198 ChaPter^4
noted, was not a Keynesian, and the huge debts accruing due to programs like
the WPA were beginning to alarm him. So, on the verge of success, FDR
killed the very policies that had improved the U.S. economy to that point.Roosevelt’s Recession and the New Deal’s Legacy
Just as it seemed that the depression was going away and economic health was
returning, FDR switched gears. He turned away from the federal programs
to create jobs, and thus create deficits, and caused what came to be known as
the “Roosevelt Recession” of 1937-1938. FDR began to worry about infla-
tion and the growing deficit, since so much money had been put into circula-
tion, so took measures to slow the economy down. Pressured by Treasury
Department officials, FDR raised taxes. He cut funding for the WPA and
other programs, and even cancelled some projects already under-construction
in order to reduce the deficit [today, these same issues are being debated by
“liberals” and advocates of “austerity”]. Many New Deal relief measures were
reduced or eliminated, so millions had to go back to digging through garbage
cans for food. From the fall of 1937 through the summer of 1938, unemploy-
ment, which had fallen every year of the New Deal, went back up to nearly
20 percent, or 4 million workers losing their jobs, while industrial production
declined by 37 percent, and wages fell by 35 percent. In addition, the Federal
Reserve “tightened” the money supply, making it harder to get loans. With
far less money in circulation, consumption naturally fell significantly, and any
hint of recovery was gone.
FDR has snatched defeat from the jaws of victory, as economic and social
conditions deteriorated in 1937 and the Great Depression was not close to
ending. Human misery continued, as a letter from a young girl in Missouri
to Eleanor Roosevelt in 1939 showedI am a 17 year old girl. I am writing to you for help in solving a very seri-
ous problem. My mother is very ill she may not live long. She has been
sick for about 8 years. My step-dad is also sick. My mother has cancers. My
step-dad has T.B. He has been sick for a long time too... My step-dad is
a World’s War Veteran. He gets $100.00 a month. But that isn’t enough to