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 nation-wide 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 have 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.”

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute. He is currently writing a book entitled Cordell Hull, Anthony Eden and the Search for Anglo-American Cooperation, 1933-1938.

President Obama has called for the creation of an infrastructure bank. Congress must follow his lead.

“It's not a bigger government we need,” President Obama said in the State of the Union address, “but a smarter government that sets priorities and invests in broad-based growth.” The creation of a national infrastructure bank is a “smarter government” idea whose time has come.

Plans for a national infrastructure bank – one that uses federal funds to incent or leverage even greater investment, public and private, in large-scale public purpose projects – have been percolating since the 1990s. President Obama has long been a champion, and the idea has enjoyed bipartisan support in Congress and backing from the likes of the AFL-CIO and U.S. Chamber of Commerce. Yet we remain stalled in enacting this kind of finance facility, despite the weight of evidence of its potential efficacy and the urgency of the infrastructure (and financing) need. It is time, as the president urged, to put the nation’s interest before party, and to use this kind of public-private partnership to make the investments vital to our economic prosperity.

Arguments in favor of the I-Bank are premised on simple logic. Investments in the infrastructure we require to remain economically competitive – improved roads and bridges, high-speed rail, a new power grid, universal broadband access, renewable energy – will also put people to work. “Smart” use of some of our public dollars via grants, loans, loan guarantees, and other risk-mitigating instruments can encourage or stimulate substantially greater investment in these projects by states, municipalities, and private sector actors. Senators John Kerry, Kay Bailey Hutchison, and Mark Warner estimated that their proposed $10 billion American Infrastructure Financing Authority could unleash an additional $640 billion in infrastructure spending over the course of a decade.

With all this win-win, what explains the delay in actually establishing such a bank? First, given current fiscal constraints, every dollar counts, and even a few budgetary billions that promise significant return on investment may not deliver those returns in this election cycle. Instead, many in Congress prefer to retain prerogative over on what and where investments are made (preferably in their districts) rather than cede allocation decisions to an independent authority. Second, despite the endorsements from pro-business groups like the Chamber of Congress, a number of conservative Republicans have voiced predictable remonstrations: concerns over project selection process (“picking winners”), fear that the investment needs of metropolitan areas will be privileged over those of rural states, and a general (and congenital) preference for state-level decision making.

In fact, states have already taken the lead on creating infrastructure banks, as necessity has bred all kinds of invention. In the U.S., approximately 75 to 85 percent of infrastructure spending is financed by state and local governments, an unsustainable burden for states whose budgets and borrowing capacity have been eviscerated by the global financial crisis. According to the Federal Highway Administration, 32 states have infrastructure banks, and many new entities are taking shape, from Alaska to Virginia. Last year, the New York Works Task Force, headed by Felix Rohatyn (who helped save New York City from bankruptcy in the 1970s) called for the creation of a multibillion-dollar infrastructure bank for the Empire State.

In Chicago, Mayor Rahm Emmanuel, who as President Obama’s chief of staff was actively involved in the White House push for a national infrastructure bank, has created the Chicago Infrastructure Trust (CIT), designed to spur private capital investment in a range of infrastructure projects, including transportation, alternative energy technologies, and telecommunications and broadband access. The CIT will be capitalized by the likes of Citibank and JP Morgan and will fund projects with both debt and equity. The first local I-Bank of its kind, the CIT lies at the heart of Chicago’s new economic growth strategy.

A national infrastructure bank could learn from these local experiments. Private sector investment is not a panacea; it only lends itself to projects that can generate sufficient revenue, often in the form of user fees, like tolls on roads, to attract commercial capital. Sometimes, particularly when municipalities sell off assets, there can be unintended consequences to privatization. In 2008, Chicago Mayor Richard Daley famously leased the city’s parking meters to a private consortium for a handsome up-front fee of $1.15 billion. However, subsequent valuations of the future parking meter revenues put them at approximately $11.6 billion over 75 years – money that will accrue to the private investors, not to the city for things like education, libraries, or transportation.

A number of important new studies draw on these local experiments and best practices from around the world, including those of the European Investment Bank, which was established in 1958 and attracts a wide range of investors. Emilia Istrate and Robert Puentes note that 30 countries have specialized public-private partnership (PPP) units within their governments to promote this kind of cross-sector work. They suggest that, in addition to a national I-Bank, such an office could be housed within the Office of Management and Budget and could support state and local governments with their infrastructure investments. The idea is not to supplant or crowd out state or local investment efforts. As William Galston and Korin Davis point out, a national I-Bank would facilitate regional projects that span multiple states or those that promote goals that are truly national in scope, such as renewable energy development, a seamless power grid, or multimodal freight transport.

This would not be the first time we have looked to public-private partnership for massive infrastructure modernization and job creation. Franklin Delano Roosevelt’s New Deal included public-private ventures like the Tennessee Valley Authority, which FDR described as “a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise.” Obama’s New Deal – Keynes meets leveraged finance – would draw on this tradition of cross-sector collaboration with an eye toward our 21st century economic needs.

Calls for greater infrastructure investment have been amplified in recent months by events like hurricane Sandy, which underscore the urgency – and often regional and national nature – of the need. Polls from Lazard and the Rockefeller Foundation, among others, show that the vast majority of Americans, despite valid privatization concerns, are supportive of a mix of infrastructure finance that includes private sector capital, particularly if it is in lieu of further budget cuts or tax increases. The president and Congress must seize the moment: the time is right for a significant public-private investment in our nation’s future.

Georgia Levenson Keohane is a Fellow at the Roosevelt Institute and the author of Social Entrepreneurship for the 21st Century: Innovation Across the Nonprofit, Private, and Public Sectors.

Infrastructure image via Shutterstock.com.

Policy choices drove the Postal Service into debt, but we can still choose to save it.

The news last week that the U.S. Postal Service plans to end Saturday delivery of regular mail provoked a wide range of reactions: anger from those who hope to prevent the cuts, praise from those who see it as a bold and necessary move, sadness from those mourning the end of an era, and denial from lawmakers who noted that it’s not entirely legal. Whatever their take, the fact that nearly everyone has an opinion on this policy shift shows how thoroughly the Postal Service has become woven into the fabric of American society. Many government agencies are facing cutbacks, but few have an influence as personal or as pervasive as the mailbox outside the front door. And when we check that mailbox by force of habit and remember why it’s empty, it may make us think twice about letting yet another pillar of public life in the U.S. be knocked down.

The blame for the Postal Service’s downward spiral is usually split between the Internet (you can’t include a funny video of a cat in a physical letter, so what good is it compared to e-mail?), private competition, and the most usual suspect of all, the United States Congress. The first two have some merit, but Congress, which has lately become the Kevin Bacon of looming disasters, never more than a few degrees removed from a crisis, is the biggest culprit here. In 2006, it imposed a wholly unique mandate that required the USPS to prefund health benefits for future retirees for 75 years, to the tune of about $5.5 billion a year. So far it’s placed $44 billion into that account while running losing about $30 billion. Now it’s planning service cuts that will save about $2 billion a year. You can work out the math on that one, even if our lawmakers can’t.

While contemplating the costs of the Postal Service, it’s also important to consider what we’re paying for. As of 2011, there were 35,119 postal facilities across the country processing 554 million pieces of mail every day. It may not be as polished as FedEx, but then again, FedEx couldn’t be as polished as FedEx without the help of the Postal Service, which delivers 30.4 percent of FedEx Ground shipments thanks to its presence in rural areas where private carriers fear to tread. To do all this, the Postal Service currently has 546,000 career employees, about 20 percent of whom are black. Further layoffs and service cuts will take a significant toll on communities that have already been disproportionately affected by the recession, from economically devastated towns that can’t sustain private carrier routes to minority groups suffering sky-high unemployment.

The USPS also has value beyond the daily churn of correspondence, commerce, and junk mail. Historian Gray Brechin notes that the New Deal’s public works projects included the construction of more than 1,100 post offices “designed…to elevate and inspire the public” and “distinguished by fine architecture, materials and detailing, as well as by a lavish programme of public art that, for the first time, reflected back to patrons and workers their regional identity.” FDR, himself an avid stamp collector, understood the value of public spaces and oversaw the construction of a vast network of facilities that would bind disparate communities together while serving as a vital supply line. It was also meant as a reminder of what Americans can achieve when united by common purpose. And now some people are ready to give up on it because the lines are too long.

In this light, attacks on the Postal Service look like another symptom of the general anti-government sentiment that has been undermining FDR’s legacy and the strength of our public institutions for decades. Like any service, public or private, the USPS should look to trim costs and adapt to customer demands if it can do so without compromising its quality of service or labor standards. But that’s a big “if,” and it’s hard to blame the agency for the fiscal hole it’s in when Congress has opted to micromanage it to death. Indeed, the prefunding mandate that’s driving the USPS into debt is a classic example of the conservative governing philosophy: come in, break stuff, then complain that it never worked in the first place. Some private firm must be able to do it better, even if it depends on publicly funded resources to get it done. And of course the object of their fixation would be postal workers’ future health benefits. As we’ve been taught from the endless attacks on Social Security and Medicare, the essence of greed in the modern workforce is the desire for a comfortable retirement.

We don’t have to let this narrative play out this way. With this and other public services on the chopping block, it’s time for Americans to have a serious debate about what we want from government and what it’s worth to us, in terms of both our budget and our national identity. Through its sheer omnipresence, the Postal Service and the cuts it’s facing may help Americans to grasp the full scope of what we stand to lose if we buy into the mantra that nothing that costs something is worth anything. It’s up to all of us to decide that the mail must go through.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.

The year ahead will be full of petty budget battles that solve nothing and distract from the real issues.

On the one hand, the last minute December 2012 fiscal cliff deal was in no respects a policy breakthrough, but on the other hand, it didn't solve any process issues either. There will be no grand resolution, which pleases the ideologues on both sides. God forbid that we come to any workable compromises. And there is no framework. So the 2013 stage is set for a series of useless little budget/deficit/debt wars.

We face, in turn, (1) the sequestration battles starting in March (over irresponsible cuts we agreed to 15 months ago as a way of avoiding doing anything then), (2) continuing resolution battles starting in April (a series of confrontations over spending this year because Congress couldn't pass spending bills), (3) 2014 budget battles starting in May (but then we haven't actually agreed on a budget for years), and (4) the return of the debt limit debacle sometime around August. (You thought this was over because Congress has declared that the debt limit has been suspended, but it's coming back.)

These little battles will not -- either singly or together -- lead to a resolution of the deficit/debt/budget debacle. No actual problems will be solved. Everything will be kicked down the proverbial road. My bet is that each of the impending possible battles will wind up the same. There will be high drama moving toward farce, forecasts of doom, tense last-minute negotiations in which various congressional and executive leaders will try to act as though something important is happening. Each time the Republican House will back down, because if your approval rating is lower than cockroaches, you have surprisingly little political leverage.

We are seeing this whole drama playing out now in the run up to the sequester. To remind everyone, these are cuts (roughly $85 billion in 2013 divided between domestic and defense programs) Congress and the president agreed to because they were thought to be so awful that the same two parties would agree to solving the whole budget problem to keep these cuts from happening. So now they are likely to happen and we've decided we hate them.

I hated them a year ago and said so at the time, but predicted that we would in the end make the domestic cuts and finesse the defense cuts. To be clear, I believe we must, over a 10 year period, slow down the growth of public debt, and this has to mean budget cuts. But these reductions will occur at the wrong time, they are done in the wrong way, they hit the wrong part of the budget, and they do nothing whatsoever to alter the 10 year picture of debt growth that impends. They are a wholly symbolic and harmful ritual dance.

We should not make these cuts now. We should, if necessary, make smaller cuts so Congress can say it got a "down payment." Then Congress and the president should agree there will be no debt ceiling fight this year and should publicly and together commit to a process that might work.

In my dreams.

We seem intent on having these useless little battles. They will not actually lead to disasters. On the other hand, they won't make anything better. But they will take up time, consume political capital, raise the level of distrust in government, maintain a high level of economic uncertainty, lower our economy's growth rate, and impede the administration's and the Congress's focus on the real issues of our future. Both parties will look worse after all of this.

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.