Conservatives cherry-pick 1930s unemployment figures in continued assault on New Deal

››› ››› JEREMY HOLDEN

Columnists Mona Charen and George Will continued a trend among conservative media of responding to comparisons between the current economic situation and that of the 1930s and between Barack Obama and FDR by attacking the New Deal. In separate columns, both Charen and Will cherry-picked unemployment figures to assert that the New Deal did not reduce unemployment. But historians and progressive economists have noted that unemployment fell every year of the New Deal except during the 1937-38 recession; further, Nobel-laureate Paul Krugman has said it was a reversal of New Deal policies, not a continuance of them, that contributed to rising unemployment in 1937 and 1938.

Washington Post columnist George Will and syndicated columnist Mona Charen continued a trend among members of the conservative media of responding to media comparisons between the current economic situation and that of the 1930s and between President-elect Barack Obama and Franklin Delano Roosevelt by attacking the New Deal. In recent columns, both Will and Charen cherry-picked certain unemployment figures to assert that the New Deal failed to reduce unemployment. In doing so, they ignored both the downward trend in unemployment during the New Deal and ignored statistics on the increased numbers of jobs created in the government by the New Deal itself -- the latter omission is one that historians and progressive economists have said portrays New Deal unemployment in the "worst possible light." Indeed, both Will and Charen cited former Wall Street Journal writer Amity Shlaes' 2007 book The Forgotten Man: A New History of the Great Depression in advancing their attacks, but in a November 29 Wall Street Journal column, Shlaes acknowledged using data that ignored "emergency" public employment.

In his November 30 column, Will asserted, "The assumption is that the New Deal vanquished the Depression. Intelligent, informed people differ about why the Depression lasted so long. But people whose recipe for recovery today is another New Deal should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending -- President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt -- unemployment was 17.2 percent."

Similarly, in her November 28 column, Charen asserted, "You know the fairy tale. You were probably taught it in school. During the 1920s, America practiced laissez-faire economics. The 1920s were seen, as historian Amity Shlaes put it, as a period of 'false growth and low morals.' " Charen later claimed that "the New Deal's chief object was never achieved -- it did not solve the nation's unemployment problem. The CATO Institute's Jim Powell points out in FDR's Folly, 'From 1934 to 1940, the median annual unemployment rate was 17.2. At no point during the 1930s did unemployment go below 14 percent. ... Living standards remained depressed until after the war.' "

Will and Charen both cited certain unemployment figures during the 1930s but ignored the overall downward trajectory of unemployment rates throughout the New Deal. In a July 5, 2007, Slate article, University of California-Davis history professor Eric Rauchway noted: "Except in the 1937-38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt's first term and, after the 1937-38 dip, around 11 percent." Further, New York Times columnist and Nobel laureate Paul Krugman wrote that it was a reversal of New Deal policies that contributed to rising unemployment during the 1937-38 recession. In a November 10 Times column, Krugman wrote: "After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections."

Moreover, Will claimed, "In 1939 ... unemployment was 17.2 percent," and Charen repeated Powell's claim that "[f]rom 1934 to 1940, the median annual unemployment rate was 17.2 percent," but they appear to be relying on unemployment data that ignores government-relief employment created by New Deal programs. Indeed, Shlaes acknowledged that her figures excluded "make-work jobs," instead relying on data compiled for the Bureau of Labor Statistics (BLS) by economist Stanley Lebergott. In a November 29 Wall Street Journal column, she wrote, "To be sure, Michael Darby of UCLA has argued that make-work jobs should be counted. Even so, his chart shows that from 1931 to 1940, New Deal joblessness ranges as high as 16% (1934) but never gets below 9 percent" [emphasis in original].

After World War II, BLS ceased counting those in work-relief programs as unemployed, as noted by economist Gene Smiley in a 1983 Journal of Economic History article:

Apparently the purpose of the estimates of the number of unemployed was to estimate how many private-sector jobs would have to be created to reemploy all those who were unemployed as well as those who were employed on federal government work-relief programs. These data were used by Lebergott in constructing his unemployment rate estimates for the 1930s. Since World War II the BLS does not count as unemployed those employed in any type of government relief programs, so the Lebergott rates are not consistent with those reported since the 1930s.

As Media Matters for America documented, University of Texas professor James Galbraith criticized the methodology Shlaes used in her book. On November 18, at a Campaign for America's Future conference, Galbraith stated that "the underlying numbers, which Shlaes uses ... do not count the people who actually worked on the New Deal as employed. They count them as unemployed. Why did they do that? Because in retrospect, to give -- to put a charitable construction on it, they wanted to assess the condition of the private economy." Further, Rauchway noted in an October 10 blog post that "if you don't count these people who held jobs as unemployed, you get a different picture of unemployment in the 1930s."

As Media Matters for America has noted, in recent weeks, Will has repeatedly attacked the New Deal. During the November 23 edition of ABC's This Week, Will asked, "Before we go into a new New Deal, can we just acknowledge that the first New Deal didn't work?" He added: "That is, the biggest collapse in industrial production in history occurred in 1937, eight years after the stock market collapse of 1929, five years into the New Deal."

The comments echoed remarks Will made the week before on This Week when he asserted that "one of the ways we turned a depression into the Great Depression that didn't end until the Japanese fleet appeared off Hawaii was that there were no rules, and investors went on strike, because the government was completely improvising." He added: "Net investment was negative through almost all of the '30s because, again, people did not know the environment in which they were operating because the government had the fidgets and would not let rules and markets work." Krugman was also a panelist on the show. He responded:

KRUGMAN: No, the negative net investment was because, you know, when you have 20 percent unemployment and all the factories are standing idle, who wants to build a new one? You don't need to invoke the government to explain that. No, what actually happened was, you know, there was an -- there was a collapse of the financial system, which was not restored for a long time. There was a persistent deep slump in consumer demand and, therefore, no investment demand, and so you were stuck in this trap.

Roosevelt got the economy moving somewhat. By 1937, things were a lot better than they were in 1933. Then he was persuaded to balance the budget, or try to, and he raised taxes and cut spending and the economy went back down again. And it took an enormous public works program known as World War II to bring the economy out of the Depression.

From Charen's November 28 syndicated column:

The conventional wisdom has had a rough time of it lately among scholars. You know the fairy tale. You were probably taught it in school. During the 1920s, America practiced laissez-faire economics. The 1920s were seen, as historian Amity Shlaes put it, as a period of "false growth and low morals." Greedy businessmen got out of control and created a market crash in 1929. President Hoover, obedient to Republican ideas concerning noninterference in the market, did nothing. The economy spiraled into a depression. Roosevelt was elected in 1932, banished fear, inaugurated the New Deal, and put America back to work.

A series of recent books has demolished the myth. Some of Roosevelt's reforms were salutary (the Securities and Exchange Commission, reform of the Federal Reserve) but the New Deal's chief object was never achieved -- it did not solve the nation's unemployment problem. The CATO Institute's Jim Powell points out in "FDR's Folly," "From 1934 to 1940, the median annual unemployment rate was 17.2. At no point during the 1930s did unemployment go below 14 percent. ... Living standards remained depressed until after the war."

From Will's November 30 Washington Post column:

The assumption is that the New Deal vanquished the Depression. Intelligent, informed people differ about why the Depression lasted so long. But people whose recipe for recovery today is another New Deal should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending -- President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt -- unemployment was 17.2 percent.

"I say after eight years of this administration we have just as much unemployment as when we started," lamented Henry Morgenthau, FDR's Treasury secretary. Unemployment declined when America began selling materials to nations engaged in a war America would soon join.

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