Building the Regulatory State
Atlanta, GA
War is the health of the state.
– Randolph Bourne
We wish everyone a happy “Presidents’ Day”, by continuing our infernal series…
Yesterday, we covered the first two of our ten presidential villains.
The miscreants we review today left quite an extensive, execrable, and durable catalogue. Before we open it, we brace ourselves…with a deep breath, and a stiff drink.
…
There. Soothed and fortified, we continue cautiously on our chronological journey, into deeper circles of our civic Inferno. On it I will have many criticisms, which from a different perspective might be considered endorsements.
Yet our primary (tho’ admittedly not only) criteria is not whether a particular policy or action is beneficial or baleful per se, but whether it is consistent with the presidential oath or caused an unwarranted shedding of blood.
There’s a lot of material, so let’s pace ourselves. This may take a while.
Woodrow Wilson. While never worshiped like Lincoln or celebrated like either Roosevelt, Woodrow Wilson had till recently always been admired by the elite molders of acceptable opinion.
Then, last year, these arbiters were reminded of his nineteenth century racial views. Soon thereafter, his statues came off the lawns and his name was effaced from the buildings.
The man whose presidency featured the establishment of the Federal Reserve, the implementation of the Income Tax, and US involvement in World War I came to progressivism late in his life.
Wilson grew up in Augusta, GA, and was a child there during the war and subsequent Reconstruction. His political journey initially made him a proponent of limited government, and in 1896 he voted for the conservative, pro-gold National Democratic Party ticket.
Further down the tracks, he went off the rails. By the time he became President of Princeton and Governor of New Jersey, he was squarely in the Progressive pocket.
The Progressives, then as now, adhered to the notion that an educated intelligentsia should hold political power, make major decisions, and lead the benighted rubes. Wilson, as a PhD (in Government, naturally) and president of an Ivy League institution, certainly shared this belief. But there is a big, and obvious, problem with it.
To improve the future for millions of individuals, you must first have some idea what their future will be. Yet, any tinkerer’s view of what is to come is bound to be wrong. There are an infinite number of possible futures for each of millions of actual individuals with unique value profiles. What are the odds that some jackass in the White House will guess each one correctly (he doesn’t even know his own!)? And if he can’t, how can he improve it? After all, it’s hard to improve something if you don’t even know what it is.
The great conceit of the modern meddler and the high-minded progressive…with whom most every administration since Wilson has been filled…is that they can use “science” and their intellect to square this elusive circle, and improve everyone’s lives. Is that a reasonable assumption? Let’s peek into the lab, and watch the monster being made.
Wilson wrote an instruction manual in 1908, which he entitled Constitutional Government in the United States. In it he said that over the generations “we have become more and more inclined to look to the president as the unifying force in our complex system, the leader of both his party and of the nation. To do so is not inconsistent with the actual provisions of the Constitution. It is only inconsistent with a very mechanical theory of its meaning and intention. The Constitution contains no theories. It is as practical a document as the Magna Carta.”
This would’ve been news to the state conventions that ratified the document 130 years earlier. Like Roosevelt (both of them), Wilson considered the Constitution to be malleable…moist clay subject to the whims of the presidential potter. With it, he would mold his agenda, which he (with Orwellian irony) branded as the “New Freedom”…bringing to ming Goethe’s adage that no one is more enslaved than he who falsely believes he is free.
Wilson was in a sense the first “Prime Minister president”. He revived the unfortunate tendency of chief executives to deliver State of the Union messages in person to Congress. Since Thomas Jefferson, presidents wrote these annual updates and sent them to Congress to be read. That’s it. No pomp. Little circumstance. No planting people in the gallery, and pointing to them as a prop for cheap political points.
By joining Congress in chambers and proclaiming the State of the Union in a speech, Wilson continued transforming his office into that of chief legislator. The effect, then and since, has been profound. During and after his administration, legislative accretions to the executive branch have been less like adding barnacles to a boat than attaching a giant oil tanker to a smattering of inconsequential cirripeds.
Wilson was not responsible for the 16th Amendment, but is accountable for implementation of the income tax. To mollify the South, he agreed to a progressive tax to ostensibly punish Northern interests, with the understanding that tariff rates would fall. The Underwood Tariff was the first application of the new amendment, putting a one percent tax on high incomes. In exchange, tariffs fell. Of course, as always happens, the tax would soon rise (and spread), and the tariff would eventually exceed its previous level.
Wilson took, shall we say, an “expansive” view of the Commerce clause, and one that was at marked variance to that of the founders. When the Constitution was ratified, to “regulate” commerce meant merely to “make regular”, i.e., to maintain free trade among the states. It did not mean to confine, infringe, or inhibit.
To Wilson, that was irrelevant. Down the pike came a battalion of new rules, directives, and restrictions on exchange, trade, and speech.
The Clayton Anti-Trust Act put teeth into earlier anti-trust and interstate commerce legislation, all of which were passed even as production rose and prices fell. Like its predecessor acts a generation earlier, the Clayton Act protected incumbents, discouraged new entrants, and deprived consumers the benefits of the economies of scale and scope.
The Federal Trade Commission Act created an administrative agency in the Executive branch that gave the president almost complete legislative, executive, control of the economy. This was another affront to the Constitution, which even Alexander Hamilton denied gave the president power to control internal trade.
The most consequential innovation of the Wilson era was the Federal Reserve. Here, George Washington provided an unfortunate precedent by chartering the First Bank of the United States. Andrew Jackson commendably refused to re-charter its successor.
The Creature from Jekyll Island arose in 1913 as a system Rockefeller and Morgan interests crafted thru the agency of Senator Nelson Aldrich. It emerged and persisted as a government-sponsored banking cartel that enabled centralized money printing, fractional reserve banking, and harmonized credit expansion.
Through persistent inflation, the Fed could monetize Treasury debt, and facilitate stock market speculation, asset bubbles, world wars, cold wars, and unending wars on poverty, drugs, terror, and infection. As one writer put it, fake money and forever wars go together, like roadkill and maggots.
Of course, tho’ it was now mattering less and less, the Constitution gave the US government no authority to charter a bank, or use anything other than gold and silver as money. To do so was explicitly rejected at the Philadelphia Convention, but ardently advocated before and during the Wilson Administration.
While the worst event of Wilson’s term was World War I, he did get at least get a declaration of war to enter it. He had publicly promised to keep US out of the war prior to his re-election, but privately pressed for intervention, largely to support US creditors to the Allied cause. Such surreptitious advocacy prompted his Secretary of State, William Jennings Bryan, to resign.
US entry exacerbated a catastrophe that would otherwise have run its course, and probably ended in a stalemate. Siding with the Allies, the Americans protected the financiers who had funded them…prolonging the conflict, and tipping the balance away from the Central Powers. At Versailles, the Germans were burdened with war guilt, exorbitant reparations, and a burning desire for vengeance.
During the war, Wilson appointed dictators (now called “czars”) as extra constitutional administrators to control parts of the economy, with or without Congressional legislation. This dubious mechanism by which Congress delegates its authority to the executive branch is still employed today.
Among the abominable litany that emerged during the Wilson Administration was the Selective Service Act, passed in contravention of the 13th Amendment, and still in effect.
Likewise, the War Labor Board got government explicitly supporting unions and assuring people are working in the “right” industry. Likewise, the War Industries Board was formed to regulate industry and produce items related to the war. It was immaterial that the Constitution provides no authority for the US government to tell an industry what they can or cannot produce.
The Railroad War Board nationalized (!) the railroads. The Food Administration Agency, led by the “wonder boy”, Herbert Hoover, determined what, how, and when people could eat. It prescribed meatless days and wheatless days, ostensibly to conserve and ration calories so the army had enough. Again, the US government has no authority to tell people what or when they can consume.
The Committee of Public Information created the Four Minute Men propaganda pieces, using film, song, and press to ensure correct interpretation of the war. Similar messaging has periodically persisted since, and is apparent in our pandemic messaging and censorship today.
The Espionage and Sedition Acts echo the notorious Sedition Acts of 1798, which Jefferson called “detestable“ and “worthy of the eighth or ninth century”. The First Amendment clearly prohibits such acts, but they still remain on the books. Under the act, Socialist former presidential candidate Eugene Debs was sentenced to ten years in prison. He was released three years later when Warren Harding commuted his sentence.
The Overman Act made Wilson a virtual dictator in 1918, although by that time the legislation was probably superfluous. Chillingly, the act had almost no opposition. An amendment to it said that in essence that whatever the bill doesn’t cover the president can do anyway.
After a stroke felled Woodrow Wilson during his tour to save his beloved League of Nations, an old rival, Senator Albert Fall, went to the White House.
“I am praying for you, Sir”, the senator told the president.
“Which way, Senator?”, came the response.
Considering his appalling record, it was a fair question.
Wilson was transformative. The ogres that followed wouldn’t have been possible without him. Wilson was more innovative in his tactics than even Lincoln or Roosevelt, and gave an ominous blueprint to future presidents.
Such as…
Franklin Roosevelt. When FDR died, the great libertarian philosopher and author Albert J Nock wrote a letter cheering the event as “the biggest public improvement that America has experienced since the passage of the Bill of Rights”. And why not? Look what the country had endured the previous 12 years.
Still, unlike others who ride high on most presidential lists, FDR was very popular in his own era. He was, after all, elected four times, all by landslide. He did, however, receive some backlash, as well as the pejorative monicker of “King Franklin”. But, by and large, during his reign, few cared much about constitutional principles or proscriptions. Whatever rein the Constitution held on executive power soon slipped from the document’s hands.
Harry Truman was in 1944 asked his assessment of FDR. New to the ticket, Truman still had little personal acquaintance with his new running mate, but knew enough to provide an answer that would probably apply to most politicians:
“He lies.”
Roosevelt didn’t start the wars on the other side of the Atlantic or across the Pacific, but he did all he could to finagle America into both. And the economic depression that started before he came to office persisted till after his death, largely due to his misguided actions.
He took the first of those within days of his inauguration when, by the stroke of a pen, Roosevelt unilaterally and unconditionally closed the banks, confiscated citizens’ gold, and revalued his loot by 75% to depreciate the dollar to the benefit of the government. This larceny was of course carried out by executive degree, without Congressional legislation.
Obviously, the Constitution does not permit any of that. But under the veneer of an “emergency”, the new president whitewashed those formalities. Over the next dozen years, his brush would get much more use. The stain would soak deeper into the grain of state, and would ultimately become impossible to strip.
After Roosevelt was elected but before coming to power, the banking system was collapsing. President Hoover wrote to him suggesting they work together to stem the tide. But Roosevelt pocketed the letter, and never responded. He wanted the situation to further deteriorate, so that he could ride in as the white knight, and save the situation by clearing a very low bar.
Unfortunately, the fence fell to a point where there was little opposition to FDR’s leap. With his incessant meddling, tinkering, and intervention, Hoover’s hyperactivity had taken what would have been a run-of-the-mill downtown…less severe than the deep depression of 1920…and turned it into a full-blown calamity. Wage supports, price controls, production regulation, and steep tariffs inhibited employment, created shortages, and restricted trade.
The downturn was the inevitable consequence of the Federal Reserve interfering in markets by opening the monetary spigot in the 1920s, primarily to support the British pound. When the pipes burst, the liquidity drained. That’s what should’ve happened, as it did in all previous panics. The crash was the signal that resources had been misallocated and mal-invested. It was the solution, not the problem. It needed to be left alone so that the correction could more quickly occur.
The problem was the interference that caused the distortion. The correct government response would’ve been the reaction to the severe depression of 1920: nothing. Within a year, that panic was over, and is now barely remembered. And no heavy-handed regulation, “loose money”, or dictatorial edicts were required. Hoover and Roosevelt took the opposite tact, and converted what would’ve been a short, sharp recession into a decade and a half of unprecedented economic disaster.
Roosevelt, after justifiably ridiculing Hoover’s policies as a candidate, immediately accelerated and added to them as president. In his inaugural he called for “action, and action now!”…to combat a depression caused and deepened by an avalanche of “action.”
But FDR kept pushing boulders down the mountain. Setting a script for all future presidents, he declared an “emergency”, and continued to insist that “we need to act”. If we’ve learned one thing in the last hundred years, it’s that whenever a politician or pundit says “we need to…”, the subsequent words are bound to be imbecilic.
In another bleak harbinger, Roosevelt intimated that if Congress were to be an obstacle, he would act without them. He further asserted that he would use any means necessary to win his “war” against fear and economic instability, which reflects the attitude most subsequent presidents have had regarding limits on their power.
Echoing Wilson to justify bending and twisting the Constitution to serve his purposes, Roosevelt claimed that “Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement, without loss of essential form”. If anyone had made that sweeping assertion in any state ratifying convention, the Constitution would never have been adopted.
At this point, it may as well not have been. Roosevelt not only let the Constitution die, he pressed a pillow to its face. And the legislative branch was complicit. The president’s initiatives went thru Congress like green grass thru a goose. The New Deal, and its alphabet soup of agencies, soon came pouring out the other side.
The pile was breathtaking.
The Agricultural Adjustment Administration (AAA), aside from being unconstitutional (and declared as such by the Court), was economically insane. Led by Henry Wallace…a known Communist…the agency was tasked with transforming the agricultural sector into a big centrally planned commune to boost prices by reducing supply. This at a time when hordes of hungry people couldn’t afford food.
The AAA presumed to tell farmers when, what, and how much they could produce, with any excess being destroyed or slaughtered. The results were so predictably sadistic that they almost had to be intentional.
The National Industrial Recovery Act (NIRA) was an economic abomination similar to AAA, but applied to “industrial planning”. It dictated to companies the wages they could pay, the prices they could charge, and what and how much they could produce. As always, this corporatist-statist web disabled most small business, while large connected firms had the resources to get by. Most workers and consumers were not so fortunate.
That any of FDR’s vaunted “Brain Trust” couldn’t have foreseen the prolonged shortages and unemployment that resulted from these agencies is almost beyond belief. Until he handed half of Europe to the Soviet Union, nothing more clearly revealed Roosevelt’s affinity for Josef Stalin than his advocacy of these type acts.
There were many more where those came from, and many more still to come. The Works Progress Administration (WPA), the Export-Import Bank, labor relations acts that sided with unions and essentially condoned their violent tactics, and executive orders to set immigration law are but a few examples of additional executive overreach.
In the interest of time, I won’t bring up the Civilian Conservation Corps (CCC), the Emergency Banking Act or Glass-Steagall. I’ll also ignore Social Security, and not mention that…notwithstanding the US government having no authority to involve itself in “insurance” plans…this scheme is typical of how the state addresses problems specific to a particular segment of the population, in this case the indigent elderly.
The government conjures and implements a “solution”, yet doesn’t isolate it to the targeted group. Instead, it inflicts it across the entire population, so that when the plan implodes, it takes everyone (including the initial groups it intended to help) down with it. Most every major social, medical, or financial “support” or “protection” program the government operates today is susceptible to such a collapse. Because of Fed inflation and Congressional overspending, they are all leaking air.
When they were implemented, these encroachments into American life were all novel, even revolutionary infringements on a free people. To a public with a dim recollection of constitutional government, they were eye-opening. Now, hardly anyone even blinks.
More often that not, it is because over the years people’s eyes have been slowly sealed shut. When free choices and voluntary trade are obstructed, knowledge is blocked, resources are misallocated, and signals are jammed. In a “managed economy”, when businesses or consumers assess rigged inventory, costs, prices, or products, they don’t know what to make of what they see. Like torturing a confession from a recalcitrant prisoner, you aren’t sure how much credence to place in what you learn.
All of this, of course, became much worse under the air cover provided by World War II. Leaving aside whatever duplicitous means FDR might’ve used to pull the US into that catastrophe, during it he issued more orders to create additional agencies… many of which (even if in an updated guise) have still not gone away.
The National Manpower Commission directed that in “essential industries” (that phrase sounds familiar), employees must work certain hours, and couldn’t be fired. The Office of War Information…like Wilson’s Committee of Public Information..,arranged and managed war propaganda thru movies and media.
Of course, the most egregious of FDR’s domestic directives was that concentration camps be constructed, and that Japanese-Americans be forcibly confined to them. To any humane observer, that action should be sufficient to condemn itself…and its architect.
Across both oceans, FDR’s affronts were even more execrable, and less excusable. Two months before he died, his Army Air Force joined the RAF in dropping almost four thousand tons of incendiary devices over the city of Dresden, taking with them almost 25,000 innocents. A month later, in Japan, 83,000 old men, women, and children were incinerated when General Curtis LeMay flew low over Tokyo. Regardless the savagery of the German regime or the Japanese empire, Roosevelt’s government had no right to claim those lives.
In his penultimate State of the Union message, Roosevelt pushed for a “Second Bill of Rights”, in essence proclaiming everyone’s right to a job, food, and clothing, as well as fear from sickness, competition, and old age. This initiative codified the talking points that built the unconstitutional Welfare State, and that have been with us since. He would leave it to his successors to see them thru. For the most part, they did.
Time eventually sanctifies error as well as theft. These policies…like herpes…never go away. Eighty years after Pearl Harbor, we essentially remain on a war footing. Ninety years after Roosevelt’s inauguration, we continue to live under the New Deal. Only more so.
As we shall soon see…
JD