Reflections on "The Forgotten Man"

At the risk of disappointing my detractors who probably think I don’t read very much (and when I do it’s the Sunday funnies), I thought I’d contribute some of the impressions I came away with when reading a new history of the Great Depression, The Forgotten Man by Amity Shlaes. It seemed like a timely subject, given the financial news of late and the fact that we’re on the cusp of a very important election.

The book is very detailed—at times it’s hard to keep track of all the players—but it held my attention if nothing more than for its unsettling effect of making me think I’ve either seen this before or am seeing it now. I don’t take notes when I read as much as I should, but I did in this case and wanted to share them, as a kind of “for what it’s worth” as we come down to the election wire. I think the American people are going to make a profound choice in November and I am afraid they don’t appreciate that to the degree they should. Alas, I must confess I misplaced the first sheet of notes (written in a hotel lounge in Cambridge while on a trip to/from Stansted) but I have some from the 11-hour flight from JFK to Dubai. For those of you wondering if your packages were at risk, no, I wasn’t flying that leg.

Anyway…

This is not a comprehensive review of the book. It is, rather, a collection of “Ahah! Moments” that I committed to paper when I saw something, starting about half-way through the book, that looked or sounded familiar, i.e., what I’ve seen the government try or some of the rhetoric I’ve seen fly about in the course of the campaign season. Call it food for thought. Do with it what you will. But I recommend the book highly. By the way, Peter Robinson of the Hoover Institution, a regular contributor to National Review and one of Reagan’s speech writers—and in fact the guy who came up with the “Mr. Gorbachev, tear down this wall!” sentence in the Gipper’s Berlin speech—has a five-part video interview with Ms. Shlaes here. It boils down the premise of the book nicely.

One of the book’s core precepts is that government intervention didn’t ameliorate the effects of the economic crash in 1929; on the contrary it prolonged it substantially. Only the outbreak of the Second World War created a sufficient engine and catalyst to right the national economic upset that took jobs, homes and even food from millions of Americans. Unfortunately, when people are scared, they have a tendency to raise their tolerance for government involvement. Sometimes that’s good, I guess, but I tend to doubt it. Having been in government service for most of my life, I came to appreciate that while most people in government mean well, their aggregate wisdom and decision-making ability rarely (if ever) surpasses that of a general, free population as a whole. Roosevelt’s Brain Trusters were, upon reflection, not as smart as they thought they were, assuming you apply empirical (vs. emotional) analysis to the effects of their policies implemented in the early 1930s. Shlaes jumped out of the box and went all empirical on us, yet many in this country in general, and in the Democrat Party in particular, “cling” (heh™) to a philosophy that the power and judgment of the State is, and always will be, superior to that of the individual. I find that deeply troubling and, despite all the arguments and platforms to the contrary by both political parties, fundamentally against the nature of most middle-class Americans. So, on to my notes…see if they sound familiar:

- If a government can convince you that the “crisis” (whatever it is) is permanent, their control over your life is always justified.
- FDR was one of the first politicians to predict the deficit crisis in Social Security, saying that if benefits were too generous, the 1936 program would be imposing unacceptable burdens…in 1980. Note to self: it’s now 2008 and we STILL haven’t addressed this monster in any meaningful way.
- At the annual American Bar Association meeting in June of 1934, they noted that, until that time, all federal statutes numbered 2,735 pages. In the first two years of the new Democrat administration, 10,000 pages of new law had been enacted. That’s not a growth, that’s a cancer.
- Roosevelt wanted to mobilize children (some of the more recent YouTube clips give you some idea of the future). Methinks the National Youth Administration will serve as a prototype for Obama’s attempts to make “community service” both mandatory (sorry Barry, I don’t see how the words “universal” and “voluntary” go together) and centrally administered by the State.
- In 1935, three new types of taxes were introduced: the Estate and Inheritance Tax; the Corporate Income Tax, and the Intercorporate Dividend Tax. The second and third were to limit “corporate surpluses” (the 1930s term for “windfall profits,” I think) but had the unintended effect of reducing the cash on hand in private companies that had been used in the past to help employees, i.e., not laying them off, during market downturns. In addition to this, there was a sharp increase in the top individual tax rate—79% for those earning over $50K (that’s $799,583.94 in today’s dollars, these are known as “the wealthy” another term for them is “the job providers.”).
- They passed the National Labor Relations Act (the Wagner Act)…really cool if you’re a union leader. It made “closed shops” legal and removed any further requirement for a union, once established, to re-ratify its approval to represent workers in a company. It was significantly amended in 1947 (Taft-Hartley).
- FDR’s use of the legal system was particularly frightening. His Justice Department tacitly made tax avoidance—a perfectly legal and ethical concept—morally equivalent to tax evasion. Even those who failed to complete their returns correctly were inherently guilty of malign intent; even ambiguity meant guilt. Roosevelt himself couldn’t figure out how to fill out his own “1040” (or whatever it was back then) so he just cut a personal check for 15K and told the IRS in a letter to bill him for whatever else he owed.
- In ’37, Stalin’s show trials started, disillusioning many (to their credit) who had traveled there in the 1920s to observe the new socialist experiment. Many in Roosevelt’s Brain Trust had gone on those trips and, along with what they saw in Mussolini’s Fascist Italy, were impressed. From 1932 to 1937, the “politics of envy” hounded as many as it helped, but the net effect was counterproductive. The aggressive intervention by government had caused capital to dry up and panic reasserted itself just four years before the outbreak of WW II.
- Nevertheless, Roosevelt still couldn’t resist demonizing big business. He would also encourage his DOJ attack dogs to go after individuals…as long as they weren’t a threat to him personally (Hello, Chicago machine.)
- FDR’s principal weapon was class warfare (something he like to plan while on his yacht) and he pretty much invented the cultivation and election year leveraging of “special interest groups.”
- A word about the Dem proclivity for going after “windfall” or “excess” profits through taxation. It robs businesses of the means to expand, not fire workers when times are tough, and invest in new equipment. Do this (tax excessively) a lot and you destroy an economy’s ability to claw its way out of a business cycle hole. We’ll see how much the tax increases under an Obama Administration affect our recovery from the Fanny Mae/Freddy Mac-triggered financial meltdown.
- Something I had not known but I find so terribly out of character for an American was Roosevelt’s pessimistic view of his country’s future: “The frontier is closed. Our day is finished. We can grow no more, the future cannot equal the past.” Jeebus. This sounds very much like Obama’s scolding us to turn down our thermostats, drive smaller cars and eat less. The glass is half empty and still draining, so to speak. This is the permanent crisis needed to justify intervention. Honestly believed, perhaps, but it’s both counterproductive and it sells the American people short. We can figure things out if just unleashed (left alone?). Our history supports that belief. A president should embody it in his words and actions.
- Windell Willkie, FDR’s GOP adversary in the 1940 election, quotes Oliver Wendell Holmes: “A good catchword can obscure analysis for 50 years.” In the 1030s, it was “The Forgotten Man”…in 2008, it could be “Hope and Change.”

There’s lots more in the book…go check it out. -Attila