SOCIAL
SECURITY
The New Deal - A Raw Deal
Part
1 l Part
2 l Part 3
l Part 4
by Douglas V.
Gnazzo
June
28, 2005
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The Horror of it all “A bitter thing, a lamentable thing, a thing horrible to think of and terrible to hear, a detestable crime, an execrable evil deed, an abominable work, a detestable disgrace, a thing wholly inhuman, foreign to all humanity, has, thanks to the reports of several persons worthy of faith, reached our ears, not without striking us with great astonishment and causing us to tremble with violent horror, and, as we consider its gravity an immense pain rises in us, all the more cruelly because there is no doubt that the enormity of the crime overflows to the point of being an offence to the divine majesty, a shame for humanity, a pernicious example of evil and a universal scandal.” [author/source listed at end of article]
Back at the start of part four of this series, I asked a couple of questions:
The story is beginning to unfold before us, revealing glimpses into its inner nature and workings. It appears to be a strange, yet complicated beast, one that can wear many different chameleon-like faces that are apt to suddenly change, without notice; and then to disappear altogether – into the outer limits of cyberspace. Cyberspace – the modern-day temple of the gods of money, where the cold, cold altar to Lucre astounds. One minute the system can be very friendly, paying out retirement benefits, supplementing for badly needed income to help the elderly make ends meet; or by providing hospitalization for the sick and needy that have retired and who no longer receive a weekly paycheck and source of steady income. However, the next minute it can become a system that has been paying out regularly monthly disability payments for a year or more and suddenly stops, as your “limits” have been reached or something in the claim has become questionable, or – whatever, their limitations being only limited by the limits of their own imagination. And then there’s the real eye-opener as to just how customer-unfriendly the system can be: you find yourself in old age and deathly sick, alone in the world as far as close family members are concerned. Your Medicare coverage runs out and you now have to go on Medicaid. You are no longer free to choose what doctor you can go to and when. "The plan” will take care of that for you. You are no longer free to choose which rehabilitation hospital or center you can go to after leaving the hospital. "The plan" takes care of that. And then you find out, you better not need long term care past 100 consecutive days, 'cause if so, any assets you have, including your house, will have liens put out against them so that they can be foreclosed on and sold or liquidated to pay for your expenses. This includes any life savings, investments, etc. that you have saved and accumulated for your “retirement” and “golden years.” Gives a new meaning to the term “earned benefit” program. This happens to thousands of people every day. Would you want this to happen to you? Do you want to be treated like this or with dignity and respect as a fellow human being should be? And what about all of the hard work and effort you have done over the span of your lifetime? What about all your contributions to society – not to mention all the taxes you have paid, which is supposedly the reason as well as the source of money that gave social security the funding and hence the distinction of being an earned benefit program? Talk to your Congressman. Talk to your representatives. Tell them how you think and feel about the subject and issues. Tell them what you would you like to see done. It is your government. It is your taxes. They do work for and represent you – don’t they? But sometimes they forget, if not reminded. So remind them. If not for you, for your children and your grandchildren. Help make the world a better place. You do count. We all count. Stand up and be counted. The inner strength of civilization is revealed by how it treats its weakest members.
As was stated at the beginning of part four of the Social Security Series regarding “relationships”: “Included with this “basic issue” designation, is the question of the financial soundness and viability of the system in general, and how it relates to the overall financial soundness of our fiscal and monetary systems in general.” “Then there are even further “issues” regarding social security. These include the initial creation of the system, and how the social security system was part and parcel of many similar social programs and policies of the then current times, often summarily referred to as – Roosevelt’s New Deal.” “The present task before us is of a bit of a different bent: how is a paper fiat monetary system directly related to the issue of social security, which in turn are both directly related to the financial soundness of our great country, and just what policies have led us down this path, and who is responsible?” [Social Security Part IV] Near the conclusion of part four of the Social Security Series, the following was offered as partial answers to the questions posed above: “1933 was a scary time, as good, honest, and hard working people had come upon hard times, by the tens of thousands. There was pain and suffering throughout the land. The air was thick and heavy, a feeling of despair permeated the air. Even the mighty winds dared not blow, and had gone into hiding, as the dreaded twins of Nemesis – the Incubus and Succubus creatures, were out ravaging the land, searching for unwary victims by night, and trusting souls during daylight. First, the people’s gold and silver coin money, the honest money of the Constitution, was taken from them; and then it was made illegal to own or have possession of hard currency. This was a blatant usurpation of the right of ownership of private property that had been granted by the Constitution – The Supreme Law of the Land. Next, the people were forced to accept paper money, no longer redeemable in gold and silver coin. This certainly was a New Deal, but it sounds more like a raw deal. Is it any wonder that a social security insurance system would rise from the ashes of the demise of the hard money system of the Constitution? Something, anything, had to be offered to the public, to make it appear that the government cared, that the government was in control of the fiscal and monetary affairs of the country, and that the people would be taken care of. If the people are dependent upon the government, then the government has control over them. So what talisman did the government offer to the people, tossed as a bone to a starving dog: Social Security.” [Social Security Part IV] A reiteration of the main points to date is a good idea at this juncture before we head off into other issues of further complexity. Let’s make sure we have a good handle on what has been covered so far and then we will proceed with Roosevelt’s New Deal, the miracle of miracles.
Do you get the feeling in the pit of your stomach that something much larger then just social security was happening back in 1933? Well, if you do, you are sensible, sensitive, and correct.
The following list is comprised of just the major New Deal Programs. There were more in total. And most of these were implemented in the first 100 days of President Roosevelt’s reign, which begs the question: did they really write up all of this stuff up in the first 100 days or did it already exist, at least in blueprint form, ready to roll when the orders were given? A quick synopsis will be provided of some of the more important programs, providing examples of how Roosevelt’s New Deal was a series of active policies that taken together, formed a complete new ideological agenda – socialism and more governmental control, both of which goes against the Spirit of our Constitution, and the underlying ideals of individual freedom, less governmental powers, intervention, and control. The desperate economic situation of a depression looming, combined with the substantial Democratic Party victories in the 1932 elections, gave Roosevelt unusual power and influence over Congress in the first months of his administration. He used his unchecked power to gain rapid passage of a series of measures to bailout the shaky banking system, reform the stock market, aid the unemployed, and induce industrial and agricultural recovery. But at what cost? Cui Bono? With the banking crisis hanging over their heads, most of Congress was in a desperate mood to do virtually anything the new president suggested, although there were a few calm voices of reason. However, as usual, they were ignored. Roosevelt unleashed his programs completely unbridled. He suggested and implemented the following programs, which were passed by Congress almost immediately. Both the President and Congress had stepped way over the line – to the point of no return. Even the Romans Emperors didn’t receive immediate response and implementation of their powers and influence. It has been said that the New Deal ushered in a New Era, which may be true. The reader is left to decide for themselves. One thing is certain – the effects are still with us today. Programs
Two days after taking office, Roosevelt closed the banks down. Three days later he passed the Emergency Banking Act. If nothing else, the guy didn’t waste time. The following day he passed the Economy Act, which proposed to balance the federal budget by cutting the salaries of government employees and reducing pensions to veterans by as much as 15 percent. The bill passed through Congress almost immediately, even though there were some heated protests by some members of Congress. Next on the list was the Agricultural Adjustment Act, which created the Agricultural Adjustment Administration (AAA). Congress passed the legislation in May 1933. This was a federal program to protect U.S. farmers from the uncertainties of the market through subsides and production controls, which is direct government intervention within what were supposed to be free markets. The big deal here was the "domestic allotment" system of the act. Under the system, producers of seven basic commodities (corn, cotton, dairy products, hogs, rice, tobacco, and wheat) would decide on production limits for their crops. The government, through the AAA, would then tell individual farmers how much they should plant and would pay them subsides for leaving some of their land idle. So, how was this all paid for? The same way things always get paid for by the government – taxes and or bonded debt issuance. A tax on food processing would provide the funds for the new payments. Farm prices were to be subsidized up to the point of parity.
This was as far from free markets as one could get. Complete government intervention and control. In other words – socialism, not a Republican form of free-enterprise and hands off government, just the opposite. But wait, we haven’t even got to the worst part yet – the large-scale destruction of existing crops and livestock to reduce surpluses. Now you must remember this was taking place during a time when many families were suffering from starvation. How one can have “surpluses” when people are starving to death is beyond any semblance of reason and sanity, let alone a compassionate heart. Why not simply give the starving people the excess surpluses? It wouldn’t be – good business, now would it? A sad, sad, day. A testimony of infamy. The AAA established an important and long-lasting federal role in the planning and running of the entire agricultural sector of the economy. Socialism, pure and simple. Governmental interference at its best. Free markets at their worst. So what else could the government get their hands on to regulate and control? How about the stock market. Why that sure needed fixing – didn’t it? Voilá, a new federal regulatory agency to oversee the stock market: the Securities and Exchange Commission (SEC). And what the heck, why stop there? Why not reform the banking system as well, including a system of insurance for deposits (FDIC).
Now perhaps I’m way off base with this, but has anyone actually given some thought to the implications of an insurance program for deposits of money? Why, if the money is real and there is no theft or fraud taking place within the banking industry, would insurance be needed? Insurance for or against what? Isn’t the purpose of insurance to cover for losses incurred, to make one whole after catastrophes occur? If the monetary system is sound, why would it require insurance? Doesn’t this imply that there are potential problems with the monetary system, such that catastrophic events could occur, requiring insurance to protect against? And further, how can one protect one from the loss of money, except by providing money for any money that is lost by calamities? Lost how? Replaced how? If there is a problem with the original money being “lost,” where does the new money that insures it come from? Or in other words, if they didn’t have the money to start with, where are they going to get the money to end up with? Fractional reserves is what it is – a rip off. The only way to fix it – is to abolish it. One is reminded of the song, "Tobacco Road," and the lyric: “...and start all over again.” In 1933, over 15 million people were unemployed. Roosevelt’s plan to solve this problem was more big government, more intervention, more “relief” measures, more social programs. Among them were: the Civilian Conservation Corps (CCC), the Civil Works Administration (CWA), and the Federal Emergency Relief Administration (FERA).
One of the crowning accomplishments of the New Deal, at least in the minds of the socialistic New Dealer’s themselves, was the Tennessee Valley Authority (TVA), an unprecedented experiment in public electric power, and regional governmental planning and control. We are going to take a bit of a closer look at the Tennessee Valley Authority, as it is a stellar example of just what this New Deal was all about – more government control over the economy, and hence over the people – by social programs, by socialism, which is an ideology that places emphasis on the State, as opposed to the individual. The Republican form of government that our country was founded on, as expressed in the Constitution of the United States, places emphasis on individual unalienable rights, such as: freedom, liberty, justice, all in the pursuit of happiness, to create a more perfect union; and the individual right to own private property. And how does the Constitution say this should be done: by attempting to limit the power of government to interfere with such individual rights, by delegating it limited powers, as directly and clearly expressed in the Constitution. Socialism emphasizes State control over and above individual rights. The
U.S. Constitution emphasizes the freedom and As Ludwig von Mises clearly understood: “There is an inherent tendency in all governmental power to recognize no restraints on its operation and to extend the sphere of its dominance as much as possible. To control everything, to leave no room for anything to happen of its own accord without the interference of the authorities -- this is the goal for which every ruler secretly strives.”
The purpose of the Tennessee Valley Authority is more or less contained in its introduction, which says, “To improve the navigability and to provide for the flood control of the Tennessee River; to provide for reforestation and the proper use of marginal lands in the Tennessee Valley; to provide for the agricultural and industrial development of said valley; to provide for the national defense by the creation of a corporation for the operation of Government properties at and near Muscle Shoals in the State of Alabama, and for other purposes." [TVA - Download the Tennessee Valley Authority Act of 1933] This was done by constructing a series of hydroelectric dams along the Tennessee Valley from Knoxville, Tennessee to Paducah, Kentucky. The series of dams controlled flooding, generated hydroelectric energy, and put in place a series of deep, navigable lakes, which together formed a 650 mile long stretch of channel, which was used to haul freight up and down the Valley. The end results of the project were spectacular, especially when looked at from a purely functional viewpoint as to the amount of raw industrial capacity that was provided. But... might the full story be a bit more complicated then appears at first blush? By the end of World War II, the TVA had become the nation's leading electricity supplier. It was an impressive undertaking and accomplishment, however... It must be remembered that these power plants were subsidized by the federal government, which means they were: Subsidized by We The People’s taxes and or debt issuance – the public debt. Many private power companies strongly opposed the new power plants due to their ability to generate electricity at such a low cost, as well they should. The TVA had an unfair advantage. They were not required to live by and operate by the rules of the free market. They lived by the rules of a socialistic, governmental subsidized and controlled market. This was not free enterprise. This was government and special interest enterprise. And hardly anyone mentions the displacement of hundreds of families for the purchase of the thousands of acres necessary to create the lake system. The constitutional right of private property ownership had to take a back seat to the government's eminent domain crock of – whatever you want to call it. But of course they paid the going market rate, which at that time was severely depressed, which means the people got a raw deal, which they had to swallow regardless, if they wanted to or not. The taste of wormwood and the smell of brimstone filled the air. The following is a summary profile of the Tennessee Valley Authority:
[Why the Tennessee Valley Authority Must Be Reformed] Which led Congress to issue the following statement in 1998:
[Why the Tennessee Valley Authority Must Be Reformed] Needless to say, some saw the Tennessee Valley Authority as a socialistic program that allowed special interest groups to feed from the government trough that was continually filled by We The People, through taxes and bond issuance. So much for free market enterprise.
Remember the song when we were kids growing up that had the following lyrics: “War – What’s It Good For – Absolutely Nothing” Although I agree with the overall point the songwriter is trying to make, it is one of those very unfortunate truisms of life that war is good for a very few – the merchants of death, those who finance war. War is very expensive to fight. It requires huge amounts of goods and resources, all of which must be financed. Those who supply these goods and resources and or supply the financing of the war machine – reap huge profits, as it has been known since the days of the ancients – that the sinews of war is money. And another unfortunate truism is that war is good for the State. It makes it grow stronger, along with the elite few who run and control the State, especially the purse strings of the State. As Lord Rothschild said, he cared not who was King or Queen, as long as he controlled the money.
The relatives of the elite collectivists also get a free ride by hanging onto the coat-tails of the older family members, the J.P. Morgan’s, the Rockefeller’s, the Mellon’s, the Vanderbilt’s, the Baruch’s, the Belmont’s, the Carnegie’s, the Dupont’s, etc. The crème de la crème. Nothing like a good war to bring the elite collectivists out of the shadows. Roosevelt’s New Deal carried on the flag of some of the First World War’s favored institutions of collection. Although the titles were changed, the players and the game remained essentially the same. That’s what family traditions are for, at least in the eyes of the elite. During World War I, Eugene Meyer's War Finance Corporation lent federal money to corporations, to provide the needed goods to rage war. In 1932, Hoover renamed it the Reconstruction Finance Corporation and guess who was running it – Eugene Meyer. Small world. World War II resurrected another elite collectivist institution of World War I – Baruch's War Industries Board, which was reformed into the War Production Board of World War Il. The War Labor Board of World War I was the model for the National Labor Board in Roosevelt’s New Deal, which in turn was succeeded by the National Labor Relations Board under the Wagner Act, which once again came to be called the War Labor Board during World War II. How things change – yet remain the same.
Roosevelt’s crowning initiative, the National Industrial Recovery Act (NIRA), which created the National Recovery Administration (NRA), was also one of Roosevelt’s biggest defeats, as well it should have been. In my opinion, almost, if not every one, of Roosevelt’s programs should have been defeated, as our country is supposed to be governed as a Republic, according to the Constitution, Not a socialistic dictatorship – decreed by one man. The Act established codes of fair competition, which were supposedly attempting to support prices and wages, and thus stimulating economic recovery. This type of legislation amounted to wage and price fixing, which is far, far removed from the idea of free markets and is an extreme socialistic policy, which is becoming ever so closer to even more sinister ideologies. Thank God the Supreme Court still had some clear-headed thinkers sitting on the bench. “The NIRA was overturned on May 27, 1935 when the Supreme Court of the United States ruled in the case A.L.A. Schechter Poultry Corp. v. United States (295 U.S. 495) (sometimes called the "sick chicken" case) that the Act encroached upon states' authority, unreasonably stretched the Commerce Clause, and gave legislative powers to code-makers in the executive branch.” [Wikipedia] “Chief Justice Hughes wrote for a unanimous Court in invalidating the industrial "codes of fair competition" which the NIRA enabled the President to issue. The Court held that the codes violated the constitutional separation of powers as an imperssible delegation of legislative power to the executive branch. The Court also held that the NIRA provisions were in excess of congressional power under the Commerce Clause.” [A.L.A. Schechter Poultry Corp. v. United States] A perfect example of how the system can work as intended, if allowed to work as intended without interference from the other branches of the government, which branches the court is supposed to act as a check and balance of; and without interference from big money interests and special interest groups.
Who paid for the New Deal? Earlier we had ventured forth the question, at what cost were all of these programs being created? Where was the money coming from to pay for them? Same place the money always comes from – We The People. All of Roosevelt’s programs were extremely expensive. Concurrently, the government was not taking in enough revenue to pay for all the expenses, which meant the politicians would use their favorite fall back plan – deficit spending. Spending in 1916 was $697 million. In 1936, it was $9 billion. That’s an increase of almost 1400%. The government increased taxes on the wealthy, as they could most easily handle it. However, the coffers still were empty. What was the government to do? Well, there are only two basic ways the government can raise money: taxes and by borrowing money through the sale of government bonds. So as Krugman and Jonathan have pointed out – they did just that. They sold bonds, lots of bonds. Meanwhile, The National Debt Climbed to Unprecedented Heights You’ve probably noticed that the social security system has not really been mentioned in this part of the series. It has been referred to or alluded to, but nothing of substance has been offered. The reason being is that this particular part of the series is focusing on the New Deal and how it came about, and what precipitated it, and what thought processes were behind it. This is being done to try to attain a better understanding of social security, as the system was just one of many of the New Deal social programs. By better understanding the ideology behind the New Deal, a better understanding of social security will be had as well. Part Six to be Forthcoming The Delusional Saving Grace of Part 2 of the New Deal Two Hangmen “As
I Rode Into Tombstone On My Horse His Name Was Mac It
Seems The Folks Were Up In Arms A Man Now Had To Die The
Man's Name Was I'm A Freak The Best That I Could See I
Guess That He'd Seen Loopholes From Workin' With His Rope He'd
Talk To All The People From His Scaffold In The Square He
Said The Laws Were Obsolete, A Change They Should Demand The
Marshall's Name Was Uncle Sam He Said He'd Right This Wrong He
Finally Arrested Freak And Then He Sent For Me It
Didn't Take Them Long To Try Him In Their Court Of Law They
Sentenced Him To Die So His Seed Of Thought Can't Spread So
The Hangin' Day Came 'Round And He Walked Up To The Noose They
Called It All Conspiracy And That I Had To Die And
Now We're Two Hangmen Hangin' From A Tree Two
Hangmen Hangin' From A Tree [Terry Talbot 1969] Note: the quote at the very beginning of this article is from the orders given to the royal seneschals by Nogaret just prior to Friday the 13th, the day they arrested all of the Knights Templars. It is the opening line of the orders.
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