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NOTE 06. The Great Depression, World War II, and American Prosperity, Part II (video)

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Finishing up this discussion of the New Deal that we've only barely started really,

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I want to first start off by adding one final point to one of the questions that was raised at the end of the last session,

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because somebody was asking, well, I don't remember, but one gentleman was asking the question of how did this false historiography get started,

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The Theory of Money and Credit

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The American Liberty League was mainly an organization that was really a matter of degree rather than of kind.

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They weren't absolutely opposed to all government intervention, but they were more or less anti-New Deal.

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So because Hoover became an outspoken opponent of the New Deal, I think that fact alone fed into the mythology,

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because the fact is he was an opponent of the New Deal, so you tend to think that he must have had exactly the opposite position.

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Okay, well where we left off was the National Industrial Recovery Act and my aim at the end of the last session was to demonstrate that that idea did not just emerge from the brow of Franklin Roosevelt but was the culmination of desires on the part of businessmen for the past at least decade and a half to in effect suppress competition and coordinate production and to proceed on a basis of competition.

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Cooperation rather than Competition, we've all heard this before.

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Now Roosevelt in doing this was not only, you know, in effect, exceeding to this business

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desire for regulation, he's also, as I mentioned, involved in trying to prop up wages because

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in order to get organized labor on board for this legislation, the production codes that

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So Roosevelt's stated purpose in doing all of this was to keep wages high and the workweek short and prices from declining too much as a result of excessive competition.

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He thinks declining prices are in some way a contributor to depression.

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Now, the effect of this was to raise prices on every good whose production had been organized into one of these cartels

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and on every good that used such artificially overpriced goods as inputs in its own production.

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So if FDR is saying that he wants higher wages, but he also wants business to be able to establish these production codes

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and establish minimum selling prices, well that's going to tend to offset the higher wages

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The General Minimum was 90% of the average hourly wage of 1933.

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In fact, as you read in that book, Out of Work, Americans, for example, bought more than twice as many refrigerators in the United States as the U.S. and the U.S. did in the 19th century, and the U.S. was the only country in the United States that had a minimum wage of $5.00 an hour in current terms, but these are very high minimums that are being imposed, and so once again the veteran Galloway thesis pops in here that it's going to have the effect of discouraging employment, and that is in fact what happened. Wages were quite strong during the Great Depression, but the problem of course was that millions of Americans had no wages at all.

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in 1935 when unemployment was over 20 percent, as they did in 1929 when unemployment was 3.2 percent.

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Beneath the surface of most New Deal programs, and of course the National Industrial Recovery Act was part of that,

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was the assumption that so-called purchasing power needed to be restored.

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And that, so therefore we need to increase people's wages so that they have the purchasing power

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Production is what makes demand of other goods possible.

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A publication called The Magazine of Wall Street made an interesting observation to this effect, that purchasing power needed to be increased.

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The Magazine of Wall Street came back and said, well, if the president really believes, as he seems to, that reducing the work week in order to spread work among more people

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and Increasing Wages would help the economy by boosting purchasing power.

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Then the magazine of Wall Street asked,

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why not swell purchasing power still more by establishing a 10-hour week and quadrupling wages?

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Good question.

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Well, again, this emphasis on purchasing power in itself

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is based on a misunderstanding of the causes of the Depression,

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as we discussed in the last session.

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Well, given that the capital goods industries are the ones

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Well, you might think what you'd want to do is to create a climate favorable to business and by which I don't mean subsidies to business, just get out of the way of business, but instead what Franklin Roosevelt did and what came forth from his administration was a series of ceaseless and bewildering regulatory measures combined with tax increases, increased labor costs, and endless denunciations of economic, financial, economic, financial, financial, financial, financial, financial, financial, financial, financial, financial, financial, financial, financial, financial, financial, financial,

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and economic royalists, and the depression continued, by some miracle apparently the depression continued even under these conditions of tax increases, everything else, the depression still went on.

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Now the agricultural policies of Franklin Roosevelt are among the most interesting of all.

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If by interesting you mean hideous, evil and destructive, then yes, quite interesting.

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Falling prices are hindering economic recovery, according to FDR, so therefore prices need to be raised by any means necessary.

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And he's looking at one sector of the economy at a time. Now he's going to look at the agricultural sector.

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And it's quite clear that the program of Herbert Hoover was not successful because it was, in effect, a voluntary program.

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There was no way to prevent people from increasing their acreage or new people coming along and producing more of a given crop.

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The Roosevelt policy in the Agricultural Adjustment Act is geared toward, in fact, placing limits on the amount of acreage you can bring into cultivation.

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At first, the first phase of the Agricultural Adjustment Act involves dealing with the fact that at this moment, in 1933, you have supposedly a huge glut of agricultural goods.

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So we have to deal with that crisis right from the beginning, for the very fact that that's a crisis is kind of interesting.

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And so the response is to start, as many of you know, to start destroying a lot of this surplus so as to increase prices for these goods.

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So to destroy 10 million acres of cotton and slaughter 6 million pigs and on and on down the line.

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And this had a kind of a very bad public relations aspect to it, because it did occur to some people that this was a little bit, you know, odd or, you know, in some way seemingly contradictory that you want to help starving people, but yet you're destroying food and you're making clothing more expensive by destroying cotton.

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And a gentleman was telling me over lunch about, was it your father, sir?

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A great uncle.

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Oh, great uncle, okay, who was in Texas at the time that this program was initiated,

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and he was told to plow under and destroy some cotton, and he absolutely refused to take part in that.

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And so, in effect, his cotton was boycotted, he couldn't sell it, and he never sold any cotton ever again.

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Is that right? That was it, that was it. So that, you know, that's what actually happened.

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And it's funny that one criticism I got when I discussed the agriculture policy in The Politically Incorrect Guide is that I wasn't fair to Roosevelt because I didn't outline all the arguments in favor of destroying these surpluses.

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And I thought, well, I guess I didn't. Throw me in jail. I guess I didn't.

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But I don't even know how to, where would I even begin to respond to that?

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Yeah, well, I guess there are pros and cons to destroying wealth and crops.

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Anyway, there's no satisfying some people.

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Well, so in the short run, Franklin Roosevelt has to deal with the already existing stocks of goods

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whose abundance was leading to low prices and so you have this destructive policy.

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The agriculture secretary, Henry Wallace, described hysterically in John T. Flynn's book, The Roosevelt Myth,

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It was a total Soviet dupe and everything else.

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He described this process of destroying crops.

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He said this was a cleaning up of the wreckage from the old days of unbalanced production.

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So, alright, let's just leave that.

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Wallace obviously had some special insight into precisely what quantity of production would bring things into balance.

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The U.S. history text that I am forced to use, the text I use from about 1877 to the present, is by George Tyndall and David Shee.

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And they assure us that, quote, for a while these farm measures worked, unquote.

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Well, if by worked they mean that they raised the prices of food and clothing at a time when people were desperately poor,

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Shortly after the Agricultural Adjustment Act was established, the Department of Agriculture

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released the findings of its study of the American diet during these difficult years.

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The study constructed four sample diets, liberal, moderate, minimum and emergency, below subsistence.

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John T. Flynn said that the last course a government run by sane men would adopt to get this problem solved would be to destroy a good part of what we do produce, but of course that was the policy.

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When the Supreme Court struck down the Agricultural Adjustment Act and Franklin Roosevelt's program,

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The President conjured up a horrifying picture. He said,

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Are we going to take the hands of the Federal Government completely off any effort to adjust the growing of national crops

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and go right straight back to the old principle that every farmer is a lord of his own farm

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and can do anything he wants, raise anything, any old time in any quantity, and sell any time he wants?

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Well, this grave peril was wisely averted.

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Meanwhile, evidence that FDR's approach was wrong-headed continued to mount.

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The Department of Agriculture's Bureau of Agricultural Economics reported in 1936 that in the case of cotton,

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farm income would have been at least as high and perhaps even higher in the absence of the Agricultural Adjustment Act.

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Following month, Cornell University's James Boyle argued in the Atlantic

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The Agricultural Adjustment Act had been responsible for the joblessness of at least 2 million Americans, especially sharecroppers and other farm laborers.

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Because, of course, if you think about it, what is there for a farm laborer to do when you're not producing or cutting back on production?

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And although the AAA was intended to increase farm income, Jim Powell, in his book FDR's Folly, notes that farmers actually found themselves worse off

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Because FDR's National Recovery Administration had been even more successful in forcing up the prices that consumers, including farmers, had to pay for manufactured goods.

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Now, as we well know, this kind of massive government intervention into agriculture never went away.

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And the gentleman who was with the USDA, I've sort of made him promise that he's going to share at least one horror story with us later.

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But even in the 1980s, the decade that people associate with, rightly or wrongly associate with government retrenchment, you still get $30 billion annually on farm programs.

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Two-thirds of them are subsidies, two-thirds of that money, and then the other in higher prices to consumers.

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And again, the price support. The price support is the key mechanism here.

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The federal government establishes an amount that it will pay farmers per unit of a given product.

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The Federal Government will buy any amount that the farmers are willing to sell.

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So farmers are not going to sell on the market if the Federal Government is going to pay them more, of course.

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The Federal Government therefore winds up with enormous amounts of various agricultural products on its hands.

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So typically, or at least in many cases, it will just destroy them.

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Because anything else it does will just glut the market again and create more problems.

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So when you consider what's actually happening here, the logic of it is indeed quite perverse.

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By offering price supports to farmers, the federal government is going to encourage more agricultural production than would have occurred without such support.

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So it creates surpluses. Then it has to figure out a way of getting rid of these surpluses.

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So it will simply destroy them very often.

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In the 1980s, USDA marketing orders were responsible for destroying 50 million lemons a year, 100

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million pounds of raisins, a billion oranges and so on.

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Since 1937, as much as 40% of all oranges grown annually in the US have by law been

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destroyed, fed to livestock or exported.

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Quotas on peanuts have in effect doubled the price of peanuts and peanut butter.

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Dairy subsidies have amounted to each dairy cow in America being subsidized to the tune

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of about $700 a year, which happens to be an amount greater than the income of half

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the world's population, according to one scholar.

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For most of the 20th century, the price of sugar to Americans was 500% higher than the

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world price.

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Sugar producers are getting an average of $235,000 a year from that policy.

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So again, you can understand why it is that these policies would stay in effect.

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And of course, all American industries that use sugar are at a competitive disadvantage

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as a result, because they now have to pay a higher price for sugar.

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So this is one of the lasting legacies of the New Deal.

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We have Franklin Roosevelt to thank.

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Basically primarily big farmers and agricultural concerns and bureaucrats in the Department

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of Agriculture make very comfortable livings at the expense of the rest of us.

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The program favors the largest farmers.

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The agricultural payments were based on the amount of acreage that you owned and which the amount of acreage that you could therefore keep out of production.

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So in a 1989 study, the USDA, turns out, gave in direct payment to the 29,000 largest farms an average of $46,000, an amount that exceeded the net worth of over half the families in America.

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That's a little excessive, I think.

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So, okay, so that's a little bit something about the agricultural program.

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Now, what I'm going to note to you now is perhaps not entirely fair, but why not at least note it, okay?

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It's just interesting information, and it probably makes more sense to discuss this in the context of the cartels

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and the National Industrial Recovery Administration Act and the National Recovery Administration.

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But this has to do with the fascism element in all this.

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And John T. Flynn points out why it is that people like Mussolini or people who had fascist sympathies,

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in effect, were sympathetic to Roosevelt.

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And in fact, why it was that people who were sympathetic to Roosevelt sometimes had fascist sympathies

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or were sympathetic to what Mussolini was doing with the economy.

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So, for example, speaking about Mussolini, John T. Flynn says,

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What they liked particularly was his corporative system.

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He organized each trade or industrial group or professional group into a state-supervised

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trade association.

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He called it a cooperative.

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These cooperatives operated under state supervision and could plan production, quality, prices,

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distribution, labor standards, etc.

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The NRA provided that in American industry, each industry should be organized into a federally

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supervised trade association.

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It was not called a cooperative.

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It was called a code authority, but it was essentially the same thing. This was fascism.

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Well, Mussolini himself, who was an admirer of New Deal policies, went so far as to describe FDR as a social fascist.

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But he wasn't the only admirer of the president. Late in the first year of his administration,

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FDR told his secretary of the interior that, quote,

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What we were doing in this country were some of the things that were being done in Russia

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and even some things that were being done under Hitler in Germany, but we were doing

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them in an orderly way."

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Now Hitler himself wrote to the U.S. Ambassador in early 1934 and says,

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The Reich Chancellor requests Mr. Dodd to present his greetings to President Roosevelt.

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He congratulates the President upon his heroic effort in the interest of the American people.

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The President's successful struggle against economic distress is being followed by the entire German people with interest and admiration.

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The Reich Chancellor is in accord with the President that the virtues of sense of duty, readiness for sacrifice and discipline must be the supreme rule for the whole nation.

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This moral demand, which the President is addressing to every single citizen,

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is only the quintessence of German philosophy of the state,

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expressed in the motto, the public will before the private gain.

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Hitler later told a New York Times correspondent,

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I have sympathy for Mr. Roosevelt because he marches straight toward his objectives

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over Congress, lobbies and bureaucracy.

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Hitler later described himself as the only European leader

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who expressed, quote, understanding of the methods and motives of

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President Roosevelt.

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All right, well, all right, I don't know if that's fair or not, but it did happen, right, can I mention it?

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I'll get a lot of hate mail for that, but then I'd say, well, why are you listening to this lecture series anyway?

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You had to know you weren't going to like it.

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Why are you getting upset at me?

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All right, that's agriculture and all this.

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Okay, let's see.

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Now, still other aspects of the New Deal damage the economy even further. I'm going to postpone discussion of the public works programs for just a moment.

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New Deal labor laws are going to be, as I said earlier, that's a subject I'm going to cover in my discussion of labor history tomorrow.

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I had a whole chapter on the history of American labor unions that would have gone into my book, but for space reasons it just didn't make it.

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So we won't talk about that right now, other than to say that New Deal labor laws did in fact increase, of course, labor costs, and veteran Galloway makes some estimates with regard to just the degree to which that damaged the economy, and it was not insubstantial.

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There's also the increased labor costs associated with social security, because of course you understand that your employer puts in half of that for you, so you really are only paying half, right?

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It's being shared by your employer, who obviously just simply factors that into the wage he pays you.

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I mean, you know, how stupid do they think we are?

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Veteran Galloway said that by 1938, you're talking about an additional 1.2 million unemployed as a direct result of these things.

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The social security issue, I feel like this is as dead a horse as there is in terms of people writing and talking about it,

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so I hope you'll excuse me if I decide that, you know, social security, big scam, you know, let's just move on.

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The funny thing about social security though, I can't resist noting, is that the time that it was established,

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If you look at the average life expectancy of the American man, it's about 57, the American woman is 61, so the average American by age 65 would be dead.

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You wouldn't have to pay out anything to them. So as time goes on, we get healthier and our life expectancy increases.

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Obviously, you're going to have problems, let alone the population problems, demographic problems that occurred.

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We also have the fact that FDR is fairly consistently making pretty severe rhetorical salvos against the business community.

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Like they're conspiring against recovery and they're conspiring against him and then the tax increases all the time.

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These are not exactly recipes for economic recovery.

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Bob Higgs, if some of you know him, has argued that something that he calls regime uncertainty helped to hinder the recovery.

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and this is an article in the very first, I believe it was the very first issue of The Independent Review

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which is one of the more interesting scholarly periodicals out there.

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The Independent Review I believe started in 1997 and at least in the first year of that publication

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Higgs had an article on, I forget the, I can't think of the title of it, but it was something along the lines of

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Why The Great Depression Lasted As Long As It Did and he adds this additional, it's not just some of the things we've looked at

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It's also something, a phenomenon that Higgs identifies as regime uncertainty.

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When the business community is uncertain of the intentions of the regime,

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is the regime going to engage in further depredations against private property?

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If the regime is hostile to business or is unpredictable and its programs are sort of chaotic and haphazard,

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this is going to have an effect on business confidence and a willingness to invest,

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and a willingness to start up businesses.

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So what you tended to have, according to Higgs, was businesses refraining from investing altogether.

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Now this point is confirmed by Benjamin Anderson, who had a book on the economics of public welfare.

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Benjamin Anderson said,

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The impact of all these multitudinous measures – industrial, agricultural, financial, monetary and other – upon a bewildered industrial and financial community was extraordinarily heavy.

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We must add the effect of continuing, disquieting utterances by the President.

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He had castigated the bankers in his inaugural speech.

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He had made a slurring comparison of British and American bankers in a speech in the summer of 1934

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that private enterprise could survive and rally in the midst of so great a disorder

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is an amazing demonstration of the vitality of private enterprise.

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Now on this thesis of Higgs on regime uncertainty, he points out that he says

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for one thing we can engage this a little bit on the basis of polling data.

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Now organized polling began only in the 1930s and it wasn't until 1939

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That pollsters began to compile data on the perceptions of businessmen and the general public regarding the climate for investment.

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That year, an organization called the American Institute of Public Opinion, AIPO, posed the question,

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do you think the attitude of the Roosevelt administration toward business is delaying business recovery?

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Some 54% said yes and 26% said no with the remainder having no opinion.

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The AIPO also asked Americans, do you think that 10 years from now there will be more or less government control of business?

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56% said more, 22% less, with 22% either expecting no change or having no opinion.

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Also in 1939, Fortune magazine asked business executives, with which of these statements do you come closest to agreeing?

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1. The policies of the administration have so affected the confidence of businessmen

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that recovery has been seriously held back. 2. Businessmen generally have been unjustly

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blaming the administration for their troubles. It found 64.8% of respondents agreeing with

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the first statement, about a quarter with the second, and nearly 10% saying they did

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not know. In late 1941, on the eve of American entry into World War II, Fortune magazine

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and Paul Business Executives regarding the kind of economic regime they expected to see in place after the war.

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93% believed that private property would be further compromised in one way or another.

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36.7% expected, quote, a semi-socialized society in which there will be very little room for the profit system to operate.

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And another 3% anticipated a complete economic dictatorship along fascist or communist lines.

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All these figures reveal serious and ongoing misgivings and uncertainty on the part of

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business and Higgs draws this conclusion. He says, given the unparalleled outpouring

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of business-threatening laws, regulations and court decisions, the oft-stated hostility

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of President Roosevelt and his lieutenants toward investors as a class, and the character

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of the anti-business zealots who composed the strategists and administrators of the

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New Deal from 1935 to 1941. The political climate could hardly have failed to discourage

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some investors from making fresh long-term commitments.

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We have further evidence of this point about regime uncertainty in financial markets and

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investment data. Higgs notes that investments made during the first and second Roosevelt

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administrations remained far more concentrated in short-term assets than the investments

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The kind of sustained long-term investment was precisely what uncertain businessmen were moving away from.

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In the bond market, long-term bonds carried a substantial risk premium, indicating that business leaders were very uncertain about the future.

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So this uncertainty about the future, if we add in the polling data that we just looked at, indicates an uncertainty about future government policy.

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Businessmen took seriously the various ravings of the, what Higgs calls, anti-business zealots who occupied the White House.

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At one point, by the way, Roosevelt attempted to impose by executive order a 100% top income tax rate

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The Illinois Manufacturers Association, in a statement forwarded to Roosevelt, via Commerce Secretary Daniel Roper, cautioned that the prince of the

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The principal obstacle to business revival with accompanying increase in unemployment is the almost universal attitude of uncertainty and apprehension on the part of business executives regarding the future policies of the federal government on issues directly affecting the welfare of private enterprise.

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That tends to lend support also to the Higgs thesis. I've dug up some quotations like this.

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In the fall of 1934, a meeting of more than a hundred business executives and financial experts was held on Long Island under the auspices of the American Management Association.

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Their report, which was approved with only two dissenting votes and sent to Roosevelt through Secretary of the Treasury Henry Morgenthau, concluded the following.

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Uncertainties concerning the fiscal situation, likely to result from the government's borrowing and spending activities, with consequent effects upon monetary and revenue policies, are retarding re-employment and recovery.

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Even Walter Lippmann, himself no libertarian, and in fact an erstwhile supporter of the New Deal, broke with Roosevelt over the president's ongoing inability or refusal to come up with anything more creative than still more punitive measures against business.

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Roosevelt's measures, according to Lippmann, only retarded enterprise at a time when the relief of unemployment and of insolvency depends primarily upon the revival of enterprise.

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What the economy needed, of course, was for Roosevelt to give business business a breathing spell, free of new reform initiatives, but no such spell was forthcoming.

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Instead, in June 1935, Roosevelt proposed a series of tax increases, calling for higher inheritance taxes, gift taxes, personal income taxes, as well as a graduated scale of corporate income taxes.

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Lippmann, who is still frustrated by the New Deal, commented that the tax bill reflected

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the absence of any plan and the lack of intellectual effort, the work of tired brains relying on

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their wishes and their prejudices and throwing out casual suggestions which they are too

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hot and bothered to think about.

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Even the New Republic magazine complained that the whole conception behind the tax bill

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overlooks the fundamental fact that there is little point in trying to redistribute wealth

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as long as nothing is done to produce more than a fraction of the wealth we are equipped to create.

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The tax bill that Congress ultimately passed fell short of what FDR had requested,

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but the effort helped to alienate a good portion of the President's supporters.

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Gary Dean Best says this,

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Previously pro-Roosevelt newspapers,

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newspaper men, businessmen and progressives

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abandoned him in large numbers over the tax bill,

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many of them not to return to the New Deal fold again.

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In large part, the defection resulted

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because the arguments put forth in defense of the bill

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were so quickly and easily discredited

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and that when these layers of argument were peeled away,

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nothing remained to justify the bill

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but prejudice, vindictiveness and spite.

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Okay, well now we do have to get of course to the issue of public works programs because

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we know that people got jobs with these things and didn't they help the country and help

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people find employment and I mean that's how Ralph Cramden met Alice, he was working

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from the WPA and she was handing out the shovels.

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See, there used to be a show called The Honeymooners.

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Anyway, Jackie Gleason is one of my favorite old shows.

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But anyway, so he tells that story about the WPA.

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Now, there are all kinds of jokes you can tell

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about the WPA and the silly jobs people were given.

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When I was doing some media thing

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and I was talking about the WPA,

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sorry, the Works Progress Administration,

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as a public works thing, the idea is that we put people to work building bridges or

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stadiums or whatever, anything, just to put people to work on the government dole.

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And I gave the example that some of these jobs didn't seem to me to be necessary.

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And I said, for instance, there were people under the auspices of the WPA who were paid

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to chase starlings off the White House lawn.

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So I said that, and then later I looked at the transcript of the interview and it had me saying that they were paid to chase starlets off the White House lawn. Starlets, so they're obviously thinking of the Clinton White House, I guess.

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It's so cheap making Clinton jokes, isn't it? I mean, the guy's been out of office for years now, who the heck cares? But, I don't know, that one just was screaming out, I hope you'll forgive me for that. It's the only Clinton joke of the whole week.

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What we need to point out first of all is the economics of these types of programs.

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As we all know, obviously the government cannot create jobs.

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What the government does is takes money from the private sector and spends it to pay people to perform some task.

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I was taken to task for suggesting that because there's no profit and loss system in government public works programs,

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We have no way of assessing rationally whether these programs are a net benefit or not, because the government doesn't go out of business.

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The government's revenue comes through coercion, so there's no way of knowing.

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Would people in the absence of this voluntarily have paid for this project or not?

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There's no way to know, whereas in the private sector, you have to test everything you do by profit and loss.

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If people aren't willing to purchase this product, then you go out of business.

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and a lot of business. There's something that guides you and you're guided in how much to produce, where to produce, what type of thing to produce.

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None of these forms of evaluation are available to a government program. It's just an obvious point.

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It's a point that Mises repeatedly makes in his book, Bureaucracy.

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This is the difference between a profit-making firm and the government sector.

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Now, what in fact these programs did was to divert capital from the private sector and thereby inhibit job creation.

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In fact, there are studies that are cited in the Powell book that I just refer you to,

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in which economists have suggested that the public sector jobs created by New Deal spending programs

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either simply displaced or even on net destroyed jobs, destroyed private sector jobs.

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So the various public works programs that FDR established, and the billions of dollars

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spent on them, served to dry up capital in an already capital-starved private sector

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in favor of government projects that were in and of themselves, ipso facto, inherently

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wasteful because they lacked the kind of profit and loss test that guides entrepreneurs in

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their investment decisions.

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So the problem, therefore, with anecdotal evidence about the New Deal and people talking

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What would I have done if my grandfather hadn't had the job from the WPA or something?

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Of course the WPA job, and I hate to lecture this group, you all know Bastiat's what is seen and what is not seen,

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but we all see the jobs created by the government.

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Nobody knows exactly which jobs are destroyed because of all these resources being sucked out of the private sector.

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You can't know which jobs are gone as a result of that.

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So the costs of this are, in effect, invisible or unknown.

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The benefits are clearly earmarked.

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Hey, look, these people have jobs.

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Well, so naturally, people are going to support that.

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They have no way of seeing what the costs of it are.

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Well, there's also, as Tom DiLorenzo has pointed out

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and a great many other scholars beginning in the 1970s began to point out,

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was that there's a peculiar distribution of the spending on these projects

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Because it seems to be the case that a lot of this money for WPA work went to areas of the country that didn't seem to be the most depressed areas.

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The South was hit particularly hard and yet the South received the least assistance in WPA money.

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And what has been suggested by a whole line of economic historians is that there may be a political explanation for this.

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I'm sorry that your innocent ears have to be exposed to that cynical conclusion.

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The Federal Reserve, fiat money, fractional reserve banking, Human Action, Man Economy and State, The Theory of Money and Credit

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And so, as I say, this has been done, there have actually been studies done that have looked into this.

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Gavin Wright found that political factors, he believes, can account for 80% of the interstate differential in New Deal spending.

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The South had given FDR two-thirds of the vote, so it's much more politically secure for him than the West, and so he didn't have as much need, in effect, to buy their votes, but the West was more politically secure.

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WPA workers were often pressured into supporting Roosevelt's favored candidates, or changing their party affiliations, or contributing to FDR's re-election campaign.

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A Senate committee, in fact, undertook an investigation of these programs, and found a great many cases of WPA employees being instructed to vote.

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A Senate committee, in fact, undertook an investigation of these programs and found a great many cases of WPA employees being instructed to contribute a portion of their salaries to the President's re-election campaign if they wish to remain employed, or of people being thrown off the relief rolls for refusing to pledge their support for a favored candidate, and of demands that registered Republicans on relief register as Democrats in order to keep their jobs.

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When Father James Gillis, who was a Paulist priest, sort of an old righty type guy, criticized

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Franklin Roosevelt and his court packing scheme, which we haven't gotten to yet, the FCC took

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his license away.

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As early as 1935, Roosevelt was requesting that the FBI investigate a variety of conservative,

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and later, of course, Roosevelt became notorious for secretly seeking proof that there was Nazi money and Nazi influence going into the America First Committee,

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which was the committee that did not want American involvement in World War II.

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They never found any such money, of course, but that was sort of typical of FDR.

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Now, in 1937, we get Franklin Roosevelt's so-called court packing scheme, because the

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court has been striking down some of his most cherished legislation, and in particular,

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the NIRA and the AAA, and Roosevelt is going around condemning this type of horse and buggy

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He says that these old fogies on the Supreme Court, they're taking us back to the horse

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and buggy days, whereas now that we have cars that operate on their own steam, the Constitution

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needs to be changed or something, but anyway, that's his thinking, that this is old fashioned

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and we need these programs for recovery and for heaven's sake.

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When Roosevelt first proposes his court-packing scheme, he conceals its true purpose, because

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his scheme was that for every Supreme Court justice over the age of 70, the president

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gets to name an additional justice.

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Given that six of the nine Supreme Court justices were over the age of 70, this would have increased

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the court to a potential 15 justices, and naturally they would have been justices who

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Roosevelt's very, very broad interpretation of the Constitution.

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But he portrayed this at first as an attempt to help the Supreme Court because they had

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a backlog of cases, and they just needed more bodies to help them with this workload.

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And that was such an insult to people's intelligence when he tried to portray it that way, that

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even his own supporters said, look, if you just want to pack the court with your friends,

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why don't you at least have the decency to come out and say so?

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So he finally did say that and say, all right, I am doing this because I think we need to rescue the constitution from these unreasonably narrow Supreme Court justices.

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Well, even, I mean, the opposition to this was unbelievable and even the Democrats, FDR's fellow Democrats, many of them had to depart from the President on this matter.

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The Senate Judiciary Committee said this,

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The parallel will never again be presented to the free representatives of the free people of America.

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Well, the bill was rejected, but that does not mean that FDR's intimidation of the court had no effects.

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There's a lot of speculation that Justice Owen Roberts was sort of spooked by this whole campaign

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and began to become much more friendly to the Roosevelt administration in his decisions.

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And in any event, Franklin Roosevelt got his opportunity to influence and change the court after all, and not through such crude manipulation.

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Over the next four years, the president was able to fill seven vacancies on the court caused by resignations, retirements and death.

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So what kind of jurisprudence then do we get with this new court, the new Franklin Rooseveltized court? What do we wind up with?

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Well, there's a classic case that I think some of us have heard about, but it bears repeating.

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1942, here's a classic case of how the new jurisprudence is going to go.

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It's a case called Wickard v. Filburn.

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What we need to recall here is that one of the clauses in the Constitution,

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the Constitution has a clause about the Federal Government's power to regulate commerce,

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commerce among the states, interstate commerce.

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And that had been interpreted as a limitation on what fell under the authority of the Federal Government to regulate.

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Because if it didn't involve interstate commerce, commerce from one state to another, the Federal Government could not, it was thought, interfere with it.

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Well, now what we're going to get is a Supreme Court that is going to interpret interstate commerce so broadly

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that everything will somehow be described as constituting interstate commerce

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and therefore everything will be subject to Federal jurisdiction.

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So for instance, if I sneeze, well maybe the germs will float over to Georgia

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and that could affect interstate commerce because if that guy gets sick then he can't sell milk that day.

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I mean that sounds bizarre but see how far removed that weird argumentation is from Wickard versus Filburn.

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You have here the case of a farmer growing wheat for his own use on his own property.

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This is defined by the court as interstate commerce.

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Now, it's a farmer growing wheat for his own use on his own property.

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This is interstate commerce, says the court, and therefore subject to regulation.

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00:45:58.840 --> 00:46:02.840
Now, the way that the case came to court, basically what it dealt with was,

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this was a farmer who wasn't restricting himself to what the agriculture department was telling him.

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I was telling him he was entitled to plant.

398
00:46:12.880 --> 00:46:15.480
Just to clarify something from earlier, I said that the Agricultural Adjustment Act

399
00:46:15.480 --> 00:46:19.760
was found unconstitutional, so you may wonder, how is this still going on?

400
00:46:19.760 --> 00:46:24.300
Well, it was repackaged later as a soil conservation measure.

401
00:46:24.300 --> 00:46:28.360
So we're just conserving the soil, and that's sort of like a general welfare thing or something.

402
00:46:28.360 --> 00:46:30.640
So we get that back again.

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00:46:30.640 --> 00:46:35.880
But you have a gentleman who says that, well, look, it's my property, and plus I'm not growing

404
00:46:35.880 --> 00:47:05.880
Well, the court said, well, nevertheless, that's still interstate commerce and still subject to Federal regulation, because according to the court, homegrown wheat supplies a need of the man who grew it, which would otherwise be reflected by purchases in the open market. Homegrown wheat, in this sense, competes with wheat in commerce. So what they're saying is that somebody who supplies himself with wheat, because he is not purchasing wheat,

405
00:47:05.880 --> 00:47:09.880
is therefore indirectly affecting interstate commerce.

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00:47:09.880 --> 00:47:13.880
So really anything would qualify as interstate commerce here,

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00:47:13.880 --> 00:47:17.880
and thereby be subject to Federal regulation under that type of standard.

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00:47:17.880 --> 00:47:21.880
That's what we have. Everything is defined as interstate commerce.

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00:47:21.880 --> 00:47:25.880
Now a century and a half later,

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00:47:25.880 --> 00:47:29.880
or a century and a half after

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00:47:29.880 --> 00:47:33.880
the 10th Amendment had been drafted,

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00:47:33.880 --> 00:47:44.880
You've got Franklin Roosevelt's court, having been either intimidated or totally changed in its personnel, began to redefine even what the meaning of the Tenth Amendment was.

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Thomas Jefferson had said the Tenth Amendment is the cornerstone of the whole Constitution, reserves powers to the states, it militates against political centralization.

414
00:47:52.880 --> 00:48:02.880
But a century and a half after that ratification, you've got the Roosevelt Supreme Court declaring in the United States versus Darby that the Tenth Amendment was a mere tautology.

415
00:48:02.880 --> 00:48:09.880
The Federal Reserve is a mere tautology, so in other words it's just like all bachelors are unmarried, all powers not delegated or reserved.

416
00:48:09.880 --> 00:48:14.880
Well, sure, of course all powers are not delegated or reserved, but they say that has no substantial import.

417
00:48:14.880 --> 00:48:19.880
It's just a statement of the obvious. It is not in itself a limitation of the Federal Government.

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00:48:19.880 --> 00:48:26.880
So everyone who thought that up to now, I guess, wasn't understanding it as well as the experts from 1940.

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00:48:26.880 --> 00:48:32.880
It was now obvious that the Court had no intention of allowing the Interstate Commerce Clause to limit the authority of the Federal Government.

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00:48:32.880 --> 00:48:41.880
We get other Court decisions suggesting that the Federal Government can extend its power over any area in which it might contribute to the general welfare.

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00:48:41.880 --> 00:48:48.880
So in other words, exactly the opposite of what Madison said the meaning of the General Welfare Clause was is now the official version.

422
00:48:48.880 --> 00:48:53.880
If it's in favor of the general welfare, then the presumption is that it's okay.

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00:48:53.880 --> 00:49:07.880
Now, we should take a brief moment to say something about the Commerce Clause, just to make clear that this is a misinterpretation and obviously an extremely broad reading.

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00:49:07.880 --> 00:49:19.880
And just look at what was the original intent of the Commerce Clause, and here's an area where I think the Bill Watkins book on reclaiming the American Revolution is very good,

425
00:49:19.880 --> 00:49:39.880
Congress has the authority to regulate commerce with foreign nations and among the several states, and with the Indian tribes.

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00:49:39.880 --> 00:49:48.880
Watkins points out that at the time of the framing, if you look at Samuel Johnson's dictionary, what did commerce mean?

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00:49:48.880 --> 00:49:55.880
It meant intercourse, exchange of one thing for another, interchange of anything, trade, traffic.

428
00:49:55.880 --> 00:50:01.880
So it did not, the word would not have included local concerns like agriculture.

429
00:50:01.880 --> 00:50:11.880
Now in case anyone might want to try to argue that the Commerce Clause could give the Federal Government the power to interfere in local matters,

430
00:50:11.880 --> 00:50:18.880
We have Alexander Hamilton in Federalist Number 17 saying that the Commerce Clause would not affect

431
00:50:18.880 --> 00:50:25.880
quote, the administration of private justice, the supervision of agriculture and of other concerns of a similar nature.

432
00:50:25.880 --> 00:50:33.880
So this FDR version of the Commerce Clause is expressly ruled out even by someone like Hamilton.

433
00:50:33.880 --> 00:50:40.880
Now Richard Epstein makes just the simple point that if you look at the construction of the Commerce Clause

434
00:50:40.880 --> 00:50:47.880
It says that the Congress has the power to regulate commerce with foreign nations among the several states and with the Indian tribes.

435
00:50:47.880 --> 00:50:55.880
Well then, if it says that, then the word commerce has to have the same meaning in each of those three cases

436
00:50:55.880 --> 00:50:59.880
in relation to foreign nations, several states and Indian tribes.

437
00:50:59.880 --> 00:51:04.880
So let's suppose that interstate commerce could in fact actually include something like agriculture.

438
00:51:04.880 --> 00:51:10.880
Then we should be able to insert the word agriculture before each of these three things.

439
00:51:10.880 --> 00:51:16.880
But yet certainly it would be absurd to say that Congress has the authority to regulate agriculture with foreign nations.

440
00:51:16.880 --> 00:51:22.880
Although today they probably would claim we have the authority to tell Syria what they can grow or something,

441
00:51:22.880 --> 00:51:24.880
but that would seem sort of absurd.

442
00:51:24.880 --> 00:51:30.880
Congress doesn't have any power to regulate agriculture of the Indian tribes, so it can't work in that sense.

443
00:51:30.880 --> 00:51:38.360
Well, what the rule eventually comes to be, though, in Wickard v. Filburn, is that if

444
00:51:38.360 --> 00:51:43.680
something exerts a substantial economic effect on interstate commerce, then it is subject

445
00:51:43.680 --> 00:51:49.600
to federal regulation. Now, in the case of Wickard v. Filburn, we're talking about 11.9

446
00:51:49.600 --> 00:51:56.000
acres of wheat. Again, very insubstantial, but the point is that what if we had a lot

447
00:51:56.000 --> 00:52:10.500
In fact, in 1997, the Solicitor General of the United States was asked by a Supreme Court

448
00:52:10.500 --> 00:52:17.800
Justice, can you name for us something, some activity, that you believe the Federal Government

449
00:52:17.800 --> 00:52:23.660
under the Constitution would not have any authority over? And he stood there dumb-bounded.

450
00:52:23.660 --> 00:52:53.660
Now, recently, Watkins did an article trying to talk about the medical marijuana issue in relation to this, because it's very interesting that the Court, talking about medical marijuana, says that this is something that can be regulated by the Federal Government under the Interstate Commerce Clause because, and listen to the weird parallel with Wickard v. Filburn, because homegrown marijuana

451
00:52:53.660 --> 00:52:58.220
displaces drugs sold in both the open drug market and the black drug market

452
00:52:58.220 --> 00:53:01.900
regulated by the Controlled Substances Act.

453
00:53:01.900 --> 00:53:06.180
So it's concluded then that Congress, or at least this is the government's brief

454
00:53:06.180 --> 00:53:10.580
in the case, the government's brief says this, Congress has the power to regulate

455
00:53:10.580 --> 00:53:12.380
the interstate market in marijuana

456
00:53:12.380 --> 00:53:15.940
as well as activity that substantially affects that market regardless of the

457
00:53:15.940 --> 00:53:18.060
purported use of the drug.

458
00:53:18.060 --> 00:53:23.500
And then Watkins goes on to make the point that if this were true,

459
00:53:23.500 --> 00:53:27.860
that anything that might affect the market in marijuana, it was a market that the government

460
00:53:27.860 --> 00:53:32.260
doesn't even permit in the first place, anything that might affect that market could itself

461
00:53:32.260 --> 00:53:33.260
be regulated.

462
00:53:33.260 --> 00:53:38.180
And so Watkins says, then why doesn't Congress claim to have a power to regulate procreation?

463
00:53:38.180 --> 00:53:42.580
Because the more people we create in this world, the more we could affect the interstate

464
00:53:42.580 --> 00:53:46.400
market in marijuana and the price of marijuana, the more people there are.

465
00:53:46.400 --> 00:53:49.940
Why couldn't you use the interstate commerce clause then to regulate human procreation?

466
00:53:49.940 --> 00:53:52.940
Well, I would say to Bill Watkins, keep your damn mouth shut.

467
00:53:52.940 --> 00:53:57.940
Don't give them any ideas.

468
00:53:57.940 --> 00:54:00.940
All right. That's that.

469
00:54:00.940 --> 00:54:06.940
All right. Well, finally, I think I want to say something about what the heck does get us out of the Great Depression.

470
00:54:06.940 --> 00:54:13.940
And oftentimes you get the answer that World War II got the country out of the Depression.

471
00:54:13.940 --> 00:54:31.940
And, of course, the classic article, as many of you know, is an article written by Bob Higgs from 1992, I'll have to get the exact site, but I haven't, where he did some excellent work on this.

472
00:54:31.940 --> 00:54:37.940
and he showed that, you know, your instinct that war can't be a source of