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A Cheap Way to Win 2012

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Burton Folsom Jr. is the author of New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America. The product description reads:

In this shocking and groundbreaking new book, economic historian Burton W. Folsom exposes the idyllic legend of Franklin D. Roosevelt as a myth of epic proportions. With questionable moral character and a vendetta against the business elite, Roosevelt created New Deal programs marked by inconsistent planning, wasteful spending, and opportunity for political gain — ultimately elevating public opinion of his administration but falling flat in achieving the economic revitalization that America so desperately needed from the Great Depression. Folsom takes a critical, revisionist look at Roosevelt’s presidency, his economic policies, and his personal life.

Elected in 1932 on a buoyant tide of promises to balance the increasingly uncontrollable national budget and reduce the catastrophic unemployment rate, the charismatic thirty-second president not only neglected to pursue those goals, he made dramatic changes to federal programming that directly contradicted his campaign promises. Price fixing, court packing, regressive taxes, and patronism were all hidden inside the alphabet soup of his popular New Deal, putting a financial strain on the already suffering lower classes and discouraging the upper classes from taking business risks that potentially could have jostled national cash flow from dormancy. Many government programs that are widely used today have their seeds in the New Deal. Farm subsidies, minimum wage, and welfare, among others, all stifle economic growth—encouraging decreased productivity and exacerbating unemployment.

Roosevelt’s imperious approach to the presidency changed American politics forever, and as he manipulated public opinion, American citizens became unwitting accomplices to the stilted economic growth of the 1930s. More than sixty years after FDR died in office, we still struggle with the damaging repercussions of his legacy.

In his recent blog post “Why Keep Attacking the Rich?” Folsom writes:

One question that many political observers are asking is this, “If raising taxes stifles economic growth, and sometimes even generates less revenue for the government, why do it?” Good question, and there seem to be three reasons.

First, for the spenders in Washington, higher taxes is not just about trying to get more revenue; it’s about redistributing wealth from rich to poor. Of course, the top one percent of taxpayers now pay 38 percent of all federal revenue, but the spenders want even more out of the rich. They want equality of outcome, not equality of opportunity–which was the motivating force behind the founding of our nation.

Second is the political point. We have fifty times as many Americans in the bottom half of wealth-earners as we have in the top one percent. Thus, any effort to redistribute wealth has the potential of gaining fifty votes for every one lost. Shifting money from rich people to poor people is a vote-getter—and it also expands government, which creates even more dependency on federal spending.

Third is a subtle historical point. In the past, when high taxes have been foisted on the rich, they howl about it and try to avoid paying them. When the rich avoid paying taxes, and hire fewer workers for their businesses, the spenders can then use them as scapegoats to explain why deficits and unemployment are both rising. Franklin Roosevelt was the master of this strategy. In 1935 he promoted a tax hike on the richest Americans to 79 percent of their income. Naturally, they (along with others in high tax brackets) protested and often refused to expand their industries. Double-digit unemployment then continued into 1936, and FDR attacked them for allegedly prolonging the Great Depression.

One week before the election, Roosevelt gave a major speech in New York, and scapegoated rich businessmen with vigor. “Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred. I should like to have it said of my first Administration that in it the forces of selfishness and lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.”

FDR won every state except for two in that 1936 presidential election, and the political value of using rich people as a scapegoat to explain economic problems is not lost on the big spenders today.

This is exactly how votes are won in Washington.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.