Franklin Delano Bush

by Don Boudreaux on October 31, 2008

in Government Intervention, History, Myths and Fallacies

Here’s a letter I sent on October 20th to the Washington Times:

Dear Editor:

Your equating George W. Bush with FDR is spot-on (“Franklin Delano Bush,” October 20).  Both presidents recklessly increased government’s role in the economy – a move that proved (in FDR’s case) and will prove (in Bush’s case) to do nothing but saturate the economy with such uncertainty as to frighten away entrepreneurs and investors.

But popular history will almost surely remember Bush, not as a second FDR, but as a second Herbert Hoover.  The myth will be made that Bush was a staunch free-marketeer who was succeeded in the Oval Office by a charismatic saint whose hyperactive interventions saved the economy (even though precious little evidence of economic salvation will appear in the data).  History will forget Bush’s interventions just as it has forgotten Hoover’s – as it has forgotten that Hoover signed the largest tariff hike in U.S. history; as it has forgotten that Hoover tried to create jobs by deporting hundreds of thousands of Mexicans; as it has forgotten that Hoover signed the Emergency Relief and Construction Act, the Federal Home Loan Bank Act, and created the Reconstruction Finance Corporation; as it has forgotten that, with the Revenue Act of 1932, Hoover raised the top marginal tax rate on personal incomes from 25 percent to 63 percent (in addition to raising the corporate-tax rate).

History will repeat itself, blaming capitalism for a problem caused and intensified by government interventions.

Sincerely,
Donald J. Boudreaux

By the way, even the Washington Post — no catacomb of free-market sympathies — understands that blaming capitalism for today’s financial turmoil is absurdly simplistic.

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{ 50 comments }

drtaxsacto October 31, 2008 at 11:24 am

Spot on Don!

Methinks October 31, 2008 at 11:29 am

bravo.

tw October 31, 2008 at 11:43 am

Agree completely, Don.

One thing that has bugged me throughout the mortgage mess is the politicians (echoed throughout the media) who proclaim the mess was caused by no regulations…or free markets…or laissez faire economics.

I wish that one smart politician or media member (note: oxymorons?) had printed out every single regulation in the mortgage industry and put them in a huge binder to illustrate just how silly that hyperbole really is. I'd bet that binder would be about as thick as our tax code.

John V October 31, 2008 at 11:55 am

Well said.

The difference of course in how they are remembered is Party Affiliation and Rhetoric.

What you do isn't half as important as what you SAY you will do and WHY you are doing it.

John V October 31, 2008 at 11:59 am

BTW, Dr. Boudreaux,

Your "BTW" comment about the Wash Times will never be accepted by many people because that newspaper has a conservative/GOP slant. Thus, the label "free market sympathies" will necessarily be attached to that slant because of the intellectual laziness by many of linking the two as if they were the same thing.

Don Boudreaux October 31, 2008 at 12:04 pm

John V:

My "By the way" comment refers to an editorial by the Washington POST (not the Washington Times).

Don

John V October 31, 2008 at 12:13 pm

Oops. Sorry, Dr. Bourdeaux.

I didn't catch that. :)

mike farmer October 31, 2008 at 12:49 pm

Exactly. There is a concerted effort to frame free enterprise as the culprit. Even if Obama (if he wins) is forced to take free market measures eventually to get out of the bog, credit will be given to government social engineers who master-minded a recovery.

Chris October 31, 2008 at 12:59 pm

tw –

The "Lack of Regulation" argument is silly. OF COURSE the "right regulations" would have prevented all this mess. But, that's true of nearly every disaster — the "right regulations" would have prevented 9/11, the Titanic, the JFK assassination and maybe even the recent Indiana Jones movie.

The problem is that nobody proposed and really pushed for those regulations. It isn't enough to say "regulation would have prevented the problem." At minimum, they have to say "the regulations I proposed on XX/YY/ZZ AND fiercely fought for would have prevented this problem and not caused a raft of new, more serious, problems."

Oil Shock October 31, 2008 at 1:12 pm

Chris,

Don't be silly. There are no right regulations. All regulation have negative consequences, most of them unintended.

muirgeo October 31, 2008 at 2:13 pm

"Both presidents recklessly increased government's role in the economy – a move that proved (in FDR's case) and will prove (in Bush's case) to do nothing but saturate the economy with such uncertainty as to frighten away entrepreneurs and investors."

Is this a statement of fact? Can you back it up with some evidence or are you just proselytizing?

Cause if I was to proselytize I would claim the markets and credit are frozen because all the banks don't know the value of what they hold or the value of what others are holding… this all a result of their own doing purchasing opaque paper and leveraging assets to ridiculous degrees that had nothing to do with government regulation, intervention or oversight.

Martin Brock October 31, 2008 at 2:34 pm

The current correction is not remotely comparable to the '87 correction, but Reagan's reaction to the Black Monday '87 is for me one of the most memorable and admirable moments of his administration. He said, "So what?" Then I suppose he took a nap.

Matt October 31, 2008 at 2:45 pm

I find comfort knowing that this letter is being archived as a piece of history.

Some student in 50 years will be studying "The Financial Crisis of 2008" in history class and will be able to search and find Dr. Bourdeaux's letter about Bush's "roll in the crisis".

In this way, I optimistically disagree, future popular history will be studied very differently by the general public.

muirgeo October 31, 2008 at 3:10 pm

For those interested in people talking sense ont he issues rather then propping up failed ideology here's a good read.

"The common denominator of everything that has gone wrong so far has been reckless amounts of leverage. The system both nationally and globally is still trying to de-lever as fast as possible, the problem is that everyone is being forced to do it at the same time. 3-month LIBOR is off the charts – not as many believe, because banks don’t trust each other – but because THERE IS NO MONEY LEFT FOR THEM TO LEND TO EACH OTHER."

Oil Shock October 31, 2008 at 3:21 pm

George,

Cool it dude! Don't believe everything you read. Leverage is a function of regulation. During the era of free banking, banks failed with a small fraction of the recent levels of leverage. So leverage can be totally blamed on the government intervention.

Banking industry is a cartel, credit is centralized and cartelized and it was the fifth plank in the failed 10 plank ideology of marx.

tarran October 31, 2008 at 4:17 pm

Murigeo,

Of course, there's evidence:

Here is Murray Rothbard's Economic history of the Great Depression.

America's Great Depression

It's full of sources for his data, and describes all of Hoover's attempts to intervene in the economy to bail out his friends, covering what caused the Great Depression to start.

Then you can switch to a history of FDR written by a journalist who supported him early in his white house years:
The Roosevelt Myth

and a political analysis of his administrative philosophy:
A Country Squire in the White House.

It will teach you exactly how Roosevelt came to make his important policy decisions and plan out his economic programme.

Needless to say, Roosevelt's policies tended to be poorly thought out expansions of Hoover's policies (what, you thought hoover didn't intervene in the U.S. economy? that he left it "unregulated"? Wow, I bet when George Bush said the WMD's had been shipped to Syria, you believed him too), with the predictable result of being more devastating the more thoroughly and vigorously they were applied.

Happy reading :)

Trumpit October 31, 2008 at 4:22 pm

"He said, "So what?" Then I suppose he took a nap."

Is that the role of economists as well? Who knew that all economists were suffering from undiagnosed Alzheimers. Perhaps more economists should become B-movie actors, too. "Bedtime for Bush" is coming to a theater near you, 01-20-09, his last day in office.

Don Boudreaux October 31, 2008 at 4:35 pm

Trumpit,

Do you think that biologists would be better scientists or better citizens if, in addition to using the logic of natural selection to explain observed patterns of biological forms and behaviors, they also spent their time advocating the conscious alteration of various species' genes for the alleged purpose of improving the gene-carriers' phenotypes and behaviors?

Sam Grove October 31, 2008 at 4:36 pm

"Bedtime for Bush" is coming to a theater near you, 01-20-09, his last day in office.

And I think many of us here are glad of that.

muirgeo October 31, 2008 at 4:41 pm

Matt,

There are already plenty of archives to look back on. We can see who predicted this problem and who ignored it. We can see who is denying facts and who's explanations fit with the facts.

It's clear to me the ones who predicted it did so on the basis of a sound logic, a good understanding of economic principles and a good regard for history. What we see here on this board and it's archives was a steady and persistent support for the status quote right to the edge of the cliff and even talking how well things were while in free fall. You never saw anyone here point to specifics of regulation that pointed toward impending disaster but now they have absolute certainty that regulation was the problem. And now as the broken pieces of the economy fall all around us we see what are to me are glaring mis-representations of reality all based on polemics, hand-waving and an ideology firmly stuck in cement.

Yes I'm glad this is being documented. But there is a hell of a mess out their caused by this dangerous ideology that's soon to effect each of us in greater and greater degrees. I for one have a brother out of work with 2 small children and am seeing the writing on the wall that I'll have to do more with less to provide for my patients… at least the ones that still have insurance.

And it's all for an ideology that thinks it's OK to starve of the American worker to provide unfathomable wealth for a greedy few.

This ideology that strangles wages strangles demand and strangles growth and always topples over from the massive accumulations of wealth on top. History is replete with its failure and apparently with people who continue to have faith in an idea where none is warranted.

Yes I'm glad this is all being documented.

Oil Shock October 31, 2008 at 4:53 pm
MnM October 31, 2008 at 4:55 pm

"And it's all for an ideology that thinks it's OK to starve of the American worker to provide unfathomable wealth for a greedy few."

…Irony, defined yet again.

Sam Grove October 31, 2008 at 4:58 pm

Straw man slayer is here!
Kill the straw man!

Our hero!

The straw man is dead, long live the straw man.

Sam Grove October 31, 2008 at 5:02 pm

Who predicted the financial chaos?

Ron Paul did.

Who said Fannie Mae and Freddie Mac were sound?

Barney Frank.

muirgeo October 31, 2008 at 5:09 pm

Do you think that biologists would be better scientists or better citizens if, in addition to using the logic of natural selection to explain observed patterns of biological forms and behaviors, they also spent their time advocating the conscious alteration of various species' genes for the alleged purpose of improving the gene-carriers' phenotypes and behaviors?

Posted by: Don Boudreaux

They do Don. Try eating a stalk of native corn (Teosinte) versus the "intelligently designed" and artificially selected forms that good planning has brought to your table. Crop yields are not a result of the invisible hand of evolution they are a result of foresight, observation, societal advancement, political improvement and good planning.

Our advantage as a species is that we ARE planners Don and you think that's a bad thing. I find that incredible especially since you'd prefer some "invisible hand" over thinking and logic that have got us to where we are. A free market society would be a monstrous unnatural hybrid of anything that our biology and evolution prepared us for.

indiana jim October 31, 2008 at 5:11 pm

The Washington Post also says this Don:

"Government must be more selective about manipulating markets; over the long term, business works best when it is subject to market discipline alone. In those cases — and there will and should be some — in which government intervenes on behalf of social goals, its support must be counterbalanced with taxpayer protections and regulation."

You may call the notion that "government" can balance "social goals" with "taxpayer protections" and "regulation" un-simplistic or sophisticated if you like, I think it better qualifies as hubris (it is the kind of nuanced high-toned rhetoric that will muddle thinking to potentially calamitous ends).

MnM October 31, 2008 at 5:21 pm

"They do Don. Try eating a stalk of native corn (Teosinte)"

People aren't plants. You clearly missed his point.

John V October 31, 2008 at 5:26 pm

Muirgeo,

Wow. Do you make this stuff up as you go along? Or is it more likely that come here with a preconceived argument and preconceived strawman of everyone who posts here?

Where in the world do you find material to back up those assertions?

It's as if you go to RedState or LittleGreenFootballs and read stuff and then come back here and pretend you read it here so you can comment.

MnM October 31, 2008 at 5:36 pm

John V, are familiar with the term "shadow boxing"? It's awfully similar to what muigeo does.

John V October 31, 2008 at 5:52 pm

"shadow boxing" makes a nice mental image.

hehehe

muirgeo October 31, 2008 at 5:54 pm

Where in the world do you find material to back up those assertions?

Posted by: John V

John on the "Is Barack a Socialist" post you asserted I couldn't logically make the claim that Democratic presidents consistently preside over better economies then Republican presidents.

I asked you on what basis you claim a free market system would be superior but the thread stopped accepting post.

So on what factual basis does one become an adherant to the free market philosophy? Show me some evidence because I have lots of evidence for my claims of economic performance of presidents based on their party affiliation but I've never seen you guys present a shread of evidence.

And don't fall back on your comparison of socialism to capitalism because that's NOT what we are talking about.

I'm pretty sure you have NO evidence for your claim… it's just a belief system… nothing more.

Oil Shock October 31, 2008 at 6:11 pm

I accept free market just on the basis of freedom/no coercion, regardless of the economic benefits.

If some how it is possible to prove that if we kill all the deadbeats, rest of us would be better of, would you support to kill all the deadbeats?

Regardless of the utilitarian arguments, I support free markets. It just happens that economic freedom brings better prosperity, and thats besides the point.

There are plenty of examples

South Korea versus North Korea
West Germany versus East Germany
Chile verus Rest of South America
India before 1990s verus India after 1990
China before 1979 verus China after 1979
Vietnam before 2000 versus Viet after 2000
HK, Taiwan versus Mainland China
Dominical Republic versus Haiti
Saudi Arabia versus UAE

These are examples of relative freedoms

United States Until Wilson Presidency ( Building upto the most prosperous nation on earth ) versus Now a crumbling empire over the last 100 years.

John V October 31, 2008 at 6:11 pm

Muirgeo,

You totally avoided my question. And you misrepresent what I said in the other thread.

Besides, I answered you twice in the other thread but the comments were closed.

tarran October 31, 2008 at 6:35 pm

Our advantage as a species is that we ARE planners Don and you think that's a bad thing. I find that incredible especially since you'd prefer some "invisible hand" over thinking and logic that have got us to where we are. A free market society would be a monstrous unnatural hybrid of anything that our biology and evolution prepared us for.

Muirgeo, with that comment you demonstrate you have no clue what don is talking about.

I'll explain. Don is saying rape is bad. You are arguing that Don is crazy, because we breed using sexual reproduction.

I'll point you to Don's article in the CSM:

A central plan, by its nature, denies to individuals the right to choose and to innovate. It replaces a multitude of individual plans – each of which can be relatively easily adjusted in light of competitive market feedback – with one gigantic, monopolistic, and politically favored plan.

Sam Grove October 31, 2008 at 7:00 pm

Our advantage as a species is that we ARE planners Don and you think that's a bad thing.

I doubt that Don thinks that planning is a bad thing. You love to slay straw men.

The point you prefer to miss is that a free market consists of millions of planners planning their own lives and business endeavors as opposed to a "planned" economy where people's fates are subject to a plan created by a relative few.

In a free market, people can succeed or fail and learn from their failure and modify their plan.

In a "planned" economy, when failure comes, everyone gets to bear the cost, except for the planners who blame the failure on someone else and continue with their plans, free from the constraints imposed by competition and consumer choice.
(The recent bailouts come to mind.)

We are even now bearing the fruits of government participation in the economy as we get to pay for the foolish speculations of a few well-connected "financiers", thanks to a government empowered and authorized by "progressive" thinking.

I find that incredible especially since you'd prefer some "invisible hand" over thinking and logic that have got us to where we are.

Your straw man arguments tell us that you have yet to comprehend the functioning of the market.

Adam Smith did not say: "guided by an invisible hand", he said: "as if guided by an invisible hand".

We advocates of a free market understand that the opportunity to profit by production and selling what people need and want is what guides the activity of individuals acting as entrepreneurs and that their activities are best constrained to satisfying customers when there is free entry into the market thus providing competition for customers, giving them CHOICE.

We also understand that many people will cheat if they can and the availability of political power is the favored mode of cheating by those able to effect political influence.

Now, tell us. Do you think the expansive credit policies of the FED have anything to do with this financial turbulence, or not?

tarran October 31, 2008 at 7:07 pm

Sam,

You are using too complicated an argument. I think the only way to get through to muirgeo is to use simple, brutal arguments.

Don says rape is bad. Murigeo says Don is crazy because we need sexual reproduction for our survival as a species.

brotio October 31, 2008 at 7:20 pm

"Muirgeo,

You totally avoided my question. And you misrepresent what I said in the other thread.

Besides, I answered you twice in the other thread but the comments were closed." – John V

John,

If you're new to the Cafe, you might not realize that you've already answered Mierduck two more times than you're ever likely to get a direct response from him. Mierduck does not answer direct questions directly.

muirgeo October 31, 2008 at 7:29 pm

I accept free market just on the basis of freedom/no coercion, regardless of the economic benefits.

OilShock

Kinda what I thought. So even if it is less ecomically effecient and even if free markets lead to loss of competitive markets because of monoplies and even if it means most people are living in poverty to the benifit of a privledged few you prefer "free markets"?

I suggest you read some historical references of the markets that might be said to be the closest thing to free markets.

Maybe start here and read the populist party platform from a time of very unregulated markets at the trun of the last century.

Populist Party Platform, 1892 (July 4, 1892)

PREAMBLE
The conditions which surround us best justify our co-operation; we meet in the midst of a nation brought to the verge of moral, political and material ruin. Corruption dominates the ballot-box…. The people are demoralized;… public opinion silenced…. homes covered with mortgages, labor impoverished, and the land concentrating in the hands of capitalists. The urban workman are denied the right to organize for self-protection, imported pauperized labor beats down their wages… and [we] are rapidly degenerating into European conditions. The fruits of the toils of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind…. From the same prolific womb of governmental injustice we breed the two great classes ­ tramps and millionaires.

Is that what you want Oilshock? Does that sound like a free society? If you're a middle class person arguing for freemarkets you are an idiot in my opinion because you are arguing that you'd like to be a pauper for all practical purposes. A "FREE" pauper but a pauper none-the-less.

muirgeo October 31, 2008 at 7:31 pm

Muirgeo,

You totally avoided my question. And you misrepresent what I said in the other thread.

Besides, I answered you twice in the other thread but the comments were closed.

Posted by: John V

EXACTLY!!

muirgeo October 31, 2008 at 7:33 pm

Where in the world do you find material to back up those assertions?

Posted by: John V

I didn't answer because I have no clue what assertions you are talking about.

muirgeo October 31, 2008 at 7:38 pm

If some how it is possible to prove that if we kill all the deadbeats, rest of us would be better of, would you support to kill all the deadbeats?
Oilshock

Sure lets kill all the CEO's and Wall Street paper pushering deadbeats… we'd certainly be better off. Just one of these deadbeats steals more from the productive economy then a 100,000 welfare recipients.

brotio October 31, 2008 at 7:58 pm

"Sure lets kill all the CEO's and Wall Street paper pushering deadbeats… we'd certainly be better off. Just one of these deadbeats steals more from the productive economy then a 100,000 welfare recipients." – Mierduck

Because Mierduck doesn't comprehend what a CEO does, or what happens on Wall Street, he presumes they do nothing.

MnM October 31, 2008 at 8:04 pm

"Sure lets kill all the CEO's and Wall Street paper pushering deadbeats… we'd certainly be better off. Just one of these deadbeats steals more from the productive economy then a 100,000 welfare recipients."

Posted by: muirgeo | Oct 31, 2008 7:38:37

That's some bleeding heart you've got there.

You don't understand what they do, so it's clearly theft. Brilliant.

tarran October 31, 2008 at 8:34 pm

I see the Hippocratic oath is a thing of the past then…. ;)

Actually, it's a good thing that few doctors do take the Hippocratic oath. I believe that it includes a vow never to do surgery, which in the days before anti-biotics and any understanding of bacteria was defensible but would now be indefensibly neglectful.

John V October 31, 2008 at 8:35 pm

Brotio,

I am well acquainted with Muirgeo's tactics.

Stranger October 31, 2008 at 8:44 pm

Spot on with the Hoover comments; in fact, if memory serves, one of FDR's closest advisers, Rexford Tugwell, claimed much of the new deal was simply a continuation of what Hoover had already begun.

John V October 31, 2008 at 8:49 pm

Muirgeo,

You have no idea which of your assertions I'm talking about?

Let's see:

We can see who is denying facts and who's explanations fit with the facts.

It's clear to me the ones who predicted it did so on the basis of a sound logic, a good understanding of economic principles and a good regard for history. What we see here on this board and it's archives was a steady and persistent support for the status quote right to the edge of the cliff and even talking how well things were while in free fall.

You say this as if to imply that no libertarians were not warning of looming problems. Patently false and you know it. You just choose to pretend otherwise.

Your assertion that board is a support of the status quo is incredibly false to the point of being intellectually criminal and you know that too. Explain.

But there is a hell of a mess out their caused by this dangerous ideology that's soon to effect each of us in greater and greater degrees.

BS. Explain this one too.

And now as the broken pieces of the economy fall all around us we see what are to me are glaring mis-representations of reality all based on polemics, hand-waving and an ideology firmly stuck in cement.

Oh brother. Explain here as well.

And it's all for an ideology that thinks it's OK to starve of the American worker to provide unfathomable wealth for a greedy few.

OMG. Go back to daily kos. Care to explain?

This ideology that strangles wages strangles demand and strangles growth and always topples over from the massive accumulations of wealth on top. History is replete with its failure and apparently with people who continue to have faith in an idea where none is warranted.

Yes I'm glad this is all being documented.

And finally, you can explain this whopper too.

Sam Grove October 31, 2008 at 8:54 pm

Muirgeo is well versed in the official version of history.

He took the blue pill.

muirgeo October 31, 2008 at 9:42 pm

Because Mierduck doesn't comprehend what a CEO does, or what happens on Wall Street, he presumes they do nothing.

Posted by: brotio

No they do worse then nothing you Ding Dong. They destroyed the economy for personal short term gain. And apparently they hold hostages like you who suffer Stockholm Syndrome and defend your own abusers.

MnM October 31, 2008 at 9:50 pm

Hear that brotio, you DING DONG!, you're just a hostage and you're too stupid to understand what's really going on.

Luckily the Good Doctor is here to help you with your SS.

/sarcasm

This is getting tired and predictable.

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