Why the Democrats Oppose Economic Freedom

The seeds of the modern bureaucratic or administrative state go back to the Progressive Era of American history in the early 20th century. But progressive regulation morphed into the hyper-control of our present federal government during the New Deal. Modern students, whose history education has been directed by teachers who “accept” the reality of a federal leviathan, are often unaware of the fact that before 1916 there was no income tax in the United States, and that federal revenues were primarily through import duties. The income tax was justified by the need to support the ever-expanding regulatory environment being promoted by Democrats, with a small amount of crossover by Republicans. Woodrow Wilson and the Democrats were far more drawn to the big government idea and ideal than their Republican confreres. Under Wilson, the Sherman Antitrust Act of 1890 was replaced with the more powerful antitrust tool, the Clayton Antitrust Act. The Federal Reserve came into being under Wilson. Further, the 16th Amendment allowing a federal income tax was enacted in 1916, although the move to establish that institution had begun before Wilson took office, having been passed by Congress in 1909. More importantly, under Wilson, the U.S. became involved in World War I, and in the prosecution of that war, various federal governmental controls over industry were enacted in order to promote the war effort, not the least of which was the War Industries Board under Bernard Baruch.

So the progressive emphasis was to curb the greed and concomitant excesses of the business community that were manifesting in an America which, in the late 19th and early 20th centuries, moved from being a prosperous agriculture-based society to being an industrialized manufacturing and mining mega-power on the world stage. Competition was to be promoted. The Federal Reserve was created as a backup and institution of last resort when cyclical banking downturns took place, and, as we became more involved in international markets, military buildup became necessary as we needed to protect far-flung property and trading interests throughout the world. By the time of the New Deal, the regulatory ideal of progressivism began to give way to government planning which involved federal control or even ownership of business, and federal engagement with previously private markets on an unprecedented scale. Franklin D. Roosevelt’s administration set up the “alphabet agencies” which performed functions that were controlling or active in unprecedented ways. The Tennessee Valley Authority (TVA) actually produced electricity and functioned alongside private electric companies. The premise was that the TVA (clearly a socialist venture) was delivering electric power to many citizens who were not getting it because they were living in a market that was not profitable for private companies to establish generating plants. So, according to TVA justifiers, the federal government was supplementing the private sector, i.e., meeting a need that the private sector was not meeting, but not going into competition with the private sector in those markets it was already serving. The federal government also became an employer of vast numbers of people through its public works projects, undertaken by the Works Progress Administration (WPA), the Public Works Administration (PWA), the Civilian Conservation Corps (CCC), National Youth Administration (NYA), and many others too numerous to list. And the feds became lenders of choice to many, especially in the agricultural sector. With vast government apparatchiks in the regulatory agencies and these vast employment programs, the federal government was no longer locked into the progressive ideal of protecting workers, but increasingly became the employer of vast numbers of people, thus going into competition with the private sector as the employer of record. However, unlike the private sector, the employees were not supported by markets, but by the taxpayers, government borrowing (increase of the national debt), and printing of money. Productivity was not the centerpiece for paying those federal bills. The Agricultural Adjustment Act (AAA) was passed as an effort to keep farm income up by controlling production. By limiting production, the prices of farm products from hogs to corn could remain elevated. Thus, under AAA, the feds authorized themselves to pay farmers for destroying crops or otherwise limiting crop production, even killing 6.4 million pigs. This clearly went beyond regulating market practices to maintain competition as in the progressive era, but intervened to control markets at both the production and price ends of enterprise. However, the centerpiece of New Deal legislation was the National Industrial Recovery Act (NIRA) which set up the National Recovery Administration. This signal piece of legislation called for price and wage fixing by various industries working hand-in-glove with the federal agency administering the program. Companies participating in these associations were authorized to imprint their products with a Blue Eagle indicating their “cooperation.” Here we see the most important shift away from the earlier progressivism. Under progressivism, competition was being promoted – by the Republicans under the Sherman Antitrust Act and by the Democrats under the updated and more powerful Clayton Antitrust Act. Under the NIRA, what might otherwise be called a “trust,” “cartel,” “monopoly,” or “oligopoly” by the pro-competition progressives were, so to speak, under federal blessing. Price and wage fixing would be considered okay as long as they were aligned with federal economic goals and policies. Thus, the shift in orientation from regulation under progressivism to governmental control under the supervision of a brain trust of demand side, Keynesian economists. Wilson had believed in the importance of experts in our new scientific marketplace, but Roosevelt stepped up our dependence on so-called experts to a degree Wilson could not have imagined, and the New Deal was implemented. Both the AAA and the NRA were declared unconstitutional. However, the AAA was rewritten with adjustments to meet the Supreme Court’s objections, and a new AAA was passed and upheld. In the famous case of Schechter Poultry Corp. v. the United States (1935), the NIRA was deemed to be unconstitutional. The Blue Eagle disappeared from products, and wage and price controls under so-called “voluntary agreement” were disbanded. But the socialist and communist left had tasted blood. The NIRA whetted the appetite of the “reds” who admired Vladimir Lenin’s and Josef Stalin’s iron man appropriations of the means of production in the USSR for the supposed collective good. In fact, FDR’s rapport with Stalin during WWII is a well-established fact, and that “rapport” should not be surprising in light of the radical expansion of government control during the New Deal. The new expert class of left-wing professors and advocates operating during the Roosevelt years saw that the battle cry “workers of the world, unite” was needed more than ever before as the capitalist colossus marched onwards. Those leftists dominate the Democrat Party to this very day, and their hatred for free markets is poisoning our society. E. Jeffrey Ludwig has taught history, literature, and philosophy at Harvard, Penn State, Juniata College, City University of New York, and other colleges and secondary schools. His latest interview on the Hagmann and Hagmann Report can be accessed at https://www.youtube.com/watch?v=tXl3H1jjZrU