The New Deal and Recovery, Part 2: Inventing the New Deal

by | Sep 2, 2020 | Money & Banking

The New Deal wasn't a grand scheme at all, but an assemblage of steps and programs, many of which were decided upon or concocted only after Roosevelt took office.

“It is difficult to think of an important aspect of the New Deal to which Roosevelt had not plainly pledged himself before taking office. …Roosevelt had campaigned on a clear and specific New Deal Program.” (Eric Rauchway, Winter War, pp. 15-17.)

To understand the New Deal’s shortcomings as a grand scheme for achieving economic recovery, it helps to realize that the New Deal wasn’t a grand scheme at all, but an assemblage of steps and programs, many of which were decided upon or concocted only after Roosevelt took office.

But if I’m to expect you to see the New Deal that way, I must first convince you that Eric Rauchway’s opposite claim isn’t true. Hence this post, which (unlike most others to come) is about history, but not so much about economics. If you’re only here for the econ., you might skip it without fear of not being able to follow others in this series.

Rauchway’s Revisionism

According to Rauchway, most of the New Deal’s important components had been planned and pledged to well before FDR took office. Rauchway’s view goes hand-in-hand with his portrayal of the New Deal as a well-oiled, supercharged recovery machine. In contrast my own view of the New Deal, as a set of make-shift remedies, makes it seem more likely to have had the U.S. economy bucking and stalling like an ill-tuned jalopy.

Of the two views, mine is (for once) the more orthodox. Although journalist Robert Wright took poetic license when he wrote, back in 2001, that “FDR threw a bunch of policies against the wall, and the ones that stuck became the New Deal,” his opinion isn’t all that far removed from what most New Deal historians believe. Roger Daniels, in his 2015 book Road to the New Deal, even goes so far as to say that “The notion that when Franklin Roosevelt became president he had a plan in his head called the New Deal is a myth no serious scholar has ever believed.”

Rauchway is certainly a serious scholar. So, how has he come to his unorthodox view? In brief, he argues (1) that the New Deal must have been a coherent and well-advertised program, as well as a radical one, for otherwise Hoover couldn’t have made opposition to it the cornerstone of his own presidential campaign; (2) that the memories and motives of FDR’s own colleagues and advisors who insist there was no plan can’t be trusted; (3) that other historians haven’t examined the right documents; and (4) that the orthodox view can’t possibly be right because it implies that Roosevelt misled voters, depriving his program of “democratic legitimacy,” whereas it’s clear that  democratic legitimacy “was the New Deal’s ultimate goal.”

Most of these arguments seem easily answered. Concerning “democratic legitimacy”: that Roosevelt didn’t tell voters just “what he was going to do” needn’t mean that he hoodwinked them. It could (and did in fact) mean that he himself had no precise idea what he would do once in office. Concerning Hoover: although he did say things like “they [i.e., the Democrats] are proposing changes and so-called new deals which would destroy the very foundations of our American system,” it is of course common for candidates to accuse their opponents of harboring sinister plans. If Hoover’s frightening portrayal of FDR’s plans was unusual, it was not because it accurately represented the avowed designs of FDR or his party, but because Hoover appears to have sincerely believed it.{1] Concerning other historians missing key sources: if so, then Rauchway ought to supply direct proof of his own thesis from these. But he never does. He merely succeeds in showing that a few elements of what became the New Deal were prefigured by FDR’s campaign promises—something no one has ever disputed.

What Rauchway does do is either ignore or dismiss key documents declaring that there was no advance New Deal plan, including the testimonies of Raymond Moley and Frances Perkins, two of FDR’s closest associates. According to Moley, the first member of FDR’s “brain trust,” believing that New Deal policies were “the result of a unified plan” is like believing “that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter’s tools, and chemistry sets in a boys bedroom could have been put there by an interior decorator.” Although he cites Moley extensively, Rauchway doesn’t mention this statement.

Dissing Frances Perkins

Moley eventually parted company with FDR, so perhaps his testimony is jaundiced. The same certainly can’t be said of the testimony of Frances Perkins, who first served with FDR in Albany and was secretary of labor for all four of his terms in Washington. In The Roosevelt I knew, her 1946 memoir, Perkins writes:

The notion that the New Deal had a preconceived theoretical position is ridiculous. The pattern it was to assume was not clear or specific in Roosevelt’s mind, in the mind of the Democratic party, or in the mind of anyone else taking part in the 1932 campaign.

Not clear or specific.” Although Rauchway does refer to this passage, he avoids quoting these words flatly contradicting his own. Instead he opines, condescendingly, that while “Perkins may have been a great secretary of labor… she was a poor historian: not a word of her remarks is true.”

Why would Perkins not tell the truth?  “In reminiscing,” Rauchway says, “she may merely have forgotten how things stood thirteen years before.” But thirteen years isn’t so long, after all; and “ridiculous” isn’t the sort of adjective one uses to describe something one isn’t certain about. Nor, for that matter, is it likely that Perkins’ foggy memory inspired not only the passage in question,  but several others to the very same effect that Rauchway doesn’t quote. Passages like

When Franklin Roosevelt and his administration began their work in Washington in March 1933, the New Deal was not a plan with form and content. It was a happy phrase he had coined during the campaign, and its value was psychological. It made people feel better, and in that terrible period of depression they needed to feel better,


It is important to repeat, the New Deal was not a plan, not even an agreement, and it was certainly not a plot, as was later charged.

This last statement reads almost as if Perkins wanted to make sure no one would attribute her other statements to mere heedlessness.

There are also other passages referring to specific New Deal programs. For example, Perkins observes that as late as April 1933 FDR’s “mind was as innocent as a child’s of any such program as the NRA.” In fact, far from being confined to scattered obiter dicta, Perkins’ claim that the New Deal wasn’t planned in advance forms one of her memoir’s central themes.

But Rauchway has an answer to this as well. “In reminiscing,” he says, “Perkins may have wanted to minimize Roosevelt’s own role in the New Deal so she could maximize her own.” To call this charge against Perkins, who has been described as “a modest woman” who “didn’t care if other people took credit,” and who by all accounts was fiercely loyal to FDR, “far-fetched,” is being charitable. “Shabby” is more like it.

The New Deal and the FDR’s Campaign

Let’s now consider the facts of the case. They are, in brief, that while a few elements of what the “New Deal” came to mean in practice were spelled-out clearly enough beforehand, many others, including most of the New Deal’s “recovery” components, weren’t. Nor is it likely they could have been anticipated, or that Roosevelt would have divulged them if they had been.

As for what Roosevelt did make explicit, until his nomination his most revealing remarks came during his May 22, 1932 speech at Oglethorpe University. Here he spoke of “the vital necessity of planning for definite objectives.” But if Roosevelt already had a plan in mind he revealed nothing of its content. Instead he declared that “the country demands bold, persistent experimentation. It is common sense to take a method and try it:  If it fails, admit it frankly and try another.  But above all, try something.” This was indeed an accurate indication of what was to come. But what it described was more like a plan to throw policies against a wall to see which ones stuck than a “clear and specific New Deal program.” The closest Roosevelt came in his speech to announcing even part of such a program was in declaring it “self-evident that we must… restore commodities to a level approximating their dollar value of several years ago or else see more defaults or loan write-downs.” Even so, he didn’t say how he planned to get “commodities” up again.

From the opening of the Democratic National Convention on June 27th, 1932, the Democratic platform became the official statement of FDR’s intentions, to which he solemnly agreed to adhere. “We believe,” it declared,

that a party platform is a covenant with the people to have [sic] faithfully kept by the party when entrusted with power, and that the people are entitled to know in plain words the terms of the contract to which they are asked to subscribe.

If there was ever an opportunity for the Democrats to reveal a “clear and specific” New Deal program, this was surely it. But while the platform listed some measures that would indeed be part of the actual New Deal, as far as the New Deal’s recovery initiatives are concerned, it was more misleading than prescient. The platform promised:

  • “an immediate and drastic reduction of governmental expenditures…to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government”;
  •  “a federal budget annually balanced on the basis of accurate executive estimates within revenues, raised by a system of taxation levied on the principle of ability to pay”;
  • “a sound currency to be preserved at all hazards and an international monetary conference called on the invitation of our government”;
  • “strengthening and impartial enforcement of the anti-trust laws, to prevent monopoly and unfair trade practices, and revision thereof for the better protection of labor and the small producer and distributor.”

The platform also “condemn[ed] the extravagance of the [Hoover administration’s] Farm Board,” including its “unsound policy of restricting agricultural products to the demands of domestic markets.”

As we’ll see, Roosevelt did in fact try to cut spending and balance the federal budget. But he was unsuccessful on both scores; and today it is the growth in spending, and especially in deficit spending, during the New Deal that is said to have contributed to the recovery as an early application of supposedly “Keynesian” thinking. (I’ll address Keynes’s actual influence on Roosevelt’s policies in a later post.) As for “strengthening and impartial enforcement of the anti-trust laws,” the National Recovery Administration, one of the actual New Deal’s centerpieces, would do just the opposite. A second New Deal centerpiece, the Agricultural Adjustment  Association, would, through its “domestic allotment” plan, implement the very “policy of restricting agricultural products to the demands of domestic markets” that the platform expressly condemned.{2]

Turning to monetary policy, that the “bank holiday” and Emergency Banking Act were adventitious measures rather than ones FDR had been planning all along should go without saying. FDR also remained adamantly opposed to deposit insurance—his position throughout his campaign—until the very eve of the passage of the Banking Act of 1933. According to Jonathan Alter (The Defining Moment, p. 305), FDR had “hoped the whole banking reform bill would die,” and threatened to veto it, but ultimately signed it because he realized his veto would be overridden. The promised “international monetary conference” was actually scuttled by Roosevelt. As for the other monetary measures that were to be chiefly responsible for aggregate demand growth during the New Deal era—suspending gold payments, and devaluing the dollar—the platform never so much as hints at them. On the contrary: it assures voters that a “sound currency is to be preserved at all hazards.”

Some commentators claim that the phrase “sound currency” was vague enough to avoid committing Roosevelt to maintaining the  gold standard; and in his 1936 book Half Way with Roosevelt Ernest Lindley explains that the word “gold” wasn’t mentioned because “the silverites and other advocates of price-lifting by monetary action were strong enough to keep it out.” The fact remains, however, that “sound currency” is just a variant of “sound money,” which itself comes from the French “monnaie sonnante et trébuchante.” This literally means “money that rings and stumbles”; but it stands for full-weight or standard, as opposed to debased, precious metal coins, which actually sound different than their debased counterparts when tossed onto and allowed to “stumble” on a hard surface. In other words, to practically everyone who heard it in 1932, including banker James Warburg, who was to be one of Roosevelt’s more savvy financial advisors, and who felt bitterly betrayed by his decision to go off gold, the Democrats’ promise to preserve “sound currency” could mean nothing other than that FDR did not plan to toy with the gold standard.

Once again: none of this is meant to deny that the platform did point, if only vaguely, to some actual New Deal measures, including its extensive public works program, the Glass-Steagall Act’s separation of investment from commercial banking, the TVA, unemployment insurance, and social security. But the anticipated bits almost all had to do with relief and reform, rather than recovery. So far as the voting public was concerned, the New Deal’s recovery plan, to the extent that it was a plan at all, was a black box.

Nor is it the case that Roosevelt clarified matters by explicitly departing from any part of the platform. Instead, in his nomination acceptance speech FDR said, “I have many things on which I want to make my position clear at the earliest possible moment in this campaign. That admirable document, the platform which you have adopted, is clear. I accept it 100 percent. …And you can accept my pledge that I will leave no doubt or ambiguity on where I stand on any question of moment in this campaign.” While it certainly can’t be said that FDR led a campaign free of “doubt and ambiguity,” he gave the public no reason to doubt that he meant to keep his word.

A Secret New Deal?

Nor, to judge from press reports, did the public doubt him. That is, they believed that the New Deal would be just as the Democratic platform described it, and not a far more ambitious program that would radically depart from that platform in many respects. Reporting just after the election, The Economist expressed a common opinion in saying that it didn’t

anticipate that any very radical experiments will be made. We doubt whether Mr Roosevelt, in any attempt which he may make to lift America from the depression “by her own boot-jacks,” will succeed in evolving measures very different from those formulated and applied during the past two years by Mr Hoover. (“The New President,” November 12, 1932).

Although it might have been expected to help the public to form a more accurate picture of the coming New Deal, the interregnum—that is, the weeks separating FDR’s election from his inauguration—was marked by increasing rather than diminishing doubts as to just what the president-elect had in mind. With just three weeks to go before FDR took the oath of office, The Economist  (February 11, 1933) observed that “The market has tacitly suspended action and judgment until the new Roosevelt administration has assumed office and declared its policy on major questions” (my emphasis).  It would, of course, have been perfectly unnecessary for the incoming administration to “declare its policy on major questions” had FDR “campaigned on a clear and specific New Deal Program” all along.

That he didn’t, and that the specifics of the actual New Deal would often run counter to FDR’s less-vague campaign pledges, raises two possibilities. One is that there really was no well-worked-out New Deal plan, as Raymond Moley and Frances Perkins insisted. The other, which we must also consider, is that there was such a plan, blueprinting more-or-less what took place, but that FDR kept it under his hat. This last possibility appears especially plausible with respect to FDR’s plans for the dollar. After all, if FDR did in fact intend all along to suspend the gold standard and eventually devalue the dollar, he could hardly have revealed these parts of his plan in advance! During the campaign Hoover repeatedly accused FDR of harboring plans to abandon the gold standard in favor of “fiat money”; and by the closing weeks of Hoover’s presidency many had begun to suspect that Hoover might be right. Were they just falling for Hoover’s FDR-bogeyman, or had Hoover been onto something after all?

The answer is a little of both. FDR wanted to keep his options open. ”I do not want to commit to the gold standard,” he told Brains Trust member Adolf Berle a few days before the election. “I haven’t the faintest idea whether we will be on the gold standard on March 4th or not; nobody can foresee where we shall be’.” This was an astute position; but it spoke not of a definite plan for gold but of the folly of trying to formulate any such plan.

And that seems to have been FDR’s position all along. Having carefully looked into the matter, Sebastian Edwards concludes

that during the primary and presidential campaigns, neither Roosevelt nor his inner circle had a strong view on gold or the dollar. …Tinkering with the value of the currency was a possible area for experimentation; but it was an option with a relatively low priority. …Until inauguration day FDR’s views on the gold standard were ambivalent and noncommittal; he was neither a diehard fan of the system, nor was he a severe critic.

Nor, Edwards adds, had the Roosevelt team undertaken or commissioned any “studies that examined in detail what would be the possible consequences of abandoning the gold standard.” In short, while FDR may have contemplated abandoning the gold standard, he certainly hadn’t planned on it. What’s more, nothing changed during the interregnum: “To put it simply,” Edwards says, “on March 4th, the day Franklin Delano Roosevelt was to take over as President, there was no concrete or definitive plan for taking the U.S. off gold and devaluing the dollar.”

What was true of FDR’s secret plans for the dollar was almost certainly true of his other secret New Deal plans, namely, that he didn’t have any. That is, there is no reason to disbelieve what Francis Perkins, Raymond Moley, and most historians have had to say on the subject.


To conclude: “New Deal” rhetoric and revisionist histories notwithstanding, FDR didn’t come to Washington equipped with any well worked-out plan for ending the Great Depression. Instead, his recovery plan was mostly rushed together during his famous first 100 days in office. That some components of this hastily-assembled program should have failed to contribute to the recovery, and that some may even have hindered it, should not seem all that surprising. But this is merely speaking of probabilities. I still have to prove that certain New Deal programs did in fact impede recovery, and did so enough to justify the claim that, taken as a whole, the New Deal, considered as a program for economic recovery, was a flop.


[1] As evidence that Hoover was fully aware of the New Deal’s various elements, and that these must therefore have been planned and made public before FDR took office, Rauchway and others like to cite Hoover’s October 21, 1932 Madison Square Garden speech, in which he famously characterized that year’s presidential campaign as “a contest between two philosophies of government.” But far from proving that Hoover knew exactly what steps FDR planned to take once in office, that speech proves just the reverse. In it, Hoover makes it clear that the “proposed New Deal” against which he’s campaigning isn’t one actually spelled out either by FDR or by the Democratic platform he’d vowed to support. Instead, Hoover says, it was necessary to “go deeper” than that platform to “penetrate to the full significance of the changes which our proponents are attempting.”  To do this Hoover first looked, not into anything FDR himself had said, but at “the legislative acts…sponsored and passed in the Democratic-controlled House of Representatives in the last session of Congress.” Needless to say, FDR played no part in those proceedings. Hoover also considered “the type of leaders who are campaigning for the Democratic ticket,” specifically naming Senators Norris, La Follette, Cutting, Wheeler, and (Huey) Long, as well as William Randolph Hearst. Those who know anything about American politics at the time will recognize this as a list of the more radical populists and progressives of both parties who mainly agreed only in having no use for Hoover. The New Deal “plan” Hoover assembled from these varied sources was an effective bogeyman. But so far as any of FDR’s own revelations were concerned, it was almost entirely fictional. Indeed, FDR scoffed at Hoover’s accusations, declaring among other things that “The President is seeing visions of rubber dollars” (The New York Times November 5, 1932). To call Rauchway’s attempt to pass-off Hoover’s speculations as proof of the existence of a well-worked out and publicized New Deal plan misleading is being generous. [Note added 6/30/2020, 12:30PM.]

[2] Rauchway (Winter War, p. 97) ignores Roosevelt’s pledge when he writes that “he indicated his support for a “domestic allotment or something similar to it” by “ruling out other production-controlling policies.” Because the domestic allotment was itself the one agricultural production-control policy expressly ruled-out by the Democratic platform, the fact that Roosevelt may also have ruled out others can hardly be reckoned an instance of his having offered voters a “clear and specific” indication of what he would do once in office. What happened in fact is that Henry Wallace, upon becoming Roosevelt’s first secretary of agriculture, disregarded the Democratic platform’s condemnation of the domestic allotment idea—which had been put in it by then Tennessee Senator (and future secretary of state) Cordell Hull—and instead based the AAA on the Republican platform, which among other things had called for “control of [agricultural] production to such volume as will balance supply with demand,” where “demand” was understood to mean domestic demand alone. (See former Iowa Senator Smith Brookhart’s May 22, 1938 letter to Cordell Hull, here at pp. 292ff.) The story is complicated by the fact that while many Republican Senators and Congressmen, as well as some Farm Board officials, favored a domestic allotment plan, Hoover himself vehemently opposed it while favoring a voluntary alternative. The Republican platform left room for either option.

This post first appeared first on Alt-M.

George Selgin is a Professor of Economics at the University of Georgia's Terry College of Business. He is a senior fellow at the Cato Institute. His writings also appear on His research covers a broad range of topics within the field of monetary economics, including monetary history, macroeconomic theory, and the history of monetary thought. He is the author of The Theory of Free Banking, Bank Deregulation and Monetary Order, and several other books. He holds a B.A. in economics and zoology from Drew University, and a Ph.D. in economics from New York University.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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