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Why Not Dismantle the New Deal?


Every so often, progressives and the mainstream press exclaim with horror that Republicans are intent on dismantling the New Deal, the socialist-interventionist economic system that the Franklin Roosevelt administration brought into existence in the 1930s and that has been with us ever since.

The concerns are groundless. Republicans and conservatives are as wedded to FDR’s New Deal, especially Social Security and Medicare, as Democrats and leftists are. The only ones who really want to dismantle the New Deal are we libertarians.

The obvious question arises: Why shouldn’t the New Deal, including its crown jewel, Social Security, be dismantled, especially since the entire program was born in illegitimacy?

The United States was founded on the principles of economic liberty and free markets. What that meant was that most people were free to pursue their economic interests without governmental interference. People could enter into occupations and trades without licenses or permits. They could enter into mutually beneficial economic trades with others, including labor contracts (e.g., no minimum-wage laws or maximum-hours legislation). They could keep everything they earned (no income tax) and decide for themselves what to do with it — i.e., no coercive, mandatory charity programs, including Social Security, Medicare, Medicaid, farm subsidies, and foreign aid to dictators.

Along with such things as open immigration and no drug laws, foreign wars, coups, FBI, Pentagon, CIA, and NSA, that’s what made the United States different from every other nation in history. It was the first time ever that people had brought a society into existence where the government did not control or regulate economic activity, didn’t coercively redistribute wealth, and didn’t have a massive, permanent military-intelligence establishment.

That’s what made the United States exceptional. No nation had ever done that before. That’s what made America great. That’s what our Americans ancestors believed defined them as a free people.

Franklin Roosevelt’s New Deal revolutionized America’s economic system in two ways: first, by adopting the philosophy of mandatory charity and, second, by adopting the philosophy of a government-regulated economy.

The best examples of Roosevelt’s revolutionary program were Social Security, an idea that had originated among socialists in Germany, and his National Industrial Recovery Act (NIRA), which placed American business and industry into government-approved cartels.

While many Americans today have convinced themselves that Social Security is a retirement program that enables them to get their money back that they “put into” the system when they were working, they are actually, consciously or unconsciously, just living a life of deception. Since the very beginning, Social Security has been nothing more than a welfare program, one founded on the principle of mandatory charity and no different from any other welfare program.

With Social Security, the federal government forces working people in society to provide retirement assistance to the elderly. The government forcibly takes money from the productive class and gives it to the non-productive class. If someone refuses to pay his Social Security taxes, he is arrested, prosecuted and jailed. No one has a choice. He must let his income be seized so that the money can be given to seniors.

The NIRA was based on the concept of a government-regulated or government-controlled economy. Run by a former U.S. Army general, Hugh Johnson, it mirrored the fascist economic programs that were being instituted in Italy under Benito Mussolini at about the same time. Any American business that refused to prominently display the NIRA emblem incurred the wrath of Johnson and his cohorts, who would exhort American consumers to boycott the business until it came around and did its patriotic duty by prominently displaying the Blue Eagle in its store.

To gain a deeper understanding of how revolutionary the New Deal was, read the book Three New Deals: Reflections on Roosevelt’s America, Mussolini’s Italy, and Hitler’s Germany, 1933-1939 by Wolfgang Schivelbusch, which details the similarities between the economic philosophy and programs of Roosevelt, Mussolini, and Adolf Hitler. Or just read this review of the book at reason.com by David Boaz of the Cato Institute.

When the Constitution called the federal government into existence, it provided a means by which people could change their governmental system. That process involved amending the Constitution to bring about the change. To prevent major structural changes from easily being made, the Framers intentionally made the amendment process difficult.

The important thing to keep in mind is that major change required a constitutional amendment. For example, when Americans wanted the federal government to criminalize the possession and distribution of alcohol, Congress couldn’t simply enact a law to that effect because that would constitute a major structural change in the government as it was originally established. That’s why people had to first amend the Constitution to permit such a law to be enacted.

Yet, nothing like that was ever done to enable FDR’s New Deal program to be adopted, notwithstanding the fact that a welfare state and a regulated economy were much bigger changes than Prohibition.

FDR justified his revolutionary changes by saying that the New Deal was intended to address the economic difficulties of the Great Depression, the big economic crisis in the 1930s.

However, two major problems arise with that justification:

First, there is nothing in the Constitution that permits federal officials to use crises to justify changing America’s free-market, free-enterprise system to a system based on mandatory charity and a government-controlled economy. In fact, the Framers understood that it is during crises that people are most in danger of losing their liberty and prosperity at the hands of their own government. Thus, they would never have approved using crises as an justification for avoiding the amendment process outlined in the Constitution.

Second, the Great Depression ended more than 70 years ago. If Social Security and other New Deal programs were enacted to address the economic suffering during that economic crisis, then shouldn’t those programs have gone out of existence once the Great Depression was over?

The fact is that Roosevelt cleverly used a temporary economic emergency as a ruse to circumvent the amendment process in the Constitution as a way to permanently convert America’s economic system from one based on economic liberty and free markets to one based on socialism and interventionism. The fact that the Great Depression was caused by the Federal Reserve System, as Ludwig von Mises, Friedrich Hayek, and Milton Friedman have documented, and not, as FDR claimed, by America’s free-enterprise system, adds insult to injury.

Would Americans have amended the Constitution to convert the federal government to a welfare state (and, later, a national-security state)? Maybe, maybe not. But one thing is for sure: The New Deal was born in illegitimacy. More important, it has no place in a free society. It should be dismantled.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.