Michael Ennis
The New New Deal
How can Texas bring the economy back from the brink? By listening to certain ex-presidents—and tuning out certain Texans.
Robin says: "Much as Bush-hating media members conveniently ignore historical events that led to the invasion of Iraq in March 2003, their current finger-pointing - at the White House, John McCain, and all Republican politicians for the collapse of the financial services industry lacks any honest assessment of decades-old legislation that laid the groundwork for today's problems." "...we hear about another myth: "growing inequality." But according to the accepted measure, the Census Bureau's Gini ratio, there was virtually no change in inequality from 2000 to 2007." (December 26th, 2008 at 12:38pm)
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While Roosevelt had made his trickle-up philosophy clear during the campaign, his critics were correct in assuming that he had only vague ideas of how to implement it. “The hallmark of Roosevelt’s New Deal was improvisation,” notes Brands. FDR made it a habit to set two or more teams of advisers to work on the same problem, often not telling the right hand that the left existed, reserving his opinion until a clear consensus had begun to emerge or the parties were hopelessly at odds. Yet this competitive, ad hoc process flew ahead at a pace that seems incredible by today’s standards. For the past 75 years, a succession of pundits, historians, economists, and policy makers—the latest among them the Obama transition team—has parsed and dissected the Roosevelt administration’s frantically inventive, fabled first Hundred Days.
Less than a week after his inauguration, Roosevelt convened an emergency session of Congress. By the time its work was finished, little more than three months later, America had a whole new alphabet soup of government programs, many of them infrastructure-building initiatives intended to put American workers back on the job: the CCC (Civilian Conservation Corps), the TVA (Tennessee Valley Authority), the NRA (National Recovery Administration), and the PWA (Public Works Administration). The Glass-Steagall Act created the FDIC (Federal Deposit Insurance Corporation), which even now is cushioning our economy against a cascade of bank failures; the Securities Act was the genesis of the SEC (Securities and Exchange Commission), which might have prevented the present crisis if it had remained the securities market watchdog Congress intended back in 1933. This was, in the words of a reporter, “an entirely new government system.”
The Hundred Days produced winners and losers, and both should be instructive for the incoming Obama administration. The biggest bust was the NRA, often represented as a vast experiment in state economic planning, designed to alleviate the excess capacity and drastic deflation that had mired the economy in a deep depression. But the NRA was more precisely a collection of state-sponsored cartels in which the government brought together business and labor to produce wage- and price-fixing “codes” for various industries; compliers were allowed to display the NRA’s Blue Eagle emblem on their products, and the American housewife in particular was exhorted to put “the Blue Eagle on everything that she permits to come into her home.” In effect the NRA brought together the most naive instincts of both the left and the right: the former’s belief that an economy as vast and diverse as America’s could be orchestrated and the latter’s faith that a spirit of volunteerism, patriotism, and basic morality could actually influence behavior in the marketplace. Industry, labor, and housewives all proved feckless, and there was little lamentation outside the White House when the NRA was unanimously struck down by the Supreme Court, in 1935.
But that doesn’t mean that Obama’s planners shouldn’t go big—and long. The Hundred Days’ most impressive winner was the TVA, a sweeping flood-prevention, reforestation, irrigation, and industrial-development plan for the overfarmed, eroded, exhausted basin of the Tennessee River. The key to the TVA, however, was alternative energy—hydroelectric power—which FDR had advocated while still governor of New York; by the end of World War II, the TVA was the nation’s biggest electricity supplier. President-elect Obama stumped on the promise of a new “green economy,” and with alt-energy apostles on the right (T. Boone Pickens) and left (Al Gore) talking about wind and sun farms throughout the Midwest and Southwest, along with a modernized, high-tech electrical grid to move that power around the country, this would be the time to devote a major slice of the half a trillion dollars the Obama administration is signaling it will spend to “jolt” the economy on a TVA-style, long-term national asset. A project like that could not only reclaim our energy independence and create hundreds of thousands of new jobs but also make us the chief exporter of twenty-first-century energy technology.
Sixty-three years after FDR’s death, his legacy is still hotly contested among economic planners: The fashionable notion among the same conservative ideologues who brought us the present crisis is that the New Deal actually prolonged the Depression; the left holds to the belief that if FDR had been a true follower of deficit-spending guru John Maynard Keynes, whose theories weren’t fully communicated to Roosevelt until 1936 and were never really welcomed, he would have ended the Depression long before World War II. Obama, bequeathed a huge debt by his supply-side predecessor and needing to dig deep for his own programs, has no choice but to put Keynesian economics to the test.
Of course, here in Texas our present leadership will continue to worship at the altar of a right-wing think-tank orthodoxy that a successful oil entrepreneur named George H. W. Bush long ago dismissed as “voodoo economics.” The champion of modern Texanomics, former senator Phil Gramm, who gutted the Glass-Steagall Act back in 1999 (with broad bipartisan support, it should be noted) and fathered the “shadow banking” system that has poisoned the global economy with toxic loans, came within 8.5 million votes of having the ear of the next president on economic matters—his “nation of whiners” remark notwithstanding. Now Gramm’s torch will pass to acolytes like his former staffer and current Texas congressman Jeb Hensarling, who led the GOP insurrection against the Bush bailout plan because it put us on “the slippery slope towards socialism.”
As Traitor to His Class makes abundantly clear, a capitalist democracy can’t survive without a sensible and compassionate public policy: Social Security, fair financial market regulation, even massive government spending in times of crisis. These are the kinds of things we all depend on but which delusional free-market puritans see only as “socialism.” Brands reminds us just how center-seeking FDR actually was and how integral his achievement has been to American freedom and prosperity ever since. “In the generations that followed,” he writes, “as the American economy continued to thrive and as the benefits of America’s material fortune rained down on the wealthy even more than on persons of moderate means, the objective and honest of those who had once denounced Roosevelt for class betrayal recognized that, in a decade rife with fascists, militarists, and communists abroad and irresponsible demagogues at home, he was the best thing that could have happened to them.” With Texas in real danger of both a failing global economy that will inexorably bring us down with it and a fading state GOP leadership that is more likely to squawk from the ideological fringe than have an effective voice in real solutions, the piquant and profound irony at the heart of Brands’s magisterial volume could hardly be more useful or timely.
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