FDR placed the needs of the American people above petty budgetary concerns, but today’s leaders lack his courage and vision.
In 1933 we reversed the policy of the previous Administration. For the first time since the depression you had a Congress and an Administration in Washington which had the courage to provide the necessary resources which private interests no longer had or no longer dared to risk.
This cost money. We knew, and you knew, in March, 1933, that it would cost money. We knew, and you knew, that it would cost money for several years to come. The people understood that in 1933. They understood it in 1934, when they gave the Administration a full endorsement of its policy. They knew in 1935, and they know in 1936, that the plan is working.—FDR, 1936
Eighty years ago this month, at the height of the worst economic crisis in our nation’s history, Franklin D. Roosevelt delivered on his promise to launch a New Deal for the American people. Not wedded to any one program, idea, or ideology, the New Deal was founded on the very simple premise that when the free market failed to provide basic economic security for the average American, government had a responsibility to provide that security. In Roosevelt’s day, this meant imposing the first-ever meaningful regulation of the stock market, shoring up the nation’s financial system by guaranteeing private deposits and separating commercial from investment banking, and providing jobs to the millions of unemployed through government expenditures on infrastructure. The Roosevelt administration also launched the country’s first nationwide program of unemployment insurance to help the unemployed bridge the gap between jobs as well as Social Security to ensure that the elderly, after years of work and toil, would not suddenly find themselves utterly destitute.
Conservative critics of FDR’s polices say that these programs did not work—that unemployment remained high throughout the 1930s and that it was only World War II that brought us out of the Great Depression. As such, these same critics continually argue that the deficit spending that fueled the New Deal was the root cause of its inability to bring the unemployment rate down to acceptable levels. In short, they argue that government spending and government programs do not work, and that only the free market can provide the economic stimulus necessary to get the economy back on its feet again.
But as is the case today with the naysayers on climate change, the empirical evidence suggests that nothing could be further from the truth. During FDR’s first term, for example, the average annual growth rate for the U.S. economy was 11 percent. Compare that to the paltry 0.8 percent we witnessed in the first term of the Obama administration. The nationwide unemployment rate also fell, from its all-time high of 25 percent in 1933 to 14 percent by 1935, which at the time represented the largest and fastest drop in unemployment in our nation’s history.
But far more damning to the conservative critique is the argument that tries to invalidate the New Deal by positing that it was World War II and not the relief programs of the 1930s that brought us out of the Great Depression. Conservatives love to trumpet this fact and often use it as part of their argument against deficit spending, never stopping for a moment to consider that government expenditures—and deficits—in World War II made the New Deal look like small potatoes. In fact, deficit spending in the New Deal never topped 6 percent of GNP, while in World War II it ran as high as 28 percent. In other words, World War II was the New Deal on steroids. Viewed from this perspective, it is FDR’s critics on the left—not the right—who possess the stronger argument. The problem with the New Deal was that it did not go far enough. In other words, the government should have spent more money, not less, if it was going to be successful in bringing the economic crisis to an end.
All this is not to say that free enterprise is incapable of producing economic growth—it most certainly is. But there are times when capitalism, left to its own devices, can fail. Franklin Roosevelt was willing to acknowledge this, and he spent the better part of his tenure in office trying to put in place programs that would make capitalism work for the average American, not just those at the top. Hence, his agenda was not to subvert or destroy the free market system, but rather to save it.
It took vision and courage to launch the New Deal—the vision to understand that when the free market systems falls short or fails, government has a responsibility to take direct measures to get the economy moving again, and the courage to engage in deficit spending at a time when orthodox economic theory argued that the only proper response to an economic recession or depression was to slash government spending and balance the budget.
Unfortunately, the leadership we possess in Washington today lacks the vision and the courage to follow FDR’s example and put in place the sort of common-sense programs that would stimulate the economy and put people back to work. Instead of providing jobs for millions by spending money on our failing infrastructure—now ranked 24th in the world—or investing in programs that would reverse the falling education rates of our children, or providing greater federal support for the basic scientific research that may unlock untold benefits for future generations, we instead speak of nothing but the deficit and the sequester, as if cutting spending in the midst of recession is the magic bullet that will lead us out of our economic malaise.
Franklin Roosevelt faced similar critics, who, much like today’s deficit hawks, insisted that he must cut spending and balance the budget no matter what the consequences for the average American. But FDR would have none of this. “To balance our budget in 1933 or 1934 or 1935,” he said,
would have been a crime against the American people. To do so we should either have had to make a capital levy that would have been confiscatory, or we should have had to set our face against human suffering with callous indifference. When Americans suffered, we refused to pass by on the other side. Humanity came first.
As it turns out, FDR’s decision to put “humanity first” was not only the right moral decision, it was also the right economic decision. For the deficit spending that he finally unleashed in World War II, coupled with the social and economic reforms put in place during the New Deal, led to one of the longest periods of economic prosperity in America’s history and the birth of the modern American middle class.
Sadly, all of the evidence to date suggests that our leaders in Washington are quite happy “to pass by on the other side” and let the sequester proceed without so much as a fight. With roughly 16 million people across the country still unemployed, this is surely “a crime against the American people.”
By: David Woolner, The National Memo, March 3, 2013
Mitt Romney’s chief qualification for the presidency, according to Mitt Romney, is his experience in the private sector. “[S]omeone who spent their career in the economy is more suited to help fix the economy than someone who spent his life in politics and as a community organizer,” he said in a recent interview.
But is that really true? Romney would hardly be the first man in the White House with extensive private sector experience, so we can test his claim by looking at the records of other 20th century presidents who came from business backgrounds. And those records suggest that private sector experience is by no means a guarantee of of a good president. In fact, it’s anything but.
Let’s begin at the bottom. That is where Warren Harding, president from 1921 to 1923, routinely ranks in historians’ presidential rankings. There’s little doubt Harding was a skilled businessman. After he bought an Ohio newspaper, the Marion Daily Star, and launched a weekly edition, the paper became one of the most popular in the country. Harding then profitably bumped off its rival to become the official organ for Marion’s governmental notices.
But none of that success made Harding a good president. The administration is most notable for its foreign-policy isolationism and a plethora of scandals culminating in the Teapot Dome Affair, called by one historian “the greatest and most sensational scandal in the history of American politics” before Watergate.
Next up is Herbert Hoover, who founded the Zinc Corporation in 1905 and was a wildly successful investor, making $4 million by 1914—$92 million in today’s dollars. “If a man has not made a million dollars by the time he is forty, he is not worth much,” Hoover once said.
But like Harding, Hoover turned out to be pretty much worthless as president. His policies helped grease the skids for the 1929 stock market crash, and most historians agree that his hands-off response helped trigger the Great Depression. Indeed, the day after the crash, Hoover said, “The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis.” His foreign policy wasn’t much better: He did little to stop the nascent Japanese aggression that would ultimately lead to Pearl Harbor. A 2010 survey ranked him as 36th of 43 presidents.
Aside from Hoover, Jimmy Carter was perhaps the most successful businessman to become president. He took over his father’s failed peanut-farming business and turned it around, making himself a wealthy man by the time he ran for Georgia’s governorship.
Again though, Carter wasn’t able to translate his peanut prowess into presidential success. Between stagflation, an energy crisis, the Iran Hostage Crisis and rise of the Ayatollah Khomeini, Carter was arguably the worst Democratic president of the 20th century. Indeed, despite being the sitting president, he nearly lost a primary challenge to Ted Kennedy in 1980, before being ousted from office by Ronald Reagan that fall. Carter averages 27th in the rankings.
George H. W. Bush, too, was an extremely successful businessman, working his way up from sales clerk in an oil corporation to founding his own two profitable oil companies. By the time he ran for Congress in 1966, he was a millionaire.
Bush 41 wasn’t a bad president—but neither was he a good one. His strength was foreign policy, where he skillfully wound down the Cold War and won the first Gulf War. But the economy spiraled into recession on his watch. Unable to convince Americans he knew how to fix it, Bush lost his 1992 re-election bid to Bill Clinton.
Bush’s son, George W., was less successful in the oil business. The company he founded, the aptly named Arbusto, nearly went belly-up before being sold. But he did do OK as the co-owner of the Texas Rangers baseball team, improving their performance and making a ton of cash. As for his presidency? Well, you know that disaster.
One other businessman-turned-president bears mention here. Harry Truman co-owned a haberdashery which went bankrupt in 1921. And yet, most historians agree Truman was a better president than any of those mentioned above. He implemented the strategy that would eventually lead to victory in the Cold War, recognized Israel, bravely avoided intervening in China, stared down Joe McCarthy, and helped usher in a period of robust and broad-based economic growth. Though unpopular when he left office, he is routinely ranked among the top 10 presidents, and has ranked as high as fifth in one scholarly survey.
None of this is to say that being a good businessman makes you a bad president, or vice versa. Whether there’s any correlation at all is hard to say, given the small size of the sample. But that’s just it. Romney’s central argument, boiled down to its essence, is that his private-sector success will necessarily translate into success in the Oval Office. And modern history tells a very different story.
By: Jordan Michael Smith, MSNBC Lean Forward, July 12, 2012
What should be done about the economy? Republicans claim to have the answer: slash spending and cut taxes. What they hope voters won’t notice is that that’s precisely the policy we’ve been following the past couple of years. Never mind the Democrat in the White House; for all practical purposes, this is already the economic policy of Republican dreams.
So the Republican electoral strategy is, in effect, a gigantic con game: it depends on convincing voters that the bad economy is the result of big-spending policies that President Obama hasn’t followed (in large part because the G.O.P. wouldn’t let him), and that our woes can be cured by pursuing more of the same policies that have already failed.
For some reason, however, neither the press nor Mr. Obama’s political team has done a very good job of exposing the con.
What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War.
How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high.
Over all, the picture for America in 2012 bears a stunning resemblance to the great mistake of 1937, when F.D.R. prematurely slashed spending, sending the U.S. economy — which had actually been recovering fairly fast until that point — into the second leg of the Great Depression. In F.D.R.’s case, however, this was an unforced error, since he had a solidly Democratic Congress. In President Obama’s case, much though not all of the responsibility for the policy wrong turn lies with a completely obstructionist Republican majority in the House.
That same obstructionist House majority effectively blackmailed the president into continuing all the Bush tax cuts for the wealthy, so that federal taxes as a share of G.D.P. are near historic lows — much lower, in particular, than at any point during Ronald Reagan’s presidency.
As I said, for all practical purposes this is already a Republican economy.
As an aside, I think it’s worth pointing out that although the economy’s performance has been disappointing, to say the least, none of the disasters Republicans predicted have come to pass. Remember all those assertions that budget deficits would lead to soaring interest rates? Well, U.S. borrowing costs have just hit a record low. And remember those dire warnings about inflation and the “debasement” of the dollar? Well, inflation remains low, and the dollar has been stronger than it was in the Bush years.
Put it this way: Republicans have been warning that we were about to turn into Greece because President Obama was doing too much to boost the economy; Keynesian economists like myself warned that we were, on the contrary, at risk of turning into Japan because he was doing too little. And Japanification it is, except with a level of misery the Japanese never had to endure.
So why don’t voters know any of this?
Part of the answer is that far too much economic reporting is still of the he-said, she-said variety, with dueling quotes from hired guns on either side. But it’s also true that the Obama team has consistently failed to highlight Republican obstruction, perhaps out of a fear of seeming weak. Instead, the president’s advisers keep turning to happy talk, seizing on a few months’ good economic news as proof that their policies are working — and then ending up looking foolish when the numbers turn down again. Remarkably, they’ve made this mistake three times in a row: in 2010, 2011 and now once again.
At this point, however, Mr. Obama and his political team don’t seem to have much choice. They can point with pride to some big economic achievements, above all the successful rescue of the auto industry, which is responsible for a large part of whatever job growth we are managing to get. But they’re not going to be able to sell a narrative of overall economic success. Their best bet, surely, is to do a Harry Truman, to run against the “do-nothing” Republican Congress that has, in reality, blocked proposals — for tax cuts as well as more spending — that would have made 2012 a much better year than it’s turning out to be.
For that, in the end, is the best argument against Republicans’ claims that they can fix the economy. The fact is that we have already seen the Republican economic future — and it doesn’t work.
By: Paul Krugman, Op Ed-Columnist, The New York Times, June 3, 2012
The economy had already lost 4.5 million jobs before President Barack Obama took office in January 2009, with job losses that month alone surging to 818,000. Economic contraction had also accelerated, reaching a staggering 8.9 percent annualized decline in the fourth quarter of 2008—the worst in 60 years. From this downward spiral, Obama’s economic policies proved instrumental in generating and sustaining a recovery.
In February 2009, Obama enacted the American Recovery and Reinvestment Act, and the pace of economic contraction and job loss immediately decelerated. As the stimulus ramped up, sustained economic growth took hold in mid-2009, and job growth resumed early in 2010—with 3.5 million jobs added since February 2010. The nonpartisan Congressional Budget Office estimates that without the Recovery Act, unemployment would have averaged roughly 10.7 percent in 2010, instead of 9.6 percent.
The Recovery Act was intended to jump-start the economy and avert a depression, not to restore full employment. The $831 billion price tag, spread over more than four years, was dwarfed by the staggering loss in economic activity caused by the bursting of the $7 trillion housing bubble. After economic growth resumed, mass unemployment and underemployment compelled more fiscal support. However, passing additional economic support through Congress proved a Herculean task.
In December 2010, the administration negotiated a payroll tax cut, continuation of emergency unemployment benefits, and targeted tax credits to sustain the delicate recovery as the stimulus began winding down. Without this boost, the economy would actually have slipped back into contraction in the first quarter of 2011.
It should be noted that the Federal Reserve also deserves credit for extraordinary measures taken to resuscitate the financial sector and facilitate recovery. But the Fed had already maxed out its key policy lever, the federal funds rate, when Obama entered office; monetary policy could not have single-handedly revived the economy.
While the economy has improved greatly under Obama’s stewardship, creating jobs for the millions of unemployed Americans who want to work remains imperative. In September 2011, Obama proposed the American Jobs Act, which would boost employment by roughly another 2 million jobs, according to numerous outside economists, including Mark Zandi.
Unfortunately, Obama’s substantive jobs agenda continues to be undermined by congressional partisanship. While more must be done to restore full employment, it is unquestionable that President Obama’s economic policies have been instrumental in ending the worst downturn since the Great Depression.
By: Andrew Fieldhouse, Economic Policy Institute, Published in U. S. News and World Report, March 13, 2012
Whatever their differences, the leading Republican candidates all swear that they love states’ rights. If elected president, Rick Perry vows to “try to make Washington as inconsequential as I can.” Mitt Romney declares his faith in the Constitution, which, he says, declares that the government “that would deal primarily with citizens at the local level would be local and state government, not the federal government.” Michele Bachmann “respect[s] the rights of states to come up with their own answers and their own solutions to compete with one another.” With lots of help from the Tea Party, the Tenth Amendment which, not so long ago was familiar mainly to constitutional lawyers and scholars, may now be as popular as the First or the Second. But, what this resurgence of federalism overlooks is not just the historical consolidation of federal power but also the inanity of attempts to reverse it.
For most of U.S. history, the primacy of federalism was taken for granted. Except during major wars, states exerted far more power over the daily lives of their residents than did any of the three branches of a national government located in a swampy river city on the Mid-Atlantic seaboard that most Americans had never visited. In the nineteenth century, as the historian Gary Gerstle explains, states funded canals, highways, and railroads. They decided which groups could vote and which could not. Some tried to regulate working hours. Others outlawed a variety of private acts—interracial marriage, drinking, and theater-going. In 1837, Illinois even forbade “playing at ball or flying of kites” as public nuisances.
All these policies fell under the legal sanction of “the police power,” which one influential Massachusetts judge in 1851 defined broadly as insuring the “good and welfare of the Commonwealth.” For its part, the Supreme Court, until after World War I, rather consistently ruled that the celebrated protections of the Bill of Rights—from the freedom of speech and the press to the right to a speedy trial—applied only to acts by the federal government and not to those of the states.
But, by the middle of the twentieth century, this arrangement no longer served the needs or desires of most Americans. During the Great Depression, state revenues, based mainly on property taxes, plummeted. The federal government stepped in to provide relief, and citizens everywhere began to count on Washington to keep the economy afloat and their Social Security checks arriving promptly. Then World War II and the cold war bound Americans to a national-security state that financed education for veterans and interstate highways as well as aircraft carriers and nuclear weapons. In the 1960s and ’70s, Congress passed laws to safeguard the civil and voting rights of every citizen, regardless of where he or she might live. Policies to protect the environment and regulate hazards at the workplace further diminished the sway of state governments. The Supreme Court, even with a conservative majority, has done little to reverse these changes.
Yet, states’ rights never lost its appeal to that minority of Americans who are ideologically committed to lambasting the federal state as both overweening and ineffective. (It should come as no surprise that these conservatives were so alarmed at the emergency measures taken by the Bush and Obama administrations to address the financial meltdown of 2008: the formation and rapid growth of the Tea Party was the predictable result.) However, any Republican elected to the White House in 2012 will find it impossible to lead a headlong charge back to the past, and not just because of the difficulty of undoing a half-century of tradition and Supreme Court precedent.
Voters unhappy with the inability of the federal government to restore prosperity may like the sound of “states’ rights.” But how many would trust their governors and state legislators to pay their Medicare and Social Security checks on time and at current or higher levels? How many really want 50 separate immigration policies or 50 different standards for what constitutes clean air and clean water? Or the possibility that state, seeking to lure business away from its neighbors, could cut the minimum wage in half and not requiring employers to pay for overtime?
When you look more broadly at their promises, the GOP hopefuls reveal the emptiness of their own rhetoric. Bachmann, never a paragon of consistency, supports a federal constitutional amendment banning gay marriage, as well as the right of individual states to legalize it. In 2007, before Romney got in trouble for his Massachusetts health care law, he predicted, “that all these states … who follow the path that we pursued will find it’s the best path, and we’ll end up with a nation that’s taken a mandate approach.” Rick Perry favors federal action to stop gay marriage and restrict abortion—and, last month, asked President Obama to speed up aid to stop wildfires from burning up whole sections of his vast state. Like a lot of other Americans, these ambitious conservatives like to rail against Washington in the abstract but cannot imagine how the nation would operate without a strong central government. And the specifics of their smaller hypocrisies are underscored by one giant irony: They’re all running for president.
The U.S. has long ceased to be a country in which most people look to their state instead of to the national government to address and solve their most vital problems. State pride is pretty rare these days, except for residents and alumni who dress in the old-school colors and root hard for a college football or basketball team from a major public university.
Of course, state governments still perform a vital role in education and economic development and can still be “laboratories of democracy,” sites for testing out new policies that aren’t yet ready for national consumption. Progressives who cheered when New York legalized gay marriage and look forward to the day when Vermont begins operating the single-payer health care system it passed this spring can hardly object, at least in principle, when red states pass laws they abhor. But, as an alternative philosophy of governance in a modern nation, states’ rights is very wrong. In fact, it’s ridiculous.
By: Michael Kazin, The New Republic, September 20, 2011