Most of us support the idea that the Great Depression was ended by the New Deal recovery plan proposed by R.D. Roosevelt. The key goals of the recovery plan were to establish employment, raise the workers’ salary and provide social security for Americans. Economic stability plays one of the major roles in national security. It is very cyclic in most instances. For instance, periods of welfare are highly likely to be followed by decadence era and so on. According to Cole and Ohanian, economic recovery can be best attained if economic systems are allowed to automate themselves.
It can be recalled that the overall unemployment rate was less throughout the “New Deal” recovery plan than during the peak period of the depression. Before the New Deal plan took effect, it was believed that Acts such as Securities Exchange Commission and Social Security benefits thrived quite well in terms of offering protection and security for the nation.
In other words, the Acts stabilized the economy. Unfortunately, the newly embraced New Deal policies crushed the healthy competition in the markets by establishing high incompatible pricing models. The strategies proposed and implemented by R.D. Roosevelt strategies continually delayed the normal resumption of welfare recovery cycle. The new deal plan proposed by Franklin Delano Roosevelt was not a viable recovery tool of the Great
Depression since it delayed the expected recovery of the natural economic systems in the United States due to high taxation and suppression of market competition.
The high rate of taxation was a major economic blow especially to the poor segment of the population when the New Deal plan was implemented. Arguably, the principal victims of the recovery plan proposed by R.D. Roosevelt were the poor people.
Dozens of economists have also developed evidence along the same school of thought. A number of Nobel Prize winners from top rated universities in the United States (such as University of Chicago) have equally stated that the New Deal Plan was a misplaced priority in the recovery plan during the Great Depression era. It is worth to mention that between 1933 and 1940, Roosevelt’s administration increased the federal taxes three times to $5.3 billion from $1.6 billion.
Various categories of tax regimes such as ‘excess profit’ taxes, holding company taxes, corporate income taxes, inheritance taxes, personal income taxes and excise taxes were escalated by the government. The excise taxes levied on basic items such as playing cards and cigarettes were the main source of revenue for the New Deal program. The tax bracket mainly comprised of common items used by the public on a daily basis. Hence, the program was sufficiently financed. Needless to say, these taxes were largely paid by the poor and middle class people in society. The less affluent in society were the key targets when it came to taxation levies.
Before the close of the 1940s, it was estimated that the sum of the corporate income taxes and personal income taxes had already been surpassed by the revenue generated from the New Deal recovery plan. The situation led to gross economic deprivation of consumers. The purchasing power of consumers was incredibly weakened. Worse still, job creation and growth of the existing enterprises were significantly hampered owing to minimal cash at hand. The same population the government purported to be assisting through the New Deal program was negatively affected by the same initiative.
During the whole of 1930s, hundreds of jobs were destroyed by the New Deal taxes. For the first time in the history of the United States, the mean rate of unemployment rose to 17%. In 1933, the National Industrial Recovery Act was adopted. Although this piece of legislation was meant to revamp industrial growth, it led to undesired results.
For instance, forced wages distorted the market dynamics and eventually occasioned a serious drop in production. It became quite costly for employers to recruit workers. Farm production was also cut down when the Agricultural Adjustment Act was put into force. Several black tenant farmers lost the opportunity to regain their financial stability due to the Act. In 1935, the National Labor Relations Act also worked against the recovery spirit because it worsened the state of workplace harmony.
The monopoly bargaining power given to the unions agitated most workers. Consequently, the period witnessed some of the most violent industrial actions coupled with mandatory unionization of industries that were producing in large scale. The exorbitant wages adopted by the unions led to rampant and summary dismissal of employees from various workplaces and subsequent economic downturn towards the close of 1930s.