How are tax reduction and reduced agricultural subsidies a reflection of classical liberal economic principles?
Explain in your own words what Roosevelt’s New Deal is, be sure to explain how the New Deal rescued the US (and the Global economy)
Roosevelt’s New Deal
Franklin D. Roosevelt became president of the United States in March 1933 and offered what he called a New Deal for Americans. Roosevelt’s policies were influenced in part by the theories of British economist John Maynard Keynes. As you read in Chapter 4, Keynes advocated for a more significant role for government in the regulation of the economy. He felt that in times of prosperity, government should control inflation with measures such as raising taxes, using a central bank to raise interest rates, and decreasing government spending. In recessionary times, such as the 1930s, Keynes argued that governments
should stimulate the economy by lowering interest rates and taxes and increasing government spending.
Roosevelt’s New Deal was a series of programs that focused on relief, reform, and recovery—specifically relief to the unemployed, reform to the economy, and recovery from the Depression. The first wave of programs focused on short-term efforts for all groups in American society. In his inaugural speech, Roosevelt said the following:
Our greatest primary task is to put people to work. This is no unsolveable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our national resources.
—Franklin D. Roosevelt, Inaugural Address, March 4, 1933, in Samuel Rosenman, ed., The Public Papers of Franklin D. Roosevelt, Volume 2, “The Year of Crisis, 1933” (New York: Random House, 1938), pp. 11–16. History Matters.
http://historymatters.gmu.edu/d/5057/As well, the banking system was stabilized. The Federal Deposit Insurance Corporation was created in 1933 to insure individual bank deposits.
The second wave of New Deal programs involved essentially redistributing power among businesses, consumers, farmers, and workers. The programs were numerous and far-reaching. Unions were encouraged. The Securities and Exchange Commission (or the SEC, which regulates publicly traded stocks), large-scale public works projects, and a strong social safety net were part of the legacy. The Agricultural Adjustment Act (1933) reduced farm crop and livestock outputs, and thus effectively raised farm prices. Works Progress Administration projects paid people in the arts to act, paint, sculpt, write, and more. The Social Security system was set up to provide financial assistance to people who were elderly and disabled; it continues today, as does the SEC.
Roosevelt’s New Deal was an unprecedented, bold response to a crisis. His response was noteworthy in two distinct ways:
• It extended government involvement and intervention in the economy farther than it had ever gone before in the United States and represented an acceptance of government having a very direct role in the economy. The New Deal was an economic response to the inherent instability and the resulting social pain and upheaval of natural market forces. New Dealers felt that government has a responsibility to soften the jagged edges of the market cycles while still preserving the essential freedoms required in the market. There was a perceived need for governments to protect people from the abuses of uncontrolled capitalism.
• The meaning of “people who matter” broadened. The New Deal showed an understanding that liberal principles apply to more than the rights and freedoms of industrialists; they also apply to the average citizen who needs protection from the vagaries of the market. This is what we mean by the shift from classical liberalism to modern liberalism.
Roosevelt clarified this shift in the understanding of whose interests needed consideration in his “Forgotten Man” speech, among others:
These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power, for plans...that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.
—Franklin D. Roosevelt, “The Forgotten Man” (radio address), April 7, 1932. New Deal Network.
http://newdeal.feri.org/speeches/1932c.htmRoosevelt himself had been born into a family of wealth and privilege, but he was brought up to believe that wealth brought with it a responsibility to those less fortunate. In the Great Depression, which had over 25 per cent unemployment, there were many “forgotten” men, women, and children.
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