Posted by
Christopher White on Wednesday, March 02, 2011 1:53:07 PM
Americans by and large, saw Franklyn Deleno Roosevelt, and his Presidency, as a unifying and stable force in American politics during the economically chaotic Great Depression and World War II eras. His twelve-year regime as President of the United States could be perceived, among large swaths of the American citizenry, as an excellent indicator of his popularity and leadership abilities, or maybe it is just an example of his political acumen. I do not intend on vivisecting the differences between his leadership abilities and political acumen, whether my intent is to highlight FDR’s wont to target the business sector and wealthiest Americans as a means to pave the road to the New Deal. In short, Franklyn Deleno Roosevelt utilized the tactic that he knew would be effective: class warfare. That being said, the question begs to be asked: why should the wealthy be singled out from the heard to bear the brunt of the lion’s share of taxes? Dialectical
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Throughout time much emphasis has been placed on the supposed “forgotten man” of society. We know this man to be the man that society forgot: he doesn’t have an Ivy League college education or even a junior college education for that matter; he can’t boast about the wealthy lifestyle that his family maintains, nor can he take solace in knowing where his next meal will come from. He can only hope that the road straightens and that life, eventually by the grace of the deity, becomes a little less tenuous. The aforementioned definition of the “forgotten man” is the definition that most people are used to. They are empathetic toward the plight of “the forgotten man.” However, are Americans as empathetic to the plight of the man who belongs to the upper echelon of civil society as they are to the man that society forgot?
William Graham Sumner, a philosopher and professor at Yale University, penned an essay titled “The Forgotten Man” in 1883, nearly a half a century before the Depression struck; it states: “As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X, or in the better case, what A, B, and C shall do for X . . . What I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. . . He works, he votes, generally he prays-but he always pays. . . .”
In 1932, Ray Moley, one of Roosevelt’s advisors, inserted the forgotten man into one of the future president’s memorable campaign speeches. Sumner, in his essay, intended for the “forgotten man” to be C, but Roosevelt inverted the entire meaning of Sumner’s work by placing X as the man that society forgot. FDR’s “forgotten man” was the man that scrounges for a place in Capitalist America. This mysterious figure was also the man that would become, shortly after FDR’s inauguration, the future recipient of stipends from Roosevelt’s New Deal.
Sumner, unlike Roosevelt, was not a progressive Liberal; in fact, his philosophy was more in line with Social Darwinism. Sumner, like most Social Darwinists, felt that Darwin’s theory of natural selection applied to humans in the same way that it applied to animals. If a person is a gypsy, then said person should maintain that street walker status because nature chose to deal him or her
that deck cards. In other words, the gypsy will eventually be cycled out of the social system. That said, his general ideology of winnowing society down one malcontent at a time was entirely antithetical to Roosevelt’s ideology of providing social programs to the supposed malcontents that Sumner despised. The university professor posited that C, the actual “forgotten man,” was, “the clean, quite, virtuous, domestic citizen” who “is independent, self-supporting, and asks no favors.”
The Yale University professor, suffice it to say, did not adhere to the belief that it was necessary to have strict regulation of the market by a state controlling institution. He wrote, in 1883, “all experience is against state regulation and in favor of liberty.” This quote, it can be easily ascertained, is a clear example of Sumner’s obviously strident and dogmatic adherence to economic individualism. Roosevelt was, contrarily, not an economic individualist.
Additionally, the 32nd President of The United States, by inverting the meaning of the philosopher’s essay, was sending the message that the affluent industrial capitalists of Sumner’s era were, for the betterment of society, going to be knocked down a peg. Ironically enough Roosevelt, in no uncertain terms, at the start of his campaign in 1932, declared war on the institutions of his own class: the wealthy Americans.
1929 was a harbinger of a year. President Hoover, a Republican President, after the initial crash of the stock market on November 19, 1929, made the conscience decision to disallow businesses the power to layoff employees. This policy was enacted for the sole purpose of keeping unemployment low and wages on the level. Question posed: how much sense does it make to force a business to go on spending when it does not want to? Most industrialists, at the time, believed that Hoover’s policy would hurt business. It caused the giants of industry to come to grips with the fact that they either had to drastically lower their employees’ wages, which they promised Hoover they would not do, or simply shut down operations; as the Great Depression worsened, employers ultimately chose the latter of the two decisions: shuddering the doors.
Hoover’s advocacy for strong tariffs did not help the ailing economy, either. Tariffs, during the early 20th century, it was believed by a large section of the Republican brass, were effective at protecting the agriculture industry. Such protectionist policies placed draconian fees on imports. With Hoover’s backing, the Republican Congress drew up the Smoot/Hawley Act. Benjamin Anderson of Chase Bank, a critic of the tariff policy, pointed out that the US’ exports exceeded its imports by 25 billion dollars. In essence, the United States sold more to the international community then it did to its own citizens. As time unraveled, Benjamin proved a soothsayer because the Smoot/Hawley tariff did hurt businesses by cutting them off from a much needed consumer base: the rest of the world. Shortly after the Smoot/Hawley Act was signed the unemployment rate spun wildly out of control reaching cataclysmic numbers.
Hoover, in placing Smoot/Hawley tariffs on the agricultural industry, was far from acting cordial toward American businesses; but it remains to be seen whether or not Hoover was purposefully attempting to undermine and strong arm the business sector. All indications seem to point to his genuine want to help industry, but then again, Hoover loved to tinker; he wanted to intervene. Unfortunately for Hoover and the country, his tinkering ways caused the United States to fall deeper into an economic tailspin.
Hoover exited stage left in 1933 to make room for the new President of the United States, Franklyn Deleno Roosevelt. FDR’s mentioning of the “forgotten man” during his first campaign set the stage for his ambitious plans as President. During his first term as Commander and Chief he set about creating two massive federal regulating bodies: NIRA (National Industry Recovery Act) and the AAA (Agricultural Adjustment Act). According to the President the NIRA’s goal was the: assurance of reasonable (the emphasis is mine) profit to industry and living wages for labor with the elimination of the piratical methods and practices which have not only harassed honest business but also contributed to the ills of labor.
One cannot help but wonder what entity in the federal government was the ultimate decider upon what was or was not a reasonable profit for an industry to make. In short, it appears that the public sector, not the business sector, would call the shots. Sumner’s forgotten men were now, as of the signing of AAA and NIRA on June 16, 1933, all but handcuffed by FDR’s regulating administration.
Moreover, the NIRA went about creating a new set of codes that each and every industry had to abide by. This industry-by-industry, “codes of fair competition” were drawn up to regulate practices among businesses in America; in other words, no industry, whether vital to public interest or not, was exempt from Roosevelt’s regulations. What is more, because the President signed off on the codes, NIRA and the AAA had the force of law, and therefore, violators faced fines or worse-- jail time.
Noted sociologist Theda Skocpol enumerated a very interesting scenario, which quite likely would have happened had the Supreme Court not struck down the NIRA as unconstitutional: “imagine for a moment that these two acts had together fully achieved their objectives. If both acts had succeeded-and if their efforts could have been coordinated-the United States might have emerged from the depression by the mid-1930s as a centralized system of politically managed corporatist capitalism.”
For American businesses anyway, what Theda suggested seems a nightmarish scenario. Most industries, and the wealthy persons who run them, would have, under this scenario, very little bargaining power; they would be allowed to exist, but they would be almost completely beholden to the Uncle Sam. Theda goes on to posit that the, “industrialist (capitalists), meanwhile, would have enjoyed minimally competitive relationships with one another under the aegis of government supervision.” Theda, in a polished and polite way, said that the government would have been able to, had the NIRA stayed strong, neuter private industry once and for all.
To be sure, FDR’s regulations, ironically, hit the proletariat hard. For example, the A.L.A Schechter Poultry Corporation, owned by brothers Joseph, Martin, Aaron, and Alex Schechter, was a poultry slaughtering business in Brooklyn, NY. The brothers purchased, in bulk, chickens from dealers all over the country; the dealers shipped the foul to Schechter’s slaughterhouses to be destroyed and dressed for sale in the brothers’ shop. The NIRA found that the Jewish brothers ignored the code’s wages and maximum hour provisions, and, most importantly for health issues, did not conform to the government’s slaughter0 regulations.
The Schechters, it should be dully noted, were not wealthy business tycoons; in point of fact, some New Deal aficionados might even be willing to place them into Roosevelt’s “forgotten man” category. Nonetheless, their meager circumstances aside, the men were Jewish, so they had to prepare the chickens through kosher practices. Apparently the codes did not adhere to kosher principles; so for all practical purposes, the Schechers were being asked to either comply with the codes thereby violating their religious principles or be thrown in jail. In fact, according to Amity Shlaes, “the name Schechter actually means ‘ritual butcher’ in Yiddish.” So, in a very real sense, the men were being persecuted, through regulatory codes, on account of their Jewish beliefs.
The government indicted the brothers, and their chicken corporation, on 60 counts of violating the regulating codes. The jury in the lower courts found the Schechters guilty on 19 of the 60 code violations; and shortly thereafter, brief jail sentences were dolled out for each of the brothers. They tried, unsuccessfully, to appeal their case to the U.S. Court of Appeals. After languishing in jail cells for a few months, the brothers took their case all the way to the U.S. Supreme Court; whereby, they argued that the NIRA was unconstitutional on “improper delegation and Commerce Clause” grounds.
The Supreme Court decided the case in favor of the Schechters. Chief Justice Hughes gave the majority opinion: The Constitution provides that ‘All legislative powers herein granted shall be vested in a Congress of the United States . . .’ The Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested.
And: Section 3 of the Recovery Act is without precedent. It supplies no standards for any trade, industry or activity . . . In view of the scope of that broad declaration, and of the nature of the few restrictions that are imposed . . . We think that the code-making authority thus conferred is an unconstitutional delegation of power.
Chief Justice Hughes and the Court found that the brothers were exempt from the interstate commerce clause in the U.S. Constitution because they, more often than not, sold more than 90 percent of their chickens to fellow New Yorkers. What was more damning for the Roosevelt Administration was the fact that the Supreme Court also, in deciding the Schechter case, declared the NIRA unconstitutional on the grounds that it gave the Executive Branch the power to legislate.
The reality on the ground was that the country had shifted radically to the left after 1932. Kansan and notable pontificator William Allen White remarked that the age of “do-nothing” government was over. Republicans found it exceedingly difficult to maintain any kind of relevancy during the early part of the 1930s, because they were, for all intents and purposes, the minority party in Congress. As a matter of fact, it became exceedingly apparent as the years slowly rolled by that Roosevelt was succeeding in tilting the U.S further and further to the left of center. But the changes in the country’s ideology had no effect on the character and philosophical makeup of the Supreme Court. Court membership consisted of six economic conservatives (Butler, McReynolds, Sanford, Sutherland, Taft, and Van Devanter), and three Democrats (Brandeis, Holmes, and Stone). They succeeded in cutting down several of Roosevelt’s New Deal programs as unconstitutional.
Roosevelt was furious at what he saw as obstructionist judges curtailing the U.S.’ ultimate prosperity. He explained to the American people that the justices on the Supreme Court must be too old and senile to make good judgments. Roosevelt had a juggernaut of a system backing him up. He thought, with the political capital he gained from his Presidential election mandate, that he could stack the courts with justices that would be willing to uphold New Deal legislation. He asked Congress to authorize the creation of one new seat, “on the Court for every justice who had attained the age of seventy but remained in active service.” If Roosevelt could not get around the Court’s conservatives then he would have to find a way to outnumber them. Roosevelt’s risky maneuver did not pan out, because the American people and members of his own party soon began to see FDR’s move to pack the courts as underhanded and even dictatorial. He was playing a high-risk game by pushing the aforementioned legislation, but the risk was worth taking if it meant he could push New Deal legislation through all branches of government unmolested. Public opinion was not on his side on this newest proposal; even the Democratic majority he enjoyed in Congress was against it. In the end, the proposal was a bust.
America was divided based almost solely on economic class structure from the 1930s until the malicious attacks on Peal Harbor. Prior to the ramp up to WWII in 1940, Gallop via scientific poling found that an average of 73 percent of New Deal relief recipients, 57 percent of low-income respondents, 46 percent of medium-income groups, and a meager 34 percent of the highest income earners approved of President Roosevelt’s job performance. The number that is the most troubling, to any viewer of these data, is the large gap between the highest income earners and the relief recipients.
Gallop’s research further found that, oddly enough, after Pearl Harbor, the public began to substitute the war for the economy in evaluating Roosevelt’s job performance. This can be explained by Roosevelt’s uncanny ability to go over the heads of the isolationists in Congress and speak directly to the American people through his now famous fireside chats and radio appearances. He proved his political acumen by speaking to the American people directly.
Paradoxically, FDR’s job approval ratings, primarily because of radio, began to rise among high-income earners. Roosevelt understood that 98 percent of wealthy individuals owned radios; armed with that knowledge, he set out to double his fireside chats from his previous terms. Unfortunately, his primary base, the government recipients, had little to no access to radios, so their support for FDR’s job performance varied little during the newest round of fireside chats. He went from delivering four fireside chats during the years 1937 to 1939 to delivering six from the years 1941 to 1942. The increase in communication necessarily brought forth a greater amount of rhetoric about WWII, which effectively killed off the New Deal’s shortcomings. This tactic, and the use of patriotic messages toward the war effort, helped to solidify the wealthy base. It’s strange that it took an impending war to heal the economic class divisions that Roosevelt perpetuated.
Ayn Rand originally authored the novel Atlas Shrugged in 1957. In the novel, a talented few in society begrudgingly bear the weight of the economy on their broad shoulders. These precious few eventually go on strike to protest the burden of excessive regulation and taxation, leaving the economy in shambles and the whole world in despair. At the time that Ayn wrote Atlas Shrugged, the top marginal rate for Americans making over 400,000 dollars a year was nearly 91 percent. That number seems astronomical compared to today’s standards, when marginal rates such as 36 and 39 percent are considered quite high. As high as the rate was in Ayn’s time, it paled in comparison to the 94 percent marginal rate that existed from the New Deal until 1944. The rates did not appreciably decrease for Ayn’s “talented few” until Ronald Reagan in the 1980s slashed rates from a high of 70 percent to a low of 28 percent. Reagan believed that higher marginal rates stifled investments and drastically reduced revenues: the high taxes disincentive the “talented few” from investing, thereby curtailing any hopes of a businesses expanding. If a business cannot expand then that business is unable to hire new employees, which eventually raises unemployment rates. Ayn Rand and William Sumner, no doubt, both would have fully supported Reagan’s tax policies.
The top marginal tax rate increased precipitously from 7 percent, in 1913, to 63 percent, prior to 1932, and it finally peaked at about 94 percent during the New Deal legislation. With that being the case, it should go without saying that neither Hoover nor Roosevelt were reticent to heap the burden of taxation on the wealthy, which is understandable due to the uncertain economic times that befell both men. But probing into the marginal tax rate increases, on more than just a superficial level, leads one to ask the question: is it ethical or even right to, as FDR did, tax the wealthy at a higher rate than other economic classes in society?
Reuven Avi-Yonah, in his review of “Does Atlas Shrug? The Economic Consequences of Taxing the Rich by Joel B. Slemrod” displays three very broad arguments given as to why the wealthy should bare the tax load: “they control a disproportionately large share of the country’s wealth, that their wealth is not just the result of their own choices but also stems from a combination of benefits conferred by society and brute luck, and that their wealth gives the rich a social, economic, and political power base that is inimical to the proper functioning of a democratic policy.”
Are the justifications illustrated above reason enough to levy heavy taxes on the wealthy? Firstly, it seems neither prudent nor justifiable to punitively tax or fine an individual based entirely on his or her economic standing; secondly, there is no mathematical or quantitative way to back up the assertion that wealthy individuals, when it comes to the accumulation of wealth, simply “lucked out.” If skill, hard work, and even a little bit of “brute luck” played a hand in their wealth, then why should they be penalized more than other economic classes for that?
It is unlikely that America will ever see marginal rate increases like the ones that happened during the 1930s and 1940s, because the consequences of bludgeoning the indispensable earning and investing power of the wealthy may be catastrophic. The wealthy will use every legal loophole and method possible to keep from having his or her profits taxed at a 91 percent rate. FDR used ideology, not pragmatism, to justify the over-taxing and over-regulating of Sumner’s “forgotten man.” Neither he nor any politician before or after him can legitimately argue, using the betterment for society quotient, that taxing the wealthy anymore than any other economic class is somehow fair. Communities should be taxed not individuals. All Americans, wealthy or middle-income, must share the brunt of taxes.