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Aug 17, 2013

Roosevelt Fights the Depression

Government:  We love farmers. We will help them by raising their prices.
Mike:  How?
Government:  By destroying their crops and paying them not to grow more.
Mike:  Hold on. I will have to pay more.
Government:  Sorry. You don't see the big picture.
Mike:  You don't see me at all.

Econlog by David HendersonGalbraith and the Southern Sharecroppers
08/16/13 - Econlog by David Henderson

[edited]  The government's goal was to reduce output and thus raise prices for crops. This helped farmers, but it hurt everyone else. You don't make people better off in general by reducing production and consumption. The only way to increase a nation's real income is to increase its real production.

Farmers received so-called "allotment payments" to not grow crops. An unintended and totally predictable consequence was that farmers no longer needed sharecroppers. Sharecroppers were mainly in the South and were already in bad shape. They suddenly found themselves out of work, with no crops to grow.

Did Galbraith and Steinbeck Ever Discuss This?Econlog by David Henderson
08/17/13 - Econlog by David Henderson

[edited]  President Franklin D. Roosevelt's NYTimes - FDR's Disastrous Experimentagricultural policy in 1933 was to pay farmers not to grow crops and to destroy crops and animals in order to drive prices up. This did increase prices, and more people went without or starved because of this.

Economist John Galbraith knew this. Yet, Galbraith's friend John Steinbeck attributed those policies to farmers rather than to the government. I wonder if Galbraith ever told Steinbeck the truth: the criminal here was Franklin D. Roosevelt. He's the man against whom Steinbeck should have directed his wrath.

In "The Grapes of Wrath", Steinbeck describes that farmers sprayed oranges with kerosene to make them inedible, and what this meant.

There is a crime here that goes beyond denunciation. There is a sorrow here that weeping cannot symbolize. There is a failure here that topples all our success.

The fertile earth, the straight tree rows, the sturdy trunks, and the ripe fruit. And children dying of pellagra must die because a profit cannot be taken from an orange. And coroners must fill in the certificates "died of malnutrition" because the food must rot, must be forced to rot.

The people come with nets to fish for potatoes in the river, and the guards hold them back; they come in rattling cars to get the dumped oranges, but the kerosene is sprayed. And they stand still and watch the potatoes float by, listen to the screaming pigs being killed in a ditch and covered with quicklime, watch the mountains of oranges slop down to a putrefying ooze; and in the eyes of the people there is a failure; and in the eyes of the hungry there is a growing wrath.

In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage.

See the article at Collecting My ThoughtsNew Deal Spending
Henry Morgenthau Jr. was Treasury Secretary to FDR in 1939.

We have tried spending money. We are spending more than we have ever spent before and it does not work. I say, after eight years of this administration, we have just as much unemployment as when we started, and an enormous debt to boot!

Click to the articleCash for Clunkers Folly
09/2010 - Boston.com by Jeff Jacoby   (v)Via Cafe Hayek

FDR's wrongheaded policies are promoted by today's government. We can supposedly increase prosperity by destroying property that would be useful to poorer people. Government acts to help specific people by harming people in general.

[edited]  Prices for used cars are up 10% from last year, partly from increased demand for used vehicles in a poor economy.

A bigger reason is that the supply of used cars is artificially low because of the government's hare-brained Car Allowance Rebate System, "Cash for Clunkers".

The government paid up to $4,500 to subsidize trading-in an old car and buying a new one with better gas mileage. The trade-in had to be driveable. Then, dealers had to chemically wreck the engine and crush the body. This destroyed hundreds of thousands of good automobiles.

Congress and Obama claimed "success beyond anybody’s imagination." Yes, if success is giving out money to buy a car most people would buy anyway, and wiping out productive assets that could provide value to other consumers.

The environmental benefits cost $237 per ton of reduced carbon emissions, compared to $20 per ton in the carbon offset market.

Click for the articleA Few Words About Policy
07/2009 - Easy Opinions

How do our representatives know that their legislation will help anything? The legislative language is less important than the research showing that the legislation will be of good effect. Where are the research papers that support the bills? This research has to be there. We need to see it.

No research? Then at least show me the notes on the cocktail napkin.