Obama Could Look to FDR to Tame Housing and Jobs Crises

Aug 25, 2011David B. Woolner

Unemployed and underwater, Americans need robust, FDR-style federal action.

Unemployed and underwater, Americans need robust, FDR-style federal action.

In a further indication of the weakness of the US economy, the Mortgage Bankers Association reported earlier this week that the number of Americans at risk of foreclosure is rising, while the number of mortgage applications to purchase a home has fallen to a 15-year low -- despite record low mortgage rates. The government also recently reported another sharp decline in the price of homes holding government-backed mortgages, by nearly six percent in the last quarter, the largest decline since 2009. In short, the housing crisis that played a key role in the initiation and perpetuation of the Great Recession is far from over and the risk that the ongoing trouble in the housing market will drag the country back into recession is becoming increasingly apparent.

In the face of these and other grim economic statistics, it has been reported that the Obama administration is considering further government action to help struggling homeowners keep their homes, including a proposal that would allow the millions of Americans who hold government-backed mortgages to refinance at today's historically low rates. The administration is also looking into the feasibility of a home rental program that would help keep hundreds of thousands of foreclosed homes off the market in an effort to stop home prices from falling further.

This is not the first time, of course, that the United States has faced a housing crisis. Nearly 80 years ago, President Roosevelt took office under circumstances not unlike those we face today. In 1933, for example, the non-farm foreclosure rate was running at roughly 1,000 homes per day, so that by the end of that year an estimated 50 percent of all urban mortgages in the US were either delinquent or in foreclosure. The number of housing starts had also fallen off dramatically, from a 1920s high of 937,000 in 1925 to only 93,000 in 1934.

To deal with the housing emergency and reverse this trend, the Roosevelt administration created the Home Owners Loan Corporation (HOLC) in June 1933. The HOLC -- which was a federal entity -- provided immediate relief to families facing foreclosure by buying out their existing mortgage and replacing it with a new one based not on the typical short-term mortgage agreement of the time (usually a non-amortized loan of seven to ten years terminating with a balloon payment), but rather on the far more affordable amortized mortgage of between 25 and 30 years. Over the course of its three-year history, the HOLC refinanced over one million homes or roughly 20 percent of all the urban mortgages in the country. Moreover, by the time the HOLC finally closed its books in 1951, it had turned a small profit, with the result that this remarkably successful mortgage program did not cost the U.S. taxpayer any money.

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In an effort to secure a long-term solution to the U.S. housing crisis, the Roosevelt administration passed the National Housing Act a year later. The housing act established the Federal Housing Administration (FHA), and through it significantly increased access to home ownership among average Americans by insuring loan institutions against default; by institutionalizing the 30-year amortized mortgage; and by establishing other standard criteria, such as the 10 percent down payment, building codes, and on-site inspections of new and existing homes for violations of the newly developed codes. The creation of the FHA had a tremendous impact on the US housing industry, increasing over home ownership from 40 percent in the 1930s to over 70 percent by the end of the century.

Like much of the New Deal, both of the efforts involved direct federal action inspired by a desire to provide both immediate relief and long-term reform. They were also part of a much broader effort to revive the overall economy -- spearheaded by the Roosevelt administration's determination to provide meaningful jobs to the millions of unemployed through such programs as the Works Progress Administration (WPA) and Civilian Conservations Corps (CCC), or the lesser-known Public Works Administration (PWA).

Given the inability of President Obama's Home Affordable Modification Program (HAMP) to reverse the decline in the housing market, it is encouraging to see that the administration is considering further measures to shore up this critical sector of our economy. One would hope that the administration might look towards the HOLC for inspiration as it moves towards further action. But as most economists predict -- and as the New Deal instructs -- a massive refinancing program on its own may not be enough to restore the housing market. What we really need is more jobs -- perhaps a modern version of the WPA -- to rebuild the nation's crumbling infrastructure and further funding for education and job training to restore our competitiveness in the world economy.

With the deficit doomsayers now in charge of our nation's agenda, and with the American public and media hoodwinked into believing that the best way to revive our economy is by cutting government spending, the likelihood of a new federally funded jobs program in the near future is close to nil. This is bad news for the millions of unemployed who will not be able to pay their mortgages -- no matter how low the interest rate -- without the one thing they desperately need: a paycheck.

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

 

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Dorian Warren on MSNBC: Millennials Face an "American Nightmare"

Aug 18, 2011

Roosevelt Institute Fellow Dorian Warren joined guest host Melissa Harris-Perry on The Last Word last night to discuss what she calls the "recession generation": young people graduating into this economic morass. And what do they have to look forward to if things keep going they way they are? Dorian's answer: "An American nightmare, not an American dream."

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Roosevelt Institute Fellow Dorian Warren joined guest host Melissa Harris-Perry on The Last Word last night to discuss what she calls the "recession generation": young people graduating into this economic morass. And what do they have to look forward to if things keep going they way they are? Dorian's answer: "An American nightmare, not an American dream."

Visit msnbc.com for breaking news, world news, and news about the economy

It didn't used to be this way. "Thinking back to the legacy of Franklin Roosevelt and the New Deal," Dorian points out, "we had investment in national infrastructure, not an austerity politics." There was even a National Youth Administration to specifically tackle youth unemployment. But now, he says, our politicians "don't have that same vision."

But Millennials do. Speaking of the Roosevelt legacy, Dorian recounts his experience working with Campus Network students at the FDR Library in Hyde Park recently. "The ideas and the vision are there for this recession generation," he says, "but their voices aren't being heard in the same way." Maybe it's time for D.C. to tune in.

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Obama's FDR Moment

Aug 17, 2011Eliot Spitzer

smiling-fdr-profile-150Americans are looking to the President for bold ideas. Here are two.

smiling-fdr-profile-150Americans are looking to the President for bold ideas. Here are two.

President Obama should heed the famous wisdom of FDR: "Above all, try something." Being passive in the face of rising anxiety breeds discontent, doubt, and ultimately, contempt.

Interestingly, the president's one grand moment to date -- his embrace of the plan to capture Osama Bin Laden --emerged from a willingness to be bold, even when many of his advisers were counseling otherwise. He defied the more modulated approaches many military advisers recommended, and the payoff, both substantive and political, was huge. The president should take this lesson and apply it to his actions in the domestic arena.

First, he should act dramatically to help the American homeowner. There is a continuing and incendiary crisis in the housing market, with about 20 percent of all homes underwater (that is, the mortgage owed on the house is greater than the value of the house). This is dragging down our economy, creating a downward spiral of foreclosures and abandonment. The lack of mortgage reform also reminds every homeowner of the unfairness attached to the bailouts: The banks, in their moment of insolvency and need, got hundreds of billions in direct cash payments, guarantees, and transfers in the form of artificially low interest rates, all of which have led to a massive transfer of wealth from taxpayers and savers to the banks. Yet homeowners who have seen their primary asset drop in value have been given nothing at all by the banks and nothing meaningful by the president.

The administration, in conjunction with the Federal Reserve, should insist that banks, in return for all the taxpayer subsidies they have gotten and continue to receive, reduce any mortgage that exceeds the value of the house. Once it is established that the homeowner is underwater, other variables can be considered to determine how much the mortgage should be reduced: the income of the borrower, the year the mortgage was issued, the behavior of the bank in recommending the mortgage, or the culpability of the borrower in misrepresenting income levels.

Borrowers with reduced mortgages would have more money to spend, thus boosting the economy and relieving the housing market of a huge overhang. Owners would regain mobility, and the market could set a clearing price. Many also believe that the banks would come out ahead --facing fewer foreclosures, less abandonment, fewer houses stockpiled.

In addition, the banks could also receive a piece of the upside when and if owners sell their houses for more than the value of the reduced mortgage. How much of the upside could be worked out with rules designed to encourage rational behavior by all parties. (If the bank got 100 percent of the price above the value of the mortgage, there would be no incentive for an owner to charge more; if the bank got only a tiny percentage of the price differential, it would never recoup the amount by which the mortgage has been reduced.) The opportunity is to force the banks to give the housing market a shot in the arm -- while also allowing them to retain an equity stake that permits them to recoup any short-term loss.

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The critical point is this: The best way to revive the housing market is to help out the millions of Americans who are underwater on their mortgages. It is also the best way for the president to make it clear he is acting on behalf of the public at large.

Second, the president should do more to help the American worker. He should establish a jobs program. Do the simple math: We are spending more than $110 billion annually in Afghanistan. Stop it. Or scale it back to the sort of covert operations and drone war that is warranted. Savings? Perhaps about $100 billion -- per year. Use that money to create up to 5 million jobs at $20,000 each. With the unemployment among those aged 16 to 19 at an astonishing 25 percent, and unemployment among black people at 15.9 percent, there is no question that the crisis of unemployment is destroying the fabric of our nation. Those who refuse to work get denied all other benefits.

Put Jack Welch and Jeff Immelt, former and current CEOs of GE, in charge of using this labor well. Just as FDR did during the Great Depression, put these Americans to work in states, counties, schools, parks. Make them work -- but pay them. Get the dollars flowing back into the economy to help pull us out of the Great Recession. And when the unemployment rate dips below an agreed upon number, indicating that the labor market is healthy again, phase out the program.

There are ideas out there. All the president has to do is argue for them. Americans are not used to feeling that we are not masters of our own fate. We are a nation steeped in the idea that we can redirect the course of history at will. What we need at this moment is a president with bold ideas and the passion to fight for them.

Eliot Spitzer is the former governor of the state of New York.

Crossposted from Slate.com.

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Washington, Lincoln, and FDR Were Great Presidents - and Great Radicals

Aug 17, 2011Harvey J. Kaye

fdr-we-need-you-150Those remembered as America's greatest presidents were also three of its greatest radicals.

fdr-we-need-you-150Those remembered as America's greatest presidents were also three of its greatest radicals.

Given the state of American politics and public life, we need to embrace our radical past and start putting it to good use. I refer here not -- or at least not simply -- to the great tradition of American radicals that has included such figures as revolutionary patriot Thomas Paine, feminist Fannie Wright, abolitionist William Lloyd Garrison, suffragist Elizabeth Cady Stanton, socialist Eugene Debs, anarchist Emma Goldman, and civil rights leader Martin Luther King, Jr. Just as much, I have in mind those figures whom both historians and the American people at large consider our greatest presidents: George Washington, Abraham Lincoln, and Franklin Delano Roosevelt. Rarely thought of as radicals, they definitely do stand as radicals in the American grain.

Ask most people why Washington, Lincoln, and FDR are so revered and you will get various answers… Ask them what they share as historical heroes and you will likely hear it had to do with the fact they led America through its most challenging wars to final victories. Allowing the fact that Washington was not yet President when he led the Continental Army – remember, there was no national executive at the time – the answer is clearly correct and will work on a short answer test in any classroom. But as essential as military action has been and remains to the defense of the nation and American democratic life, the answer is inadequate and potentially debilitating of patriotism and good citizenship.

What we need to appreciate – and I think most Americans will readily understand – is that Washington, Lincoln, and Roosevelt led us through our greatest national crises and not only prevailed, but made America freer, more equal, and more democratic in the process.

Washington led the American army against the British Empire to secure the nation’s independence. He led a force and a citizenry-in-the-making to create a nation committed to the proposition that “all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” And he presided over a constitutional convention that endorsed the proposition that in this country, “we the people…” govern. Washington himself may not have recognized just how radical those lines of 1776 and 1789 would prove to be, but he was the man who helped guarantee that they survived to inspire generations of radicals to come.

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Lincoln confronted the breakup of the United States over the question of slavery, a vile institution that denied the very principles upon which the country was founded. And he led the nation -- at least the northern and western sections of it -- in a brutal war to sustain the Union. But hating slavery, and coming to see how important it was to liberate black Americans and remake America without the chains that shackled them, he issued the Emancipation Proclamation in 1863. Whatever tragic and ironic turns U.S. and Southern history took thereafter, it did so without the “peculiar institution” holding it back. As he said at Gettysburg: “that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth."

Franklin Roosevelt led the United States through two terrible crises, each of which placed the very survival of the nation in jeopardy. In the 1930s, the Great Depression threatened to destroy the country economically and socially and, quite possibly, politically. But FDR harnessed American energies to carry out not only vast programs of relief, recovery, and reconstruction, but also struggles to institute major programs of reform -- from Social Security to the National Labor Relations Act -- which together revolutionized American government and public life. And if that were not enough, in the 1940s, Nazism, Fascism, and Japanese Imperialism threatened to destroy the United States militarily and politically. Yet articulating Americans’ finest ideals in the words “Freedom of speech and expression, Freedom of worship, Freedom from want, Freedom from fear,” he once again inspired and encouraged his fellow citizens not only to defend those ideals, but also to progressively advance them.

Each of those men accomplished more than they ever promised or possibly, imagined. They did so not because God led them to it or each found it in himself to go beyond himself – though both may have played a fundamental role in making it happen. Even more critically, they all had faith and confidence in their fellow Americans, who not only responded to the challenge, but also propelled Washington, Lincoln, and Roosevelt, respectively, to transcend themselves and join in making great democratic history.

So, it is time to embrace our radical history – progressive history, if you prefer – and to push, inspire, and encourage our current president to transcend his own limitations. Given the crises we face, we need to get Obama to embrace the tradition of Washington, Lincoln, and Roosevelt and start harnessing Americans’ persistent democratic aspirations and energies to do something about them. Better said, if we want to save the nation, we need to do what our greatest generations and their greatest leaders did – make America freer, more equal, and more democratic.

Reflecting on the achievements of the FDR years and the political debacles of the immediate postwar years, progressive Max Lerner wrote in the summer of 1948: "What we did once we can resume. The tragedy lies in the waste of our experience, in the waiting while all the old blunders are committed over again.”

Harvey J. Kaye is the Ben & Joyce Rosenberg Professor of Democracy and Justice Studies at the University of Wisconsin-Green Bay and the author of Thomas Paine and the Promise of America. He is soon to finish the writing of The Four Freedoms and the Promise of America: FDR, the Greatest Generation, and Us. Follow him on Twitter: www.twitter.com/HarveyJKaye

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FDR Tackled a Jobs Crisis By Putting Americans to Work -- Not Handing Out Pinkslips

Aug 15, 2011David B. Woolner

History shows that we can effectively respond to high unemployment. But the real deficit in the U.S. today is leadership.

History shows that we can effectively respond to high unemployment. But the real deficit in the U.S. today is leadership.

"Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing great -- greatly needed projects to stimulate and reorganize the use of our great natural resources."

~Franklin D. Roosevelt, March 4, 1933

The economic news of the past few weeks -- highlighted by the debt ceiling debacle; the downgrade of US credit worthiness; the wild gyrations in the stock market and the wholly inadequate growth in the US job market in June and July -- all seem to point to one thing: the economic crisis that began in 2008 is far from over.

Worse still, given the political gridlock in Washington and the inability and/or unwillingness of the leadership on both sides of the political aisle to face the real crisis we face today -- the jobs crisis -- the prospects for a meaningful recovery seem remote at best. Many economists predict that the US will slide back into a recession. This is bad news for the millions upon millions of Americans who are out of work; bad news as well for the millions of young people just entering the work force. For the first time since the Great Depression, we face the ugly prospect of the loss of skills that often comes with long term unemployment or the lack of meaningful career opportunities for our youth.

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One would think that in the face of such a calamity our government would do everything within its power to expand or at least maintain the workforce. But with the current Administration having embraced the mantra of deficit reduction and budget slashing, and with one branch of Congress ideologically opposed to government intervention in the economy, government layoffs, especially at the state and local level, are actually pushing up the rate of unemployment.

Over three quarters of a century ago, when faced with a similar jobs deficit, Franklin Roosevelt used the power of the federal government to do just the opposite -- to put people to work. Under the auspices of such New Deal programs as the Civilian Conservation Corps (CCC) or the Works Progress Administration (WPA) millions of Americans found meaningful employment restoring our nation's forests and watersheds and building the economic infrastructure we needed to grow the economy well into the future. Equally important, the skills required to build the 1000s of bridges, roads, schools, airports, dams and other key pieces of economic infrastructure necessary for a modern economy were not lost to that generation.

FDR did this because -- as he said in his first inaugural -- the most immediate and primary tasked needed to meet the economic emergency was to put people to work. This not only led to a significant drop in the unemployment rate (by more than 10 percent in his first term), it also helped fuel a period of economic expansion that would average 14 percent per year for the next four years.

Thanks to these efforts, the American people could look to the future with confidence rather than fear. Yes, times were hard. But under the leadership of the Roosevelt Administration, the federal government was engaged in an active effort to provide real jobs -- not handouts -- to millions and the industrial expertise we needed to meet the challenges of the Second World War were in place at the critical hour.

The national unemployment rate has now been at roughly 9 percent for more than two years. By any measure such a statistic -- which tells us little about the millions of under employed or those who have given up looking for work -- constitutes a national crisis. Yet all we hear about these days in Washington is the need to cut government spending (including federal aid to states) and reduce the deficit. Following this false logic will lay off more workers in the midst of the worst economic crisis since the Great Depression. Given the dire state of affairs, the American people are right to fear the future. In addition to a jobs deficit, we now face a deficit of leadership at a time when we can least afford it.

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

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Forgetting Lessons of Keynes and FDR Brings On the 'Obama Recession'

Aug 4, 2011David B. Woolner

When FDR ignored the Keynesian tenet that cutting spending in a downturn spells disaster, he paid dearly. Obama is set to relearn this lesson the hard way.

When FDR ignored the Keynesian tenet that cutting spending in a downturn spells disaster, he paid dearly. Obama is set to relearn this lesson the hard way.

"The economic experiments of President Roosevelt may prove, I think, to be of extraordinary importance in economic history, because for the first time -- at least I cannot recall a comparable case -- theoretical advice is being taken by one of the rulers of the world as the basis of large-scale action. The possibility of such a remarkable event has arisen out of the utter and complete discredit of every variety of orthodox advice. The state of mind in America which lies behind this willingness to try unorthodox experiments arises out of an economic situation desperate beyond precedent."

~John Maynard Keynes, January 1934

Just under three quarters of a century ago, a group of conservative economic advisers close to Franklin Roosevelt informed the President that they were worried about the rapid rate of growth in the US economy. Since 1933, when FDR took over at the height of the Great Depression, the economy had been expanding steadily, at an average rate of 14 percent per year. Schooled as most of these advisors were in the tenets of economic orthodoxy (which called for cuts in spending during an economic downturn), and unsure of the effects of the Keynesian-style deficit spending that the administration had been engaged in under the terms of the early New Deal, the President was advised to cut the budget, reduce deficit spending and tighten the money supply as a means to stave off inflation. Heeding their word (and no economist himself), FDR did just that.

The results were an unmitigated disaster.

Thanks to the Administration's decision to move away from the increasingly Keynesian policies it had been following -- policies that saw the unemployment rate fall from a high of 25% in 1933 to 14% by 1937 -- FDR launched one of the sharpest economic downturns in American history-the so-called "Roosevelt Recession" of 1937-38. In just a few short months, the GDP declined by 13 percent; industrial production by 33 percent; wages by 35 percent and an estimated four million people lost their jobs. No fool, FDR quickly reversed himself and went back to Congress to seek a massive stimulus bill to put people back to work and repair the damage to the Depression-era economy. Within three months growth had returned and the economy was back on track.

FDR only met John Maynard Keynes once during the 1930s, and after their 1934 meeting both men expressed a certain ambivalence about the other (Keynes said FDR did not know much about economics and Roosevelt said with all of his "numbers" Keynes struck him as more of a mathematician than an economist). But the lessons FDR drew from the 1937-38 recession were clear: cutting federal spending and tightening the money supply in the midst of a deep economic crisis were bad ideas and from this point on his administration pursued economic policies that can only be described as unabashedly Keynesian. FDR may never have publically embraced Keynes's theories, and in fact preferred to call his subsequent use of massive government borrowing and spending "compensatory fiscal policy," but the two concepts were virtually identical.

Spurred along by this change of heart and by the growing demands to increase defense spending to meet the challenges of World War II, the federal government borrowed 100s of billions of dollars in the late 1930s and early 40s, while at the same time government expenditures -- i.e. stimulus -- reached record levels. By the time the United States was fully engaged in the war, federal spending accounted for more than half of the country's Gross National Product, business was booming and the scourge of unemployment had all but disappeared.

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And what were the long term consequences of all of this borrowing and spending? Economic chaos? A sovereign debt and default crisis? No, what followed was more than three decades of postwar economic expansion and the creation of perhaps the best paid and best educated work-force America had ever seen.

The modern middle class was born.

In the past two years we have heard official after official claim that they do not want to repeat "the mistakes of the Great Depression." Yet the recent behavior of both the Obama Administration and senior members of Congress belies this claim. Rather than fight for economic policies that would stimulate the economy and put people back to work, this Administration -- and even many senior democratic party officials -- have chosen to ignore the lessons of the past. Instead of focusing on jobs and growth -- the real crisis in our economy -- they have embraced the sky-is-falling rhetoric of the Republican Party extremists. These fear mongerers and obstructionists have convinced millions of Americans and virtually the entire US media that the key to economic recovery is to slash federal spending. The Administration's championing of the 39 billion in cuts to the 2010-2011 budget and the recent debacle over the debt ceiling -- with an agreement that does nothing to stimulate the economy -- are but two sorry examples of this phenomenon.

In 1937 FDR paid a heavy political price for his decision to turn away from Keynesian economics. The democrats lost seats in the 1938 election and FDR's ability to push through further fundamental reforms in Congress was severely limited from this point forward. Worse still, millions of Americas suffered from the sudden economic downturn that came as a result of these ill-timed and unnecessary cut-backs.

President Obama sells the Budget Control Act of 2011 as a victory for the American people; as an important "first step" in solving the "deficit crisis." But he has missed a fundamental point: the most effective way to reduce the federal deficit in the long term is to spur economic growth in the short term. He also seems to have lost sight of the fact that the real crisis we face is that roughly 26 million Americans are either under employed or out of work. This national tragedy could be greatly alleviated by a return to the Keynesian economic policies temporarily abandoned by Franklin Roosevelt three quarters of a century ago. But neither the President nor his colleagues in Congress appear to have the desire or political will to resist the incessant Republican demands to cut spending no matter what the cost to the American people.

It is sad to think that history may be repeating itself. But the apparent decision of this administration to embrace cuts over spending may soon lead the President down the same path that FDR took in 1937. Only this time the "Obama recession" of 2011-2012 will most likely cost the current president his job.

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

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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's Championing of Labor Unions Key to Prosperous Post-War Economy

Jul 22, 2011David B. Woolner

Under Roosevelt's leadership, union membership and the size of the American economy grew hand-in-hand.

"It is now beyond partisan controversy that it is a fundamental individual right of a worker to associate himself with other workers and to bargain collectively with his employer." FDR --Address at San Diego Exposition, October 2, 1935

Under Roosevelt's leadership, union membership and the size of the American economy grew hand-in-hand.

"It is now beyond partisan controversy that it is a fundamental individual right of a worker to associate himself with other workers and to bargain collectively with his employer." FDR --Address at San Diego Exposition, October 2, 1935

Just over three quarters of a century ago, Franklin D. Roosevelt signed one of the most important -- though frequently overlooked -- pieces of the reform legislation to come out of the New Deal: the National Labor Relations Act. More often referred to as the Wagner Act, after its champion, Senator Robert Wagner of New York, this landmark bill established the National Labor Relations Board, an independent, quasi-judicial government agency that played a critical role in the remarkable expansion of union membership that took place during the Roosevelt era.

Prior to the passage of the Wagner Act, and thanks in part to the anti-union climate of the 1920s, union membership in the United States had declined precipitously. At the onset of the Great Depression, for example, membership in the American Federation of Labor had fallen from a high of five million in 1919 to less than 3 million in 1933. Seeking to expand workers rights as part of his administration's efforts to launch the New Deal, FDR created a weaker NLRB as part of the 1934 National Recovery Administration. But the 1934 agency proved largely ineffective and in 1935 FDR endorsed Senator Wagner's efforts to make the NLRB permanent and more powerful. The new law declared a whole series of coercive management practices to be illegal, and gave private sector workers the right to form unions and to engage in collective bargaining. It also gave the NLRB the right to determine bargaining unit jurisdictions, oversee union elections and certify the results as legally binding. The law also insisted that management had a duty to bargain with a properly certified union, though of course it did not compel the union to agree with the union demands.

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As with many other pieces of New Deal legislation, the establishment of the NLRB was bitterly attacked by employers as a measure that would ruin the US economy. But such fear mongering proved completely unfounded. Over the next ten years both union membership and the size of the US economy would grow hand in hand, so that by 1945 the ranks of unionized worker had reached a record 35 percent of the non-agricultural workforce, while wages had increased by 65 percent, unemployment had fallen to less than one percent, and the US economy exploded to meet the demands of the Second World War.

Moreover, the labor legislation of the New Deal helped form the basis of a long period of post-war prosperity that vastly expanded the size and wealth of the American middle class. Yet sadly, the right of American workers to form unions and engage in collective bargaining -- and hence protect their job security and wages -- is once again under attack. The recent attempt by conservative Republicans in the House of Representatives to challenge the NLRB authority to act through the introduction of such bills as the Protecting Jobs from Government Interference Act is but one example of this ongoing attempt to weaken the NLRB's authority and with it the power of unions to fight against unfair labor practices. In 1935, in the wake of the Wagner Bill, FDR asserted that the "fundamental...right of a worker to associate himself with other workers and to bargain collectively with his employer" was "now beyond partisan controversy." Based on the recent activities of this Congress, and the strong anti-union movement among conservatives in states like Wisconsin and New Jersey it would appear that he was sadly mistaken.

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

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Dorian Warren on Why We All Need a Strong Labor Movement

Jul 18, 2011Bryce Covert

dorian-warrenI got the chance to talk with Roosevelt Institute Fellow Dorian Warren, who just publis

dorian-warrenI got the chance to talk with Roosevelt Institute Fellow Dorian Warren, who just published new research on workplace anti-union campaigns. We discussed his surprising findings about illegal employer intimidation tactics, the labor movement's biggest weaknesses, and why comprehensive labor reform would amount to some of the best economic stimulus we could find.

Bryce Covert: You recently published new research on workplace intimidation tactics against union organizing. Can you explain the important findings that came out of your work?

Dorian Warren: As background, let me start by saying that we already know what happens when workers try to organize into a union: employers routinely violate the law. They use a range of legal and illegal tactics. The most egregious one is firing workers who are seen as union leaders or union influencers, and that happens in about 34% of union election campaigns. A number of other illegal tactics include threatening workers, threatening to close the plant, threatening to close the shop, illegal pay raises, that kind of stuff.

The other thing to note is that usually when workers file a petition with the National Labor Relations Board for an election, the wait from the date they file a petition to when the election is scheduled is really long. Throughout all that time, employers engage in anti-union campaigns, again using these legal and illegal tactics. So the National Labor Relations Board proposed a rule change to potentially decrease the number of days between when workers file a petition and form election and when the election is scheduled and held.

The research that I did with my coauthor Kate Bronfenbrenner was to look at the timing of when employer campaigns start through the election and what difference the proposed rule change would make. What we found was that the employer campaign starts very early. It definitely starts once workers start filing a petition for election, it continues constantly, and the number of tactics they use are multiple. So every single day before an election the employer campaign is constant, the tactics are cumulative, and it's unrelenting.

But the surprising finding is that employer campaigns start even before workers petition. So let's say Target or WalMart hires new employees and as part of the orientation it gives them an anti-union video to watch. From day one that's basically an employer anti-union campaign. Then it's constantly probing and trying to find out if there's any talk of unionization. The employer knows that workers are talking about potentially wanting a union, and they start doing things way before workers even file a petition to ask for an election. The longer employers can delay an election, the more time they have to harass and intimidate workers. But our research shows that from before the workers file a petition to when they file a petition, leading all the way up to an election and even after the election if they win the election, the employer's still using these tactics to intimidate and harass workers.

BC: What are the details of the NLRB rule change proposal and what are its implications?

DW: The proposal is to streamline the NLRB election process, which is very clunky. There are lots of delays and it takes a long time for workers to actually get an election. It would also prevent employers from attempting to delay. Workers usually file for election, the election date is set, but then close to the election date the employer files a claim with the National Labor Relations Board, usually falsely accusing the union of some kind of unfair practice or tactic, which then the Board has to investigate. So they delay the election. Then after the investigation, which usually finds nothing wrong, the election is rescheduled, and then that starts all over again. This rule would say there will be no delays. There will be an investigation after the election as opposed to postponing elections to investigate these delays, so-called infractions, either by employers or the union. The idea would be obviously that these changes would give workers a better chance to unionize free of intimidation and coercion.

Assuming this rule change goes through, it would make it potentially easier for workers to organize because they wouldn't be subject to the employer campaign for as long and therefore would probably end up winning more union elections. It will make organizing easier in a climate where employers are absolutely hostile by default and break the law because the penalties aren't that strong.

Employers are going crazy about this. The Chamber of Commerce is going crazy about this proposed rule change because they know that this would make it easier for unions to organize.

BC: If the rule goes through, does it address what you identified in your research? What goes unaddressed?

DW: The only thing that would address what we found in our research would be comprehensive labor reform. But obviously the political possibility for that is zero. This rule change would help address what we find, but it's not going to eliminate the employer campaign. Employers are still going to violate the law and fire people and threaten people. They'll just have a shorter time to do it, so hopefully it won't have as much impact on workers as it does now. This rule change does nothing about our big finding that employers already violate the law before workers even file for a petition. Those practices are still going to happen and employers are still going to be spying on workers, essentially, to see if there's any talk of a union and then go into action immediately when they hear it.

It's a systemic problem. There's really nothing that would change it. There are no quick fixes in terms of what the National Labor Relations Board can do. They really need legislative change to alter the incentive structure against employers violating the law.

BC: Are there other short-term things that can be done right now short of comprehensive reform?

DW: After this I'm not sure what's left. There was another rule change that another federal agency did issue. The National Labor Relations Board covers all private sector workers except transportation workers. Railroad and airline workers are covered by the Railway Labor Act. If you're an airline worker and you want a union, the election goes to the National Mediation Board, not the NLRB. Last year, with two pro-labor Obama appointees, the National Mediation Board made a rule change for their election rules. In political elections, basically whoever gets the majority of the vote wins, and the same with the NLRB union elections. The Railway Labor Act was always different. It said that a majority of all workers was what it took to win unionization. So if people didn't show up to vote you were kind of screwed. Basically if someone didn't show up that was a no vote. The rule change was to make it similar to the National Labor Relations Board and our basic election rules for political campaigns -- just a majority of who shows up. They issued that rule change last year and again business groups went crazy. One of the implications of that is probably thousands of flight attendants at a couple of airlines, something like forty or fifty thousand flight attendants, are going to have elections to decide whether they want to join a union or not.

But after that I'm not sure what else the Board can do. They're already trying to speed up the processing of cases when employers or unions, but really employers, violate the law. There has to be an investigation and there's a trial to see if the employer violated the law, and then there's a ruling. There are hundreds if not thousands of cases and there's always a backlog because Republicans are trying to defund the Board and compromise its work.

After this latest rule change that's pretty much it. That's all they can really do.

BC: Ignoring politically impossibility, what would a modern-day Wagner Act to update labor laws look like?

DW: The first thing is there'd be no occupational exclusions. We should have a national campaign right now to take out the occupational exclusions of the Wagner Act. We know the history of why they're in there in the first place. It's unacceptable that they're still in. No worker should be denied protection or the fundamental right to freedom of association.

The second thing would be really, really strong penalties for violations of the law. Ideally it would match the whole system of employment law, including all the anti-discrimination laws like sex discrimination, race discrimination, age, disability. For instance, if employers fire a worker for union activity, the only penalty is that they have to hire the worker back and they have to post a sign in the workplace saying they won't do it again and potentially pay the worker back pay. That's not a strong incentive against violating the law. Unlike, say, anti-discrimination law, where you can sue for punitive damages, which works as a stronger sanction against employers for violating the law. Even raising the penalties so that you create strong incentives for employers to actually obey the law would be important. The potential for class action lawsuits when employers violate workers rights, the potential for triple or even hundred times back pay if they fire workers, really huge fines, punitive sanctions for violating any workers rights -- that would be, I think, ideal in any kind of twenty first century Wagner Act.

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BC: To play devil's advocate, many say that pro-labor reforms in a recession will hamper businesses from creating jobs. What do you say to that?

DW: In the preamble to the National Labor Relations Act, the justification is to level the playing field so that workers can bargain for higher wages with employers, which would then help the economy and help get us get out of the Depression because it would fundamentally give workers consumption power. They'd buy more goods and services, which would create more jobs, which would help the economy. It's economic stimulus, essentially.

I would say the same thing is true now. The problem has been that with wage stagnation for forty years, people had to take on debt to keep up with inflation and to buy basic things because they weren't getting raises. If we were to pass a new Wagner Act today that gave workers the right to organize free of intimidation, they could bargain for higher wages with employers, who have record profits, and that would help to stimulate the economy again. First, it would help people get out of underwater mortgages, and second, it would help people be able to buy more stuff. Especially in an economy that's 70% based on consumption, actually giving workers more bargaining power is a form of stimulus.

BC: Following that logic, with all the backward movement against labor -- what happened in Wisconsin, the Supreme Court decision on WalMart -- is there an anti-stimulus effect from these attacks?

DW: Part of that process of downward mobility has been the loss of pensions and economic security for private sector workers, especially with declining unionization, which is only 7% in the private sector down from almost a third in the 1940s. The aim of these attacks on public sector workers is to put them in the same boat as private sector workers -- strip them of pensions, strip them of the ability to bargain for higher wages. In that sense I do think there is a huge effect on the economy because with higher unemployment and as people lose their bargaining power they're not going to be able to purchase more stuff. Also, as people lose their pensions I can't even imagine what that's going to do in terms of pushing older people into the workforce longer at the same time that there's probably going to be an increase in age discrimination.

For all those reasons, I think the attacks are very dangerous. It's basically figuring out a way to eliminate the middle class, which is just absurd to me, and to fundamentally destroy the labor movement, because the public sector is now the strongest part of the labor movement. A majority of unions are public sector workers for the first time in history. They're not in the private sector. And think about teachers and the attacks on teacher's unions: one in four union members in this country is a teacher. It's mind-blowing actually. It's also a political attack and an explicit attempt to weaken the strongest base of the Democratic Party.

BC: In your view, what can the labor movement focus on right now to help the tide flow in the other direction?

DW: The labor movement's big Achilles' heel is the fact that it never organized the South. That's important for two reasons. It's important for labor's strength because the South is a whole different economy. Because it was a non-union economy, it actually ended up destroying the manufacturing sector and the labor movement. The auto industry essentially moved to different states to get out of UAW contracts.

The second implication is political. Because labor has a huge influence on how workers vote, it's not coincidental that the South is pretty Republican and pretty right-wing. If you're a white working class man there's basically a twenty-point gap between whether or not you'll vote Democrat or Republican and it's all based on union membership. So if you're a white working class man and you're in a union, you're much more likely to vote Democrat than Republican -- it's the union difference. If you're a white working class woman you're already a little bit more likely to vote Democratic, but you're much more likely if you're a member of a union.

There has to be some really transformative strategy and real commitment, even if it's just targeting three key states for instance, for labor to organize the South. It would help make the labor movement stronger but also change the politics of the country, frankly. Labor's been the core base of the Democratic Party since the New Deal. It seems extraordinarily short sighted that the party is looking at the destruction of its base and just standing by like a deer in headlights, and in some cases aiding and abetting the attack on labor.

BC: Many saw what happened in Wisconsin as a sign of the labor movement's reinvigoration. Do you have hope for the future of the movement?

DW: I have a different take on Wisconsin. Yes it was great that people mobilized, but I would stop short of what others have called it -- a victory of some kind. I'm not very hopeful at all, even of Wisconsin. That was a moment. And we lost, frankly. And we're losing in more than a dozen states around the country. Wisconsin's either a sign of reinvigoration or a sign of the last gasp. I think people over-interpreted it. I want to be more sober about it and say okay, where do we go form here, what's the strategy? It's a defensive fight. We're the ones trying to defend fundamental rights. We lost. Now what do we do? What's our vision? First we have to get those rights back. And it's not like things were great before. What's our vision for revitalizing workers' rights broadly? Unless there are some serious breakthrough strategies that labor, that workers, can come up with, I think the labor movement has about five years to figure out how to stay alive. Otherwise it's all over.

There is a bit of good news. Last week there were recall elections in Wisconsin and all the anti-labor incumbents were defeated. That suggests that there is some sustainability and some momentum from what happened in February. That's hopeful. But we haven't seen the efforts of people to mobilize in Wisconsin in any other place. In Ohio, in New Jersey, in New Hampshire, in Michigan, Oklahoma, all across the country, there are these basically same bills, but there hasn't been the same kind of mobilization that was shown in Wisconsin. Something more has to happen on a large scale. I don't see it yet.

BC: You just described a very bleak picture. What's the difference between now and FDR's time, when there was a huge movement for labor rights in the midst of a depression?

DW: A couple of things. One key point was the 1934 sit-down strike of autoworkers. That helped to spark a movement to unionize industrial workers, whether in auto or steel or rubber or textiles. But that was five years into the Great Depression. I don't think we're at a point where workers overall feel like the existing system is discredited. Maybe we're getting there as these quarterly reports keep coming out on corporate profits and CEO salaries. I think we're getting there. It can't happen fast enough.

The second factor I think is that there was a real fight in the labor movement around a new model. The old craft model of unions that worked for the building trades, for instance, was not adequate for the new industrial economy. There had to be some other model of unionism, so industrial unionism was created in the 30s to match the new kinds of work and the new kinds of employers. I think we need a similar kind of breakthrough strategy now. What kind of unionism do we need for the current moment, for the current economy? We've been toiling at the edges. The labor movement has been trying different strategies incrementally, but there hasn't been a new model of unionism that can recruit people by the thousands, if not hundreds of thousands.

Third is frankly a question of presidential leadership. The 1933 National Industrial Recovery Act was the first time that workers were given the right to organize. Then it got declared unconstitutional, and then the response was the Wagner Act. But in both cases there were posters and signs that union organizers would walk around with and on them was FDR saying ‘the president wants you to join a union.' There was a sense that now the law is on your side, the president's on your side, it is your fundamental right to do this. I think we're absolutely lacking that today. There's no sense that the law is on the workers' side, there's no sense that the president is on workers' side.

There's this new effort, Caring Across Generations, to organize workers from early daycare workers to home health workers who work with seniors. It's promising. There's an effort to organize WalMart, there's an effort to organize warehouse workers who are actually part of a crucial supply chain to WalMart and other big box stores. That looks promising. There are efforts by restaurant workers, carwash workers. So there are all these pieces that are definitely promising. I think the big question is a question of scale. Can they scale up fast enough to really make an impact sooner than later, or have an impact sooner than later? That's what I'm worried about.

*For more on the Wagner Act, see Roosevelt Institute Senior Fellow Thomas Ferguson discuss its history and relevance to contemporary struggles at last year's panel at the FDR Library at Hyde Park, NY: "1935 and the Enduring New Deal" (click on video for Sept. 26, 2010).

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What is the Future of the American Dream of Progress?

Jul 14, 2011Brittany McMahan

flag-150There’s a lot of talk lately about American dream. But what is it, really? We asked our Roosevelt Institute summer interns to give us their perspective. Here, Harding University rising junior Brittany McMahan looks at the idea of progress in the American Dream.

flag-150There’s a lot of talk lately about American dream. But what is it, really? We asked our Roosevelt Institute summer interns to give us their perspective. Here, Harding University rising junior Brittany McMahan looks at the idea of progress in the American Dream.

The "American Dream" means a lot of things for different people. However, at its core, it's really about progress. Historically, America has had a reputation as a place where you can escape persecution or oppression and progress to something better.

That message is built into our unlikely history -- our progress from a provincial territory granted independence through a small revolution to the most powerful nation in the world. The dream is about overcoming obstacles, rising above negative circumstances or restrictions, setting a goal, and stopping at nothing to achieve it.

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Our history is also about expanding our idea of what progress means -- and to whom it applies. A nation that once enslaved people of color is now lead by a man of color. This past June, America progressed from sexual stigma for gays to equal marriage. In many ways, we have moved from a nation where the value of a person was measured by race, gender, sexual orientation and financial status to a nation of equal opportunity for everyone -- men, women, and children of every race, ethnicity, socioeconomic status, religious belief or non belief, sexual orientation, grit, and creed.

But in terms of economic equality, we're regressing.

Nearly fifty years ago Dr. Martin Luther King, Jr. told America about his dream. He worked for a nation of freedom and equality for all its inhabitants. We remember him for his work on racial justice, but he also promoted a message based on a fundamental idea laid out by President Franklin D. Roosevelt in his vision of the Four Freedoms that should be granted to all: Freedom of Speech, Freedom of Religion, Freedom from Fear, and Freedom from Want. It was this last idea, Freedom from Want, or economic justice, that King took up towards the end of his life. As FDR had done with his Economic Bill of Rights, King's Poor People's Movement sought to raise the standard of living, economic opportunities, and security for Americans on the premise that such things were rights -- not privileges. Such ideas may seem radical, but today, as our nation's economic inequality continues to grow, there's a renewed interest in them. Active citizens are lobbying for a living wage as opposed to a minimum wage. People are getting passionate about the quality of life for individuals. They want economic stability and some measure of security in their lives.

With the current job market, rising national debt, continuous big business melodramas, and the need for reform, economic equality has become perhaps our most pressing issue. Going back to the American Dream, it means that economic opportunity is part of what we believe in. And a complete lack of it should be out of the question. The American Dream is progress-- progress from apathy to political empowerment, persecution to liberation, stigma to acceptance. It is also a progress from the back of the soup line to the corner of Wall Street. From being financially powerless to economically independent. America guarantees its people certain inalienable rights -- life, liberty, and the pursuit of happiness. And the next stage of our progress will be about giving people the economic empowerment to express them.

Brittany is currently serving as a Roosevelt Institute Summer Academy Fellow with the Communications team in the New York office and a student at Harding University.


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