Critiques of “The New Deal.”

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“The Great Depression” was a critical financial crisis that drove a notable slump in the US economy (Kaufman 501). It was marked as a severe crash in the US stock market, which led to disastrous results. The national capital stock was significantly diminishing, linked with banks and corporations’ bankrupt, resulting in enormous job losses (Kaufman 506).
As a result of these events, individual assets, income from taxes, products’ prices, and profits were cut down with a notable drop in global trade (Fishback 241).
This directed to a list of actions, acts, and national programs by President Franklin D. Roosevelt to fight the aftermaths of the Great Depression in what came to be known as “The New Deal.” Diverse opinions, however, emerge as to whether “The New Deal” was effective in curbing the problems of “The Great Depression.”

“The New Deal” can be critiqued for its reliance on deficit spending (Fishback 242). The government was spending more than it could generate revenues. Deficit spending results in increased interest rates and limited amounts of money for investment (Kaufman 508). Increased interest rates also translate to reduced investments and consequently, slowed economic growth. Private sector recovery would have benefited more from income generating ventures such as investments. However, as Kaufman notes, private investment was not significantly improved by the New Deal (509). In fact, most investors detested from investments until the business climate felt better as most felt that the programs were a threat to profits in the private sector. The deficits further increased the national debt which caused the government to take measures such as an increase in taxes. Increased taxed are burdensome to the citizens.

Critics also argue that the deal was a harm to the poor people – they were the principal victims of the deal. The programs of the deal were being financed by increased federal taxes (Fishback 242). The excise tax levied on essential commodities such as matches, cigarettes, candy, etc. was a significant source of income for “The New Deal” programs that were initiated. Fishback notes that excise taxes were even imposed on radios and electricity to listen to Roosevelt’s “Fireside Chats!” (243). In this regard, the opinion was that the middle class and the poor were majorly the key financiers of the deal as most taxes fell disproportionately on them. Consequently, the taxpayers were left with little money to spend on food and other things which would otherwise have led to a stimulation of the economy (Kaufman 509).

Further, the deal’s taxes were responsible in part for the prolongation of the unemployment problem. This is because the business taxes left employers with less money for growth and job creation. Employers were discouraged from hiring because the social security taxes imposed on payrolls made hiring to be expensive (Kaufman 510). Moreover, production was reduced and wages forced above market levels by the “National Industrial Recovery Act” that further served as an impediment to the hiring process by employers. Kaufman reports that the act caused loss of 40,000 jobs to the black people which further aggravated the crisis (510). Farm production was also cut back by the “Agricultural Adjustment Act” which was a major blow to the farmers who needed work (Depew et al. 467). Some of these programs were eventually declared unconstitutional as they even further threatened the principles of democracy by overextending the power of the government. Evidently, “The New Deal” might have eased the tribulations resulting from the economic crisis, but the some of the impacts herein had negative consequences.

Works Cited

Depew, Briggs, Price V. Fishback, and Paul W. Rhode. “New deal or no deal in the Cotton South: The effect of the AAA on the agricultural labor structure.” Explorations in Economic History 50.4 (2013): 466-486.

Fishback, P. V. (2016). New Deal. In Banking Crises (pp. 241-250). Palgrave Macmillan UK.

Kaufman, Bruce E. “Wage theory, new deal labor policy, and the great depression: Were government and unions to blame?.” ILR Review 65.3 (2012): 501-532.

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