FDR's Vision for a Strong and More Compassionate America

Aug 1, 2011David B. Woolner

Wanted: a restoration of faith in government as an instrument of social and economic justice.

Wanted: a restoration of faith in government as an instrument of social and economic justice.

With deadlock in Washington and a recent spate of economic data showing that the so-called "recovery" of the US economy is growing weaker by the day, it appears more and more likely that the Great Recession which has been with us since the fall of 2007 will continue. This is very bad news for the millions of Americans who have lost their jobs, their homes, or both. It also places a terrible burden on the millions of young people about to enter the work force. It is hard to look forward to the future when that future is full of uncertainty. In this respect both the older generation of long term unemployed and the younger generation that has yet to take on their first job share much of the same anxiety. When, they ask, will this economic downturn come to an end?

This despair is not unlike that of the generation that greeted Franklin Roosevelt when he took the oath of office on March 4, 1933. The nation had never experienced anything like the economic conditions that existed that year, and there were real fears that liberal capitalist democracy itself was under siege.

To counter this despair Franklin Roosevelt famously urged the American people to remember that "the only thing they had to fear was fear itself." But he also acknowledged -- in the line that received the greatest applause in his first inaugural -- that "this nation asks for action and action now." He promised to deliver on that demand -- and deliver he did. Within his first hundred days alone, FDR, working with Congress, passed 15 major pieces of legislation, including a series of banking and financial reform measures that formed the basis of our financial economy for more than six decades.

The rescue of America's banking system and the regulation of the stock market helped restore the American people's faith in these two key sectors of the economy. Moreover, the jobs created through the launching of such New Deal programs as the Civilian Conservation Corps and the later Works Progress Administration did far more than simply help improve our environment or build our nation's economic infrastructure, they also gave people hope.

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This fundamental partnership between a government willing and able to act in the name of the public good, and a people willing to support it, formed the essence of the New Deal. Out of this partnership came many of the programs that we take for granted today, such as unemployment insurance and Social Security. But these things never would have happened without the leadership and vision of Franklin Roosevelt who time and time again admonished the American people never to forget that "government is ourselves and not an alien power over us." Bolstered by this new-found vision the President, the people and the Congress transformed the nature of the American society and government; created the economic infrastructure that made it possible for us to become the great arsenal of democracy in the Second World War and by 1945 would see the United States emerge the world's first true and only super-power.

The New Deal was not always pretty. Mistakes were made, and the road to economic recovery was long and hard. But throughout it all the American people did not despair because they understood they were following the vision of a leader who was dedicated not to a single ideology or a pre-set series of ideas, but to the simple proposition that in the midst of the worst economic crisis this nation had ever seen the government had an obligation to act.

The legislative record of the New Deal -- which has never been equaled by any administration before or since -- stands as a testament to this commitment to action. It also stands as a testament to FDR's overarching faith in government as an instrument of social and economic justice. It is clear to all concerned that our leaders in Washington today do not share this faith. Dedicated to the principles of free market fundamentalism and ideologically opposed to government intervention in the economy -- even in the midst of crisis -- they prefer to turn away from government and offer no real vision for the future except ever-more tax and spending cuts. Thanks to this misguided austerity, more workers are losing their jobs, the economy continues to falter, and hope is nowhere to be found.

Nearly eighty years ago, in the same inaugural address, FDR warned the American people not to embrace the false promises espoused by a "generation of self-seekers," because "they have no vision, and when there is no vision, the people perish." Indeed, "happiness," he said, "lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men."

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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FDR, Quantitative Easing Wonk, Used Every Tool in His Box to Jumpstart Recovery

Jun 22, 2011Mike Konczal

Rather than focusing on far off threats, FDR chose to combat high unemployment and sluggish growth with everything he had.

Rather than focusing on far off threats, FDR chose to combat high unemployment and sluggish growth with everything he had.

I’ve been reading this important David Beckworth post on the quantitative easing and monetary policy FDR implemented during the Great Depression. Beckworth argues that the first QE policy happened during this time and that it benefited from the fact that Roosevelt explicitly said he would do what it took to get to the pre-trend price-level target. Beckworth links to this Gauti Eggertsson paper that argues that when FDR took office, he signaled that they’d get the price-level back to pre-Depression trend by going off the gold standard, financing a Federal government through deficit spending, and explicitly stating target levels for prices, and this change in expectations from Hoover's administration did a lot of the work of recovery.

I wasn’t sure how serious to take this -- a president talking about price levels with the public? But sure enough, here’s the second Fireside Chat from May 7th 1933 (my bold):

Much has been said of late about Federal finances and inflation, the gold standard, etc. Let me make the facts very simple and my policy very clear. In the first place, Government credit and Government currency are really one and the same thing. Behind Government bonds there is only a promise to pay… [I]n the past the Government has agreed to redeem nearly thirty billions of its debts and its currency in gold, and private corporations in this country have agreed to redeem another sixty or seventy billions of securities and mortgages in gold… [They] knew full well that all of the gold in the United States amounted to only between three and four billions and that all of the gold in all of the world amounted to only about eleven billions.

If the holders of these promises to pay started in to demand gold the first comers would get gold for a few days and they would amount to about one-twenty-fifth of the holders of the securities and the currency… We have decided to treat all twenty-five in the same way in the interest of justice and the exercise of the constitutional powers of this Government. We have placed everyone on the same basis in order that the general good may be preserved.

The Administration has the definite objective of raising commodity prices to such an extent that those who have borrowed money will, on the average, be able to repay that money in the same kind of dollar which they borrowed. We do not seek to let them get such a cheap dollar that they will be able to pay back a great deal less than they borrowed. In other words, we seek to correct a wrong and not to create another wrong in the opposite direction. That is why powers are being given to the Administration to provide, if necessary, for an enlargement of credit, in order to correct the existing wrong. These powers will be used when, as, and if it may be necessary to accomplish the purpose.

I discussed most of the parts of that quote dealing with gold clauses here and here. FDR told rentiers who had put suicide-pact clauses in their contracts, which allowed them to collect more gold than existed in the world so as to allow private parties to profit while the country suffered and was in a deflationary spiral, that he was going to come at them like a spider monkey. Beyond establishing credibility and changing expectations, it makes me happy to see a president so actively go after broken, destructive contractual schemes that prevent the management of bad debts and threaten the general good. But there’s the bold quote, stating what the final goal of monetary policy was at the beginning of his administration.

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Economic and monetary policy commentators like Ryan Avent have noted that "the Fed chose a direction rather than a destination” when it comes to QE and monetary policy. If Avent wants to see a destination mentioned by a sitting president, he should check out FDR’s fourth fireside chat on October 22, 1933 (my bold):

Finally, I repeat what I have said on many occasions, that ever since last March the definite policy of the Government has been to restore commodity price levels. The object has been the attainment of such a level as will enable agriculture and industry once more to give work to the unemployed. It has been to make possible the payment of public and private debts more nearly at the price level at which they were incurred. It has been gradually to restore a balance in the price structure so that farmers may exchange their products for the products of industry on a fairer exchange basis. It has been and is also the purpose to prevent prices from rising beyond the point necessary to attain these ends. The permanent welfare and security of every class of our people ultimately depends on our attainment of these purposes…

Some people are putting the cart before the horse. They want a permanent revaluation of the dollar first. It is the Government’s policy to restore the price level first. I would not know, and no one else could tell, just what the permanent valuation of the dollar will be. To guess at a permanent gold valuation now would certainly require later changes caused by later facts.

When we have restored the price level, we shall seek to establish and maintain a dollar which will not change its purchasing and debt paying power during the succeeding generation. I said that in my message to the American delegation in London last July. And I say it now once more.

I have two takeaways:

1. Wouldn’t it be funny if in this fireside chat, years into a sub-trend growth and massive waste from high unemployment and unused capacity, Roosevelt said something like, “Someday, 25 years from now, Russia might be able to get a space dog into orbit before us. In order to Win the Future against this space dog, we should immediately forget everything going on right now in order to prepare for research competition with potential adversaries decades from now. We must immediately start planning for this battle right now, lest we lose the future, so let’s give a bunch of tax holidays and easily captured credit benefits to various rocket manufacturers and other incumbents.”? That would be crazy. But that's how the discussion is now framed by the current administration. Instead, FDR was really serious about using every pressure point and every lever to get monetary and fiscal policies going instead.

2. Obviously back then the Democratic coalition had a lot of farmers in it, people for whom “the price level” wasn’t a graph pulled from the St. Louis Fed to put on their blogs but a real thing that they dealt with daily. There is a chance that insomuch as hipsters are an influential Democratic coalition group, and hipsters begin to engage in urban farming, “the price level” might become more of a thing that Democrats are responsive to in order to meet the needs of urban hipster gardeners. Until then, it’s up to economic bloggers to carry this message.

Mike Konczal is a Fellow at the Roosevelt Institute.

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Failing to Learn from the Past: FDR, Obama, and the Looming Double Dip

Jun 6, 2011David B. Woolner

The key difference between then and now is a president who learns from his economic mistakes.

The key difference between then and now is a president who learns from his economic mistakes.

Two recent articles in the New York Times make reference to the perilous state of the US economy and the possible political consequences for President Obama in 2012. In a piece entitled "Employment Data May Be the Key to the President's Job," Binyamin Appelbaum notes that no American president since FDR has won reelection with an unemployment rate higher than 7.2 percent on election day. He goes on to observe that, as most economists agree, we are unlikely to see a significant drop in the current rate over the next 12 to 18 months. President Obama must defy this historic trend if he wishes to keep his job.

In his editorial "The Mistake of 2010," Paul Krugman is similarly pessimistic about the state of the US economy and the prospects for significant gains in employment over the coming year. He takes issue with the Federal Reserve's recent assertion that quantitative easing has avoided the mistake that the Fed made in 1937. At that time, out of fear of inflation, it engaged in what Krugman calls a "premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression." Krugman insists that not only was the original fiscal stimulus not large enough, but thanks to the deficit hawks on Capitol Hill and elsewhere, conventional wisdom has it that public enemy number 1 is no longer unemployment, but the deficit. The tragic result is that the possibility of further spending to stimulate the economy has all but vanished from the public discourse. Seen from this perspective, he argues that we have already repeated a version of the mistake of 1937 by withdrawing fiscal support much too early. He also fears that pressure from conservatives and European central banks over possible inflation may lead the Fed to reverse course and raise interest rates, even though we have a long way to go before we pull ourselves out of the current economic malaise.

Krugman calls all of this the "economic mistake of 2010," which he likens to a partial replay of the Great Depression. But there is one important difference. In the "Roosevelt Recession" of 1937-38, FDR and his economic advisers were quick to recognize their mistake. Instead of stubbornly holding course, they promptly reversed themselves and went back to Congress in the spring of 1938 to demand a massive increase in government spending. This spending was to put some of the millions who had lost their jobs due to the misguided policies of 1937 back to work. Within a few months, the downward spiral that was initiated by the 1937 pullback was over and the economic recovery -- that had been running at an average annual rate of 14 percent between 1933 and 1937 -- resumed.

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Sadly, it seems highly unlikely that this President and Congress will draw the same lesson from the recession of 1937-38 that FDR and his advisors drew from their experience. Steeped in a bitter partisan divide and arguing not about how much the government should spend, but rather about how much it should cut, there appears little chance that we will see any meaningful attempt to alleviate the plight of the millions of Americans still suffering the burden of unemployment. With such gridlock in Washington, perhaps we would all do well to reflect on what FDR said as he struggled with those who criticized his policies and demanded he cut back on the New Deal:

Governments can err, Presidents do make mistakes, but the immortal Dante tells us that divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted in different scales. Better the occasional faults of a Government that lives in a spirit of charity than the consistent omissions of a Government frozen in the ice of its own indifference.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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President Obama Reaffirms the "Special Relationship" with the UK

May 26, 2011David B. Woolner

The bond between the US and the UK runs deep, especially when it comes to their economies.

The bond between the US and the UK runs deep, especially when it comes to their economies.

In an historic speech before both houses of the British Parliament yesterday, President Obama reaffirmed the "special relationship" between Great Britain and the United States. He made reference to the joint sacrifices both countries have made on the battlefield in defense of freedom, taking special note of the wartime alliance and friendship between Winston Churchill and Franklin Roosevelt that helped give birth to the relationship as the two nations fought "side by side to free a continent from the march of tyranny."

References to the alliance between Great Britain and the United States in World War II are of course entirely appropriate, as the "special relationship" as we know it began in the dark days of 1939-40. But the President also made reference to the two countries' strong economic ties and the fact that today we "live in a global economy that is largely of our own making."

Here, too, the President is correct. Yet most Americans remain largely unaware of this economic aspect of the "special relationship." Much of the global economy we operate in today does indeed have its origins not in the 1980s or 90s, but the 1940s, as Great Britain and the United States struggled to defeat fascism in Europe and Asia.

To understand this, let's take a look at the link between the Great Depression and World War II -- especially from the American perspective. For Franklin Roosevelt and his Secretary of State Cordell Hull, this link was not only obvious, but tragic. The two men, in fact, were absolutely convinced that the cause of the Second World War lay in the economic depravity and dislocation of trade and commerce that were the hallmarks of the Great Depression. Near the end of the war, for example, in his State of the Union address of January 1944, FDR observed that we "had come to a clear realization...that true individual freedom cannot exist without economic security and independence. Necessitous men are not free men. People who are hungry and out of a job are the stuff of which dictatorships are made." And as early as the early 1930s, Cordell Hull was frequently quoted as saying, "If goods cannot cross borders, armies will."

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As a consequence of these beliefs, the Roosevelt administration committed itself to the concept of freer trade, beginning with the passage of Hull's Reciprocal Trade Agreements Act in 1934 and continuing right up through the war. Hull's policies took the United States in a new direction away from the high tariff policies of the Hoover years, and in many respects laid the foundation for the opening up of the world's trade immediately after the end of the Second World War. This was best exemplified by the establishment of the General Agreement on Tariff and Trade (GATT) in 1947.

Ironically, in response to the high tariffs of the Hoover administration, the British had established an intra-Empire trading system called "Imperial Preference" in 1932 that allowed most goods within the British Commonwealth to be traded with little or no tariff while keeping US goods out. This was an anathema to Hull, and during the war he used the leverage of Lend-Lease aid to try to get the British to drop it. Hull was never able to get the sort of rock solid commitment to ending Imperial Preference he would have liked, but under Article VII of the 1942 Lend Lease Consideration Agreement (governing Lend-Lease aid), the British did agree to take "joint action directed towards the creation of a liberalized international economic order in the postwar world."

By 1944, US military and economic preponderance was such that there was little doubt the Roosevelt administration had the upper hand in the "special relationship." As such, the agreements that were negotiated and signed at Bretton Woods and Dumbarton Oaks that year (establishing the International Monetary Fund, the World Bank, and laying the groundwork for the United Nations) largely reflected the American, as opposed to the British, negotiating positions. The same was true a few years later when the GATT was signed in Geneva.

Viewed from this perspective, the Second World War was as much about the re-ordering of the world's economic system along American -- and away from British -- lines as it was about defeating fascism in Europe and Asia. Still, there is no question that during these years the United States considered British cooperation in this effort not only vital, but essential, for without it they doubted their plans for a new world order could succeed. While it may true that Great Britain has always been America's junior in the transatlantic partnership, President Obama is correct when he says that the Anglo-American relationship is not merely "special" but "essential" to the development of "a world that is more peaceful, more prosperous, and more just."

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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Saving a “Lost Generation” Through the National Youth Administration

May 19, 2011David B. Woolner

We could use the ingenuity of FDR's program to combat unemployment and skill stagnation among the country's youth.

We could use the ingenuity of FDR's program to combat unemployment and skill stagnation among the country's youth.

As college seniors prepare to graduate across the country, recent reports on the state of employment among young people offer discouraging news. In 2010, for example, the unemployment rate for youth between the ages of 16 and 24 was 18.4 percent, and in January of 2011, the Department of Labor reported that it had climbed to a staggering 21 percent. Moreover, even for those college graduates lucky enough to find work, the jobs they acquire often pay less and do not require a college degree. And with grads taking on employment in the lower and unskilled market, the prospects for work among those without a college degree become even more discouraging. At the same time, those who do go to college in the hopes of better employment often graduate under a heavy burden of student loan debt -- an average of $22,900 for the class of 2011.

Statistics like these -- which represent the highest youth unemployment rate in more than 60 years and the highest level of student debt ever recorded -- have led to concerns about a the emergence of a "lost generation." Thanks to the Great Recession, this group may lose skills and/or follow a career trajectory that will place them in a lower income bracket for years.

Such concerns are not new. More than three-quarters of a century ago, Franklin Roosevelt faced a similar set of problems. During the Great Depression, youth unemployment was estimated to be as high as 30 percent and many young people found themselves unable to afford the cost of even a high school education. Taking stock of these grim statistics, Eleanor Roosevelt remarked in 1934 that she often had "moments of real terror when I think we might be losing this generation." To combat this problem, the Roosevelt administration created a unique federal agency dedicated to helping young people: the National Youth Administration.

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The National Youth Administration (NYA) was launched by executive order in June of 1935. Its goals were two-fold. The first was to prevent young people already enrolled in high school and college from dropping out due to financial hardship. This was accomplished by providing the students with grants in return for part-time work in libraries, cafeterias, as janitors, etc., with the twin objectives of developing the talents of young people while at same time keeping them out of the struggling labor market. The second goal was to provide training and/or employment of long-term value. By 1937, more than 400,000 youth were either employed or in job training programs under the auspices of local NYA offices. With the outbreak of the war in Europe in 1939 these figures increased significantly, with the vast majority of those in the program getting training as skilled machinists to work in the nation's burgeoning defense industries. The productive labor of these NYA-trained workers helped turn the United States into the great "Arsenal of Democracy" that made it possible for us to win the war against fascism.

Moreover, under the leadership of such enlightened figures as Aubrey Williams, the NYA also worked to specially address the problems of unemployment and access to education among African Americans. Williams created an Office of Minority Affairs headed by Mary McLeod Bethune, who would soon become one of the most effective and outspoken advocates for the employment and educational rights of blacks in the country.

Overall, the NYA helped over 4.5 million young people find work, get vocational training, or afford a better education before the office was closed down in 1943. Equally important, it helped a struggling generation not only to maintain its dignity, but also to contribute to the growth and productivity of the American economy at a desperate time in our history. Indeed, even though the NYA was a federal program, it became enormously popular among the business community and offers us a fine example of what enlightened leadership can do in a moment of great crisis. Surely providing jobs and making education and vocational training more affordable for young people is an investment in our future that this generation of Americans -- and all generations -- deserve. With youth unemployment approaching 25 percent, and with the cost of higher education skyrocketing, perhaps it is time to offer this generation the hope and promise of another NYA.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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When Faced with Floods, FDR Fought Back with Jobs

May 12, 2011David B. Woolner

FDR chose action to combat flooding and soil erosion that did much more than conserve land.

FDR chose action to combat flooding and soil erosion that did much more than conserve land.

The massive flooding that struck the Midwest in recent days has led a number of climatologists to argue that this event -- along with the occurrence of similar floods in Australia, Pakistan and elsewhere -- is further indication of the impact of the increase in greenhouse gasses in the earth's atmosphere. The warmer air associated with the increase holds more moisture, and the greater the moisture content, the greater the level of precipitation. Hence the record snowfalls for the upper Midwest this season and the extraordinary amounts of rain that much of the region received in April (Paducah Kentucky, for example, received 22 inches of rain in April, as compared to the average 5.4 inches it usually receives).

For the vast majority of scientists -- and for an increasing number of individuals and institutions in other parts of the world -- the potential impact of climate change is being viewed with growing alarm. But in Washington, just the opposite is true. The US House of Representatives recently rejected an amendment that would have put the House on record as acknowledging that global warming is occurring and that human activity is the major cause. In this milieu, and in spite of the overwhelming evidence to the contrary, there is almost no chance that we will see any significant climate legislation emerge from the current Congress.

Interestingly, 75 years ago the United States faced a very similar natural disaster in the form of the Great Flood of 1936. Unlike today, however, the death and destruction that struck much of the eastern United States as a result of the flood spurred Congress into action. It passed of one of the most significant -- though lesser-known -- pieces of legislation to come out of the New Deal: the Flood Control Act of 1936.

Recognizing for the first time "that destructive floods upon the rivers of the United States constitute a menace to national welfare" and that "flood control on navigable waters or their tributaries is a proper activity of the Federal Government in cooperation with States," the Roosevelt administration worked with members of Congress to pass the first piece of legislation to provide for national flood relief. The hundreds of reservoir, levee, and channelization projects that resulted from the 1936 act protected millions of acres of farmland, saved countless lives, and literally changed the face of the nation. Taken together, the projects that came about as a consequence of the act constitute one of the largest additions to our nation's economic infrastructure, on par with the development of the nation's highway system. Moreover, in keeping with the spirit of the New Deal, the construction of many of these flood control projects (which usually took place under the auspices of the US Army Corps of Engineers) also spurred local and regional economic growth and helped conserve one of our nation's most precious resources -- our soil.

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It was perhaps soil erosion, in fact, more than any other issue that drove President Roosevelt to support the passage of the flood control act. Having seen the dire consequences of the Dust Bowl, and as a great lover and believer in the restorative power of the land, FDR was deeply concerned about the long-term productivity of American topsoil. To combat erosion, he not only passed the Flood Control Act of 1936, but also established the Soil Conservation Service, which encouraged farmers to adopt more environmentally friendly practices; the Civilian Conservation Corps, which helped restore our nation's forests; and the Tennessee Valley Authority, which not only helped control erosion in the Tennessee River Valley, but also provided inexpensive hydroelectric power to an entire region of the country.

Most importantly, all of these programs helped create jobs and spur economic activity. And while today many environmentalists might take issue with certain aspects of the flood control work that came about as a consequence of the act (such as the channelization of rivers and streams), few would take issue with the spirit of conservation that inspired it.

The Flood Control Act of 1936 is but one example of the remarkable record of legislative achievements that came about in the 74th Congress. In response to the needs of a people in the midst of both environmental and economic crisis, members of Congress worked with the Roosevelt administration to pass not only this landmark piece of legislation, but also the Social Security Act, National Labor Relations Act, Banking Act of 1935, Soil Conservation Act, and the $4.8 billion Emergency Relief Appropriation Act of 1935, out of which came the WPA, among other programs.

It is perhaps the best testament to our current era that this Congress, facing a remarkably similar set of circumstances, has chosen not "action and action now," as FDR would put it, but rather to do nothing.

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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Bringing the Invisible Triumphs of the New Deal to Light

May 6, 2011Gray Brechin

fdr-we-need-you-150Criticism of one of the nation's most important programs can be stopped in its tracks by exposing how it improved our lives.

fdr-we-need-you-150Criticism of one of the nation's most important programs can be stopped in its tracks by exposing how it improved our lives.

Even those who remain unanimous in their hatred of what FDR accomplished unwittingly use and enjoy what he left behind. They can't avoid it; that legacy is as inescapable as it is indispensable. Before they succeed in wrecking it completely, we should learn at least to see it. For to do so will demonstrate what democratic government at its best can accomplish for all the people, rather than just those who can afford to buy it at discount.

The University of Chicago swamis whose neoliberal theories have wrought such havoc don't drink their own sewage because the Public Works Administration rebuilt their town's water system. Congressmen unalterably opposed to government spending and the K Street lobbyists plying them fly in and out of Reagan National Airport unaware that it -- like most of the nation's airports -- was built by the WPA (which also saved its namesake's bacon). Even the capital city itself is largely a New Deal creation. Those who enjoy the national parks, forests, and monuments threatened with closure by the GOP use lodges, trails, roads, and historic shrines built or improved by CCC "boys." If Amity Shlaes' children enjoy Central Park's playgrounds or zoo, or if they visit the Statue of Liberty, they owe a debt of gratitude to the New Deal workers who improved them seventy-five years ago.

That New Deal critics like Shlaes do not know they are using its legacy is hardly surprising: little of it -- like the thousands of mature trees that arch over my hometown's streets -- is marked. Nor would FDR's enemies want to acknowledge it, let alone what those creations did to rescue millions from despair, suicide, and crime. To do so would deal a body blow to their most cherished fantasies. It is far easier to repeat the mantra that "the New Deal didn't end the Depression, the war did" than to examine the falsity of that declaration, as my colleague Richard Walker and I have done. Nor would it buttress their argument to admit the extent to which federal investment during the Great Depression helped win the war and paid huge dividends when it was over.

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Take, for example, the public education that, we are told, the world's richest country can no longer afford. Many New Dealers had extensive experience in social work and shared the conviction that it is far cheaper and better for a society to uplift than to punish. The WPA and PWA therefore built thousands of modern schools and few prisons. They erected magnificent academic buildings and athletic facilities at the nation's public universities, and they constructed entire community college campuses. They built public libraries and museums as well, while WPA workers preserved and indexed collections for use today. WPA artists embellished many structures, such as Brooklyn College's library, with art exhorting students to match and surpass the achievements of the past. Their inscriptions continue to advise us: "Enter to Learn, Go Forth to Serve" and "Education -- The Defense of the State."

Meanwhile, over three million young men -- many of them down-and-outers -- received education in thousands of camps when they were not toiling to repair what unbridled market forces had done to the nation's land. Today in their 80s and 90s, many of those veterans credit the three C's with giving them an invaluable start in life.

We all stand today on the shoulders of giants who, unlike the veterans of our wars, have rarely been acknowledged for what they did for us. No museum exists for New Deal accomplishments, and only a few statues of "Iron John" remind visitors to our parks of the debt they owe to the men of the CCC.

For six years, I have been working with others to map what the New Deal's public works agencies did for California. Now based at the U.C. Berkeley Department of Geography, the Living New Deal inventory is going national in an effort to engage thousands of Americans in a collective act of rediscovery. In the process, we will learn once again what enlightened governance can accomplish when it sets out to build not Dodge City but a civilization worthy of the name.

Gray Brechin is an historical geographer, visiting scholar in the U.C. Berkeley Department of Geography and founder and project scholar of California’s Living New Deal Project.

*Read about how the CCC brought editor Lynn Parramore's grandfather something he always appreciated: a 'two-seater' toilet!  'Of Agee, Oil and Outhouses'

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Bold, Persistent Experimentation vs. Bold Persistence

May 6, 2011Robert McElvaine

fdr-profile-serious-150FDR knew that even when an idea failed, he had to keep trying.  Republicans think that if they keep trying the same thing, they can't fail.

fdr-profile-serious-150FDR knew that even when an idea failed, he had to keep trying.  Republicans think that if they keep trying the same thing, they can't fail.

It would be difficult to imagine a better illustration of the stark difference between the political and ideological aftermaths of the economic collapses of 1929 and 2008 than the statement made on Thursday, the eve of the anniversary of the inauguration of the WPA in 1935, by House Speak John Boehner.

“Nothing is off the table except raising taxes,” Mr. Boehner declared when addressing negotiations on raising the debt ceiling. “I believe that raising taxes will hurt our economy and hurt job creation in our country.”

What we are seeing yet again is a clash between faith-based economics and fact-based economics.

Mr. Boehner and most of his fellow Republicans are people of faith. Their faith, though, is not in God, but in the Market. Their devil is the government. They know the Truth, and facts and evidence will not shake their faith.

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The same difference between policy based on faith and on facts was the greatest one between Herbert Hoover and Franklin D. Roosevelt. The former was an ideologue, the latter a pragmatist. In 1932, FDR exemplified the fact-based approach when he famously called for “bold, persistent experimentation” and said, “It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something.” For his part, Mr. Hoover, like most people in his party today, was oblivious to evidence. His position (and, far more, that of today’s full-blown believers in the Market God) was: Take the Method (as they see it, there is only one) and try it. If it fails, deny its failure and try it again -- and again . . . and again . . . . But, above all, keep trying the same thing.

Low taxes on the rich, little government regulation, and concentration of wealth and income at the very top led to the Great Depression. When they were reinstated during the administration of George W. Bush, those policies produced the Great Recession. In between, when President Bill Clinton proposed a modest increase in the top marginal tax rate as part of his 1993 budget proposal, “conservative” economists predicted disaster and, basing their positions on received dogma, every Republican in Congress voted against the Clinton budget plan. It was followed by a period of sustained prosperity and a budget surplus.

Those facts make no impression on ideologues of the right. Nor does the fact that such government programs as the WPA substantially mitigated the ill effects of the Depression for millions of its victims and that similar programs would do the same today.

The difference boils down to this: Bold, persistent experimentation versus bold persistence.

Robert S. McElvaine is Elizabeth Chisholm Professor of Arts & Letters and Professor of History at Millsaps College in Jackson, Mississippi and the author of ten books, including The Great Depression: America, 1929-1941.

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The WPA that Built America is Needed Once Again

May 6, 2011David B. Woolner

Begun 76 years ago today, the WPA brought America into the modern age. Our times call for a repeat of this effort.

Begun 76 years ago today, the WPA brought America into the modern age. Our times call for a repeat of this effort.

More than three quarters of a century ago, President Franklin D. Roosevelt declared that the "demoralization caused by vast unemployment is our greatest extravagance. Morally it is the greatest menace to our social order." He also insisted that he would "stand or fall" by his "refusal to accept as a necessary condition of our future a permanent army of unemployed." On the contrary, he said, "we must make it a national principle that we will not tolerate a large army of unemployed and that we will arrange our national economy to end our present unemployment as soon as we can and then take wise measures against its return. I do not think it is the destiny of any American to remain permanently on relief rolls."

To put people back to work, FDR launched a series of programs designed to protect America's environment (through the CCC reforestation programs and creation of the shelter belt in the Midwest to bring an end to the Dust Bowl) and build America's economic infrastructure. The most famous of these was launched seventy-six years ago today: the Works Progress Administration or WPA. Between 1935 and 1943, the WPA literally built the infrastructure of modern America, including 572,000 miles of rural roads, 67,000 miles of urban streets, 122,000 bridges, 1,000 tunnels, 1,050 fifty airfields, and 4,000 airport buildings. It also constructed 500 water treatment plants, 1,800 pumping stations, 19,700 miles of water mains, 1,500 sewage treatment plants, 24,000 miles of sewers and storm drains, 36,900 schools, 2,552 hospitals, 2,700 firehouses, and nearly 20,000 county, state, and local government buildings.

Conservatives critics charged that the WPA was a "make work" program, but its accomplishments, which touched nearly every community in America, continue to make a mockery of this charge. The WPA put millions of skilled and unskilled laborers back to work -- it was a requirement of the program that all those involved in the projects, from the architects and engineers down to the construction laborers, be hired by WPA dollars. It provided the critical economic infrastructure needed to bring the United States into the modern age.

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Sadly, many of the conditions that led to the creation of the WPA are once again with us today: high unemployment and a crumbling economic infrastructure that is rapidly rendering the United States less and less competitive in the global economy. This sorry state of affairs is detailed in a recent article in The Economist, which notes, among other things, that the United States' public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at a paltry 2.4% of GDP. Meanwhile, Europe spends on average 5% of GDP on infrastructure and China is spending 9%. In fact, the United States, according to the article, does not spend nearly enough just to maintain, let alone expand, its existing transport and water systems. The result is that today the US ranks 23rd among the nations of the world in overall infrastructure quality, according to a recent study by the World Economic Forum.

A new and even modest stimulus package would help alleviate this critical problem and provide millions of skilled and unskilled jobs, but the deficit hawks in Congress will have none of this. They insist that such a use of government is contrary to the American way.

To this, FDR's would no doubt reply:

[T]o those who say that our expenditures for Public Works and other means for recovery are a waste that we cannot afford, I answer that no country, however rich, can afford the waste of its human resources...

In our efforts for recovery we have avoided on the one hand the theory that business should and must be taken over into an all-embracing Government. We have avoided on the other hand the equally untenable theory that it is an interference with liberty to offer reasonable help when private enterprise is in need of help. The course we have followed fits the American practice of Government -- a practice of taking action step by step, of regulating only to meet concrete needs -- a practice of courageous recognition of change. I believe with Abraham Lincoln, that "The legitimate object of Government is to do for a community of people whatever they need to have done but cannot do at all or cannot do so well for themselves in their separate and individual capacities."

Isn't it time we rebuilt our nation and put people back to work? Time for a new WPA?

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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Getting America Back to Work Remains the Singular Challenge for the Obama Administration

May 6, 2011Marshall Auerback

A universal Jobs Guarantee Program could free us from the predations of politicians and foster a strong economy.

A universal Jobs Guarantee Program could free us from the predations of politicians and foster a strong economy.

On the anniversary of the inauguration of the Works Progress Administration (WPA), it is striking to compare the unemployment record of Franklin Delano Roosevelt, and that of his modern day successor, Barack Obama. FDR's achievements in putting Americans back to work are among the most impressive of his tenure; he took the rate from 25% to 9.6% by 1936. But so far, Obama's policies have failed to "jump-start" unemployment in a significant way, even as Wall Street has continued a recovery utterly and totally divorced from Main Street.

It's easy to see why: The debt loads remain too high while income and employment continue to fall. Meanwhile, delinquencies and foreclosures continue to rise. Even at current depressed prices, assets are overvalued. Many financial institutions (probably including most of the big ones) are hopelessly insolvent, holding mountains of toxic waste that will never be worth anything. By the same token, almost 14 million active job seekers remain unemployed. Another 6.4 million people who are not actively looking for work (and therefore are not counted as unemployed) say they want jobs. Among workers who are lucky enough to have jobs, 8.3 million are employed part-time but want full-time jobs. Taken together, there are well over 28 million people in the United States for whom the economy has not performed its most important function -- providing enough jobs to go around.

The pace of recovery from the recession has been distressingly slow. It took only 18 months for the nation's unemployment rate to climb from 5.0 percent to its peak of 10.1 percent in October 2009. In the 16 months since then, the rate has made up less than a quarter of that loss. True, we did dodge another Great Depression. That fact is attributable to the federal government's forceful macroeconomic intervention in late 2008 and early 2009. Economists Alan Blinder and Mark Zandi (one a former Clinton appointee to the Federal Reserve Board of Governors, and the other a former economic adviser to Senator John McCain) have estimated that the nation's unemployment rate would have reached 16 percent rather than its actual 10.1 percent in the absence of this intervention.

And yet, in spite of the historic successes of programs such as the WPA, the current government cannot seem to even begin to replicate it. The very fiscal stimulus that helped to avert an even greater economic calamity is now viewed as an excuse against further action to mitigate the scourge of unemployment. We continue to be plagued by misguided notions that our government faces imminent insolvency (imagine the fate of the US had the Roosevelt Administration embraced this idea!).

Part of the aversion toward embracing WPA-style programs today is the false idea that they did little to reduce unemployment, which some claim was only "solved" by the war. Most statistical studies understate the effect of the New Deal job creation measures because they don't show how much of the decline in official employment was attributable to the multiplier effect of spending on direct job creation. Additionally, the "work relief" category does not include employment on public works funded by the Public Works Administration (PWA), nor the multiplier effect of PWA spending. The figures tell the story indirectly, however, in the path official unemployment followed -- steeply declining in periods when work relief spending was high and either declining more slowly or increasing in periods when work relief spending was cut back*.

Estimates for the years prior to 1940 are intended to measure the number of persons who are totally unemployed, having no work at all. For the 1930s this concept, however, does include one large group of persons who had both work and income from work -- those on emergency work. In the United States we are concerned with measuring lack of regular work and do not minimize the total by excluding persons with made work or emergency jobs. This contrasts sharply, for example, with the German practice during the 1930s when persons in the labor-force camps were classed as employed, and Soviet practice which includes employment in labor camps, if it includes it at all, as employment. Counting the WPA programs, FDR's record on unemployment, notably in his first time of office, was formidable, as he took the rate down from 25% to 9.6% by 1936.

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True, an economy can boom for a time, with what may appear to be inadequate levels of net government spending without rising unemployment. In these situations, as is evidenced in countries like the US during the Clinton Administration, GDP growth can be driven by an expansion in private debt. The problem with this strategy is that when the debt service levels reach some threshold percentage of income, the private sector will "run out of borrowing capacity" as incomes limit debt service. This tends to restructure their balance sheets to make them less precarious and as a consequence the aggregate demand from debt expansion slows and the economy falters. In this case, any fiscal drag (inadequate levels of net spending) begins to manifest as unemployment.

The Obama Administration remains fixated by deficit reduction at the expense of reducing unemployment. This is not helpful to recovery: In addition to inflicting lasting damage on an individual's labor market prospects, unemployment is associated with increased rates of physical and mental illness, alcohol and drug abuse, child and spouse abuse, failed relationships and family dissolution, suicide and attempted suicide, and a host of other personal and social ills. All sectors of the unemployed suffer an increased risk of experiencing these problems, but since unemployment itself is distributed unequally among population groups, with disadvantaged workers bearing more than their fair share of its immediate burdens, so too are they destined to bear more than their fair share of its painful, longer-term consequences.

The existence of our current job shortage also makes it harder for us to dig our way out of the recession. Long term unemployment prevents the housing market from rebounding and the housing industry from recovering. It forces the consumer sector to wait anxiously for customers. It keeps capital goods producers waiting for a plausible customer.

A more effective way to restart the economic process on solid ground is to deal with the underlying cause of the problem: We have a credit-based economy, rather than an incomes-based economy. The whole boom of the 2000s (and more broadly the growth process that emerged at the in the early 1980s) was based on household borrowing and the continuation of negative saving trends (that is, household deficit spending). A good place to start recovery efforts, therefore, would be to change this method of economic growth by fostering more, not fewer WPA-type programs.

In my view, a universal Job Guarantee program would be the best way forward and truest to the spirit of the WPA. The jobs would pay basic wages and benefits with a goal to provide a living wage. The program would take all comers -- anyone ready and willing to work, regardless of education, training, or experience. We could adapt the jobs to the workers. As the late Hyman Minsky put it, we could "take the workers as they are", work them up to their ability, and then enhance their skills through on- the-job-training. Additionally, the guaranteed public service job would be a counter- cyclical influence, automatically increasing government employment and spending as jobs were lost in the private sector, and decreasing government jobs and spending as the private sector expanded. Such a program would remain a permanent feature of our economy, acting as a buffer stock to put a floor under unemployment, while maintaining price stability whereby government offers a fixed wage which does not "outbid" the private sector, but simply creates a stabilizing floor and thereby prevents deflation.

Given the nature of today's "predator state" (to use Jamie Galbraith's felicitous phrase), politicians have a proclivity to reward those who "pay to play".  They tend toward wasteful spending and give goodies to campaign contributors. But we could take this power away from sock puppet politicians through a mechanism that automatically adjusts to insure the private sector can actually realize its desired net nominal savings position. This would help to free the system from political parasites while increasing the freedom of the private sector to achieve its savings goals. What better way to celebrate the anniversary of the WPA's inauguration?

Marshall Auerback is a Senior Fellow at the Roosevelt Institute, and a market analyst and commentator.

*The original source of this finding was Michael R. Darby (1976) "Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941", Journal of Political Economy, 84(1), 1-16). Darby had studied the writings of Stanley Lebergott (1964) Manpower in Economic Growth: The American Record since 1800, New York, McGraw-Hill. He had constructed early data from the Great Depression. See also Weir, D.R. (1992) "A Century of U.S. Unemployment, 1890-1990: Revised Estimates and Evidence for Stabilization", Research in Economic History, 14, 301-346. The hint that Darby picked up was in the original book by Stanley Lebergott on pages 184-5.

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