Monday, April 9, 2012

FDR Goes to War by Burton & Anita Folsom Part 2

Roosevelt needed to pay for the war. America had already buried itself deeply in debt before the war began. FDR's ready solution - raise taxes. When the income tax was implemented in 1913, it affected very few Americans and was only paid annually. Seeking to maximize tax receipts the first year, the bill was applied retroactively. Giving the very wealthy time to gather the payment, tax day got pushed to March 15. FDR lowered the tax burden to include millions of Americans in the 1930s and he found it increasingly difficult to wait until March 15 to collect. The ever-brilliant FDR determined to combine raising taxes with paycheck withdrawals. However, trying to collect the previous year's taxes while simultaneously withdrawing the current year's taxes led to cries of double taxation. For some citizens, it would result in a taxes exceeding 100% of income. Although FDR had coveted a 100% tax rate throughout his presidency, even some of his most loyal supporters balked at 100%+.  Withdrawal promised less painful payment of taxes, a pay-as-you-go system, and this in turn would allow the government to raise taxes with less resistance. FDR threw in the illusion of "tax forgiveness" for the previous year. No one would actually see any savings, taxes would begin being withdrawn immediately, but it sounded good! Besides, for the wealthiest, a hefty estate tax would absorb anything left over at death.

The tax debate led to a class warfare debate. Some, like FDR wanted a 100% tax for incomes over $25,000. That failed, but taxes still reached up to 90% on the very wealthy. Progressives in Congress argued against giving the richest citizens a "gift" of hundreds of thousands of dollars by "forgiving" the 1942 taxes.  Yet, because their tax rate well exceeded 50%, their rate for the 1943 tax year would, in some cases be up to 180%! Many in Congress contended this was fair since they shouldn't be making that much anyways. Conservatives and businessmen reacted violently. Never in American history had the well-off been so vilified and abused. America had no right to limit incomes. Rights came from God and inherent in our Declaration was the right to what you most naturally own - life, liberty, and property. FDR, however believed rights came from government and in times of war, the government remained well within its right to take most, if not all, of a man's earnings. The final bill reflected FDR's desire to take as much as he wanted with no respect for the rights of individuals to keep what they earned. Three-forths of either 1942 be 1943's taxes would be cancelled. This would help the lower classes who could pay the 25% still required in installments, but the higher classes would see their taxes raised to 100% or beyond for the year 1943. The resulting monstrosity had even its authors flummoxed when  trying to explain how someone could pay more than they earned.

"FDR amazed friends and enemies alike by his willingness to break laws and bend the Constitution." His was a view that considered right and wrong rather than legal and illegal. Since his motives were deemed to be pure, of course what he did was always in the right, legal or not. Although declared illegal by the Supreme Court, Roosevelt openly defied the law and wiretapped both friend and foe alike. He not only bugged phone lines, but used the Secret Service and FBI to conduct investigations of any who piqued his interest. Political enemies were threatened with blackmail and newspapers intimidated. Many who knew themselves to be in FDR's crosshairs overpaid their already hefty taxes to elude the unavoidable IRS investigation and subsequent penalties to be unleashed upon them. However, FDR not only punished his enemies and kept his friends in line with threats, he used the millions of federal dollars at his disposal to reward acquiescent citizens. No list of FDR's offenses would be complete without the mention of the internment of Japanese-Americans, which shames not only FDR, but his modern cheerleaders who overlook this most blatant violation of civil rights.

Being a fellow man of the left, Roosevelt always looked to Stalin for inspiration and direction. Of course the brutal tactics repulsed him, but one of his closest advisors, upon visiting the Communist nation stated, "I have seen the future and it works." Even if it meant throwing Churchill under the bus during negotiations, FDR would surreptitiously work to get into the confidence of Stalin. He believed the communists to have a good heart, was seeking to do the Lord's work and help society while Americans only looked after themselves! In fact, it was Churchill, as the head of the British Empire, who appeared to be the imperialist to FDR.  Roosevelt even deluded himself so far as to believe Stalin a Christian and Russia tolerant of religion! Delighted that Russia was finally our ally, Roosevelt sent supplies and arms to Russia at astonishing levels. FDR undercut Churchill in the historic meetings that took place between the three leaders. Stalin convinced FDR to allow Russia an unimpeded path directly to Berlin over Churchill's strenuous objections. Roosevelt chose to play his "hunch" about Stalin rather than rely on facts provided to him by the British and his own administration. The result became the Soviet Eastern European Bloc after the war and untold death and misery.

In 1944 Roosevelt ran for an unprecedented 4th term after an unprecedented 3rd term. However, Roosevelt had to contend with hiding his rapidly deteriorating health. A friendly reporter who visited him in March stated, "He had lost a great deal of weight. His shirt collar hung so loose on his neck that you could have put your hand inside it. He was sitting there with a vague, glassy-eyed expression on his face and his mouth hanging open." In addition, polls had him losing to Dewey 30 to 51. Roosevelt decided to shake up his campaign, drop Wallace as VP and bring in Harry Truman instead. His wartime committee tasked with ferreting out waste and fraud had succeeded quite well. However, FDR still faced Republicans in congress who had dismantled most of his vote-buying machine as well as his propaganda arm. Therefore, Roosevelt helped unions organize the first-ever PAC to "educate" and mobilize union workers. He avoided the press and photos in order to hide his decaying health, citing pressing war business. While Dewey savaged Roosevelt's inability to better the economy, Roosevelt hammered home his plea not to entrust the war to a novice. Dewey also pressed the issue of the Communist infiltration at all levels thanks to Roosevelt's infatuation with Stalin. Roosevelt's health rebounded and he appeared in an open car to put to rest all rumors. He also began offering another New Deal to take place after the war. Between playing classes and ethnicities against each other and union support, he went on to defeat Dewey.

Roosevelt died on April 12, 1945, only 3 short months after his fourth inauguration. His condition had been hidden from the public with such skill that the nation was totally unprepared. The stunned new President Truman found himself negotiating the surrender with the Germans and faced with the decision to drop two atomic bombs on Japan.

With the war won, what was to become of the economy as millions of soldiers returned home? Truman had a plan, but so did the Republicans in congress. Truman favored the ideas of John Maynard Keyes who argued for more centralization and government control. Large taxes and large deficits would stabilize the economy and set it on the right path. Truman pushed for passage of Roosevelt's Second Bill of Rights, guaranteeing such things as a job, food, clothing, a home, health care, education and old age/disability/unemployment insurance. In short, he desired to turn the foundational rights the founder's recognized as those things which you naturally own (life, liberty, pursuit of happiness/property) into a government giveaway of other people's money and resources. Thomas Jefferson would have been horrified to see his carefully worded founding document so trashed! Government, not God, was Roosevelt's guarantor of rights.

Fortunately, the sudden surrender of Japan after the dropping of the bombs left Truman no time to implement the progressive policies he favored. "The sudden end of the war startled the planners. Few government programs were in place to give jobs to retuning veterans." The Keynesians frantically sounded the alarm. Democrats in congress and the president scrambled to implement a "full-employment" bill - calling it the Fair Deal. Although called fool-hardy and worse, the Republicans instead cut taxes across the board. Knowing Roosevelt had strangled businesses with taxes as high as 90%, they believed an agenda of freedom would return America to prosperity. Many remembered the examples of the Warring and Coolidge presidencies and the resultant "Roarin' 20s." While Truman pleaded for the Second Bill of Rights, the market created the 60 million jobs in one year that the Keynesians believed could only be created with government stimulus. Meanwhile, the tax cuts led to record federal revenue as the authors predicted they would. The Keynesians, however, were unrepentant, blaming the booming economy on luck! Nothing has changed!

The elections of 1946 vindicated the Republican efforts as they took both houses of congress for the first time since 1928! The New Deal officially ended. Of course Truman took all the credit for the amazing economic recovery and  ran in 1948 on class warfare rhetoric and threats of a return the Great Depression if Republicans were allowed to continue cutting taxes. The famous "Dewey Defeats Truman" headline shows how that ended. Quietly, Truman begin implementing Roosevelt's "rights" and we are dealing with the fallout today of a huge entitlement state. Too bad Dewey did not in fact defeat Truman!