Fear froze the economy, but that uncertainty itself might have a cost was something the young experimenters simply did not consider.

From The Forgotten Man by Amity Shlaes.  Page 7.

But the deepest problem was the intervention, the lack of faith in the marketplace. Government management of the late 1920s and 1930s hurt the economy. Both Hoover and Roosevelt misstepped in a number of ways. Hoover ordered wages up when they wanted to go down. He allowed a disastrous tariff, Smoot-Hawley, to become law when he should have had the sense to block it. He raised taxes when neither citizens individually nor the economy as a whole could afford the change. After 1932, New Zealand, Japan, Greece, Romania, Chile, Denmark, Finland, and Sweden began seeing industrial production levels rise again—but not the United States.

Roosevelt’s errors had a different quality but were equally devastating. He created regulatory, aid, and relief agencies based on the premise that recovery could be achieved only through a large militarystyle effort. Some of these were useful—the financial institutions he established upon entering office. Some were inspiring—the Civilian Conservation Corps, for example, which created parks, bridges, and roads we still enjoy today. From Wyoming, whose every county saw the introduction of projects, including the dramatic Guernsey State Park, to Greenville, Maine, whose CCC Road still bears the program’s name today, the CCC heartened young Americans and found a place in national memory. CCC workers planted a total of three billion trees across the country. Establishing the Securities and Exchange Commission, enacting banking reform—as well as the reform of the Federal Reserve system—all had a stabilizing effect. Roosevelt’s desire to control tariff law worked to the benefit of the economy, for, through Cordell Hull, he undid some of the damage of the Smoot-Hawley tariff.

Other new institutions, such as the National Recovery Administration, did damage. The NRA’s mandate mistook macroeconomic problems for micro problems—it sought to solve the monetary challenge through price setting. NRA rules were so stringent they perversely hurt businesses. They frightened away capital, and they discouraged employers from hiring workers. Another problem was that laws like that which created the NRA—and Roosevelt signed a number of them—were so broad that no one knew how they would be interpreted. The resulting hesitation in itself arrested growth.

Where the private sector could help to bring the economy back—in the arena of utilities, for example—Roosevelt and his New Dealers often suppressed it. The creation of the Tennessee Valley Authority snuffed out a growing—and potentially successful—effort to light up the South. The company that would have delivered that electricity was Willkie’s company, Commonwealth and Southern. The New Yorker magazine’s cartoons of the plump, terrified Wall Streeter were accurate; business was terrified of the president. But the cartoons did not depict the consequences of that intimidation: that businesses decided to wait Roosevelt out, hold on to their cash, and invest in future years. Yet Roosevelt retaliated by introducing a tax—the undistributed profits tax—to press the money out of them.

Such forays prevented recovery and took the country into the depression within the Depression of 1937 and 1938, the one in which William Troeller died and Willkie worried. One of the most famous Roosevelt phrases in history, almost as famous as “fear itself,” was Roosevelt’s boast that he would promulgate “bold, persistent experimentation.” But Roosevelt’s commitment to experimentation itself created fear. And many Americans knew this at the time. In autumn 1937, the New York Times delivered its analysis of the economy’s downturn: “The cause is attributed by some to taxation and alleged federal curbs on industry; by others, to the demoralization of production caused by strikes.” Both the taxes and the strikes were the result of Roosevelt policy; the strikes had been made possible by the Wagner Act the year before. As scholars have long noted, the high wages generated by New Deal legislation helped those workers who earned them. But the inflexibility of those wages also prevented companies from hiring additional workers. Hence the persistent shortage of jobs in the latter part of the 1930s. New Deal laws themselves contributed to the sense of lost opportunity. This sense is what led to the famous description of the period that we have all heard—“the Depression was not so bad if you had a job.” John Steinbeck described the same sense of futility more poetically in 1945 in The Red Pony: “No place to go, Jody. Every place is taken. But that’s not the worst—no, not the worst. Westering had died out of the people. Westering isn’t a hunger any more. It’s all done.” The trouble, however, was not merely the new policies that were implemented but also the threat of additional, unknown, policies. Fear froze the economy, but that uncertainty itself might have a cost was something the young experimenters simply did not consider.