that that answers the question in free markets for example we have problem with overproduction of goods and low prices we have people move off the lands and into the cities historically you know we after all in our first census we had over 80 percent of Americans were farmers either primarily or at least partly were farmers and we had that reduce substan to maybe 20 25 percent in the 1930s and it's down to less than 1% today and so we've been able to pick up those people in the industrial sector the reason we couldn't do it in the 30s of course is because we had such high taxes that we had businessman and we had the tariffs and we had the Federal Reserve those those bad solutions which were some of which were unique to the 1930s which is why we didn't have depressions that severe before and so the secret is if you can get rid of those you can get the tariffs down and I gave Roosevelt some credit he was working in that direction but then if you can get the Federal Reserve working for working in a different way and get the tax rates down then you free people up then you have a bigger demand for foreign products because now you can export your farm say 25 percent of American exports our farm of farm products are exported well when we have a small amount like tariffs and nobody's buying our farm products we can't export anymore you take the tariffs down and you get a freer trade system then they get to export so I'm saying if when you ask that question you have to look at it from a standpoint of a lot of things are being done that are bad and you've got to start taking them off one by one freeing people up and I do want to add this when we had our first welfare system that went into effect the first relief system in 1932 and it lasted 233 it was 300 million dollars we did have Massachusetts Connecticut and six states that said we're not gonna take this federal aid and get tied into this kind of life we're gonna supply it locally even in times of 25% unemployment you still had states that were able to manage their own relief and they do it I mean in the case of Massachusetts they had exhibition football games between two of the colleges there they had the Boston Symphony playing for charities they had wealthy people giving food and in free landlines for people they had teachers I'm really proud of this teachers gave up about 2% of their salary for relief measures to help the people of Massachusetts the kind the founders wanted local wanted people to help people and more people could have helped more people if we wouldn't have been hampered by so many restrictions in the 1930s
