FDR’s Massive Federal Overreach

[Craving even more FPM content? Sign up for FPM+ to unlock exclusive series, virtual town-halls with our authors, and more. Click here to sign up.]

In his first inaugural address, on March 4, 1933, President Franklin D. Roosevelt proclaimed that “the only thing we have to fear is fear itself.” It sounded great, and is still presented as inspiring, but actually the statement made little sense, and wasn’t even true at a time when so many Americans were facing imminent financial ruin. Still, it gave the impression that the new president was a wise man who had matters well in hand during a time of crisis, and that reassured people.

The Roosevelt administration compounded the impression that it was working hard at reversing the nation’s massive economic downturn when it charged out of the gate in its first hundred days with a large number of initiatives designed to end the Great Depression. The Emergency Banking Act was the first federal bailout of the nation’s banks, and gave the federal government massive new power to regulate the banking system. Much more was to come.

On April 5, 1933, Roosevelt signed an executive order forbidding the hoarding of gold. This was a time of economic panic, with people withdrawing gold from the banks at a phenomenal rate. By ending the massive run on gold, Roosevelt saved the banks, and the American economic system (which was still on the gold standard), from wholesale collapse. He also established a number of new federal agencies designed to provide relief for the poor, get the unemployed working, enable American businesses to get on their feet, and more.

These included the Federal Emergency Relief Administration (FERA), the Civilian Conservation Corps (CCC), the Agricultural Adjustment Administration (AAA), the Public Works Administration (PWA), the National Recovery Administration (NRA), and the Tennessee Valley Authority (TVA). More of these new agencies and initiatives followed. The Social Security Act of 1935 established a plan to tax Americans to provide pensions for the aged.

All this and other New Deal initiatives made Roosevelt more popular than ever: it gave the impression that the administration was tackling the Depression with tremendous energy and would soon have America back on its feet. Yet the Depression continued through Roosevelt’s first two terms, only to be ended when the U.S. entered World War II after the Japanese bombing of Pearl Harbor on December 7, 1941.

As it turned out, the cure just prolonged the disease. Many found the proliferation of New Deal agencies, all known by their three initials, bewildering, and ridiculed them as “alphabet agencies.” Al Smith, Roosevelt’s old rival in the Democratic Party, said that the government during the Roosevelt administration was “submerged in a bowl of alphabet soup.” Smith was making light of a situation that was actually quite serious: the New Deal was the impetus for a massive expansion of government regulation and federal bureaucracy.

By mid-1934, the National Recovery Administration had added nearly five hundred new laws to the statute books; during the first year of the Roosevelt era, ten thousand new pages had been added to federal law books, tripling them in size — which meant that one year of Roosevelt was responsible for three times the legal output of the previous thirty-one presidential administrations.

This rapid growth of regulations inevitably stifled initiative and began to make it harder for businesses to get started and become prosperous. This, in turn, slowed down the economy and hurt the Americans who would have found gainful employ in those businesses had they not been spending so much time and money making sure they were in compliance with arcane and picayune federal rules.

The massive growth of the federal government on FDR’s watch significantly prolonged the Depression. His proliferation of new federal agencies didn’t generate any income themselves; they relied on tax money from already overburdened American taxpayers. Roosevelt’s reputation as an economic wizard who saved the nation from the Great Depression is more fantasy than reality, and it has been a destructive fantasy. Ever since his endless presidency, succeeding presidents have assumed that the answer to every crisis, particularly economic crises, is action from the federal government, and more federal agencies.

There is ultimately no end to the growth of the federal government, and to its encroachment upon the freedoms of citizens, unless the unspoken assumption of the Roosevelt administration, that the federal government is here to solve all our problems, is confronted and rejected. That confrontation has begun, but all too Americans still believe Roosevelt was a great president and that what we need is more government. The conflict between them and lovers of freedom will continue.