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.
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He ran against an administration that believed unfettered free markets would guarantee boundless prosperity but instead plunged the nation into an unprecedented economic crisis. His opponents called him a socialist and a Marxist, a dangerous radical who was determined to wage class warfare; others dismissed him as a philosophically vague rhetorician, a politically cautious, “pleasant . . . man who, without . . . any important qualifications for the office, would very much like to be President.” Yet he was convinced that a nation in which the rich had gotten conspicuously richer while the vast majority continued to lose ground was eager for real change, an activist government that would ease the burden on the common man. With superior communication skills, unerring political instincts, and a knack for using new media to reach out to ordinary Americans, he scored a stunning victory over a Republican party that had seemed destined to lead the country for decades to come.
That was the story of the 1932 election, and the uncanny similarities between then and now echo throughout a new biography of its victor: our longest-serving, most controversial, and most consequential president. Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt, by University of Texas history professor H. W. Brands, follows the best-selling author’s biographies of Andrew Jackson, Teddy Roosevelt, and Ben Franklin in an ambitious series intended to span the American experience from Colonial times to the present. Brands delivers his eight-hundred-plus-page portrait of FDR to bookstores—and into the marketplace of ideas—with pitch-perfect timing.
We’re at a moment when the New Deal, for decades anathema to the supply-side Laffer Curve crowd, is suddenly new again, the object of furious study by economists and politicians confronted with the grim specter of a Great Recession—if not the Great Depression II—in the aftermath of our free-markets-gone-wild party (as President George W. Bush, on whose watch much of the partying took place, observed, Wall Street “got drunk and now it’s got a hangover”). As such, Traitor to His Class should be required reading here in Texas, where we seem determined to remain one of the last bastions of old-fashioned Reaganomics and where cries of “socialism” reflexively greet any economic initiative more complicated than cutting taxes. On the cusp of a historic Barack Obama administration that will quickly be swept away by history if it can’t come up with a fresh iteration of the New Deal, FDR-style “socialism” may once again have to rescue capitalism from its worst excesses.
Traitor to His Class doesn’t neglect the salient and sometimes salacious details (both FDR and his remarkable wife, Eleanor, found comfort in the arms of other women) required of a first-rate popular biography. But Brands’s real gift is the lucid explanation and analysis of the political and economic issues at the center of what was not merely an epic struggle to bail out a sinking economy but a desperate battle for the American soul and the survival of our democracy. The paradox central to Brands’s narrative is that FDR was an unlikely champion of the common man; born into blue-blooded New York society, he was still living in a plush apartment on Harvard University’s “Gold Coast” when his cousin Teddy became president, after the assassination of William McKinley, in 1901. Although TR and FDR represented different parties, Franklin rose quickly on the most famous last name in American politics: from New York state senator to assistant secretary of the Navy to vice-presidential candidate on the doomed 1920 Democratic party ticket, all by the time he was 38 years old.
FDR’s 1921 bout with polio transformed his rather shallow, “happy-go-lucky” character even more than it altered the trajectory of his career. Roosevelt’s status as a “cripple”—the politically incorrect but common parlance of the time—gave him unusual empathy for his most disadvantaged countrymen in the midst of the New Era, an economic boom that saw stock market values quadruple between 1922 and 1929. Herbert Hoover, who in 1928 became the third Republican president in as many election cycles, promised to continue the hands-off policies of his predecessors and looked forward to the day when poverty would be “banished from this nation.” While Hoover complacently presided in Washington, FDR honed his executive skills in two terms as a reform governor of New York, at the same time perfecting his chops in a new mass medium that he saw as the answer to Republican bias in the press. “I think it is almost safe to say,” noted Roosevelt, “that . . . what is heard over the radio decides as many people as what is printed in the newspapers.”
By the time the 1932 election rolled around, not only had Hoover come up with nothing to remedy the plague of failing banks (more than five thousand had already closed or faced collapse) and catastrophic unemployment (25 percent) that had followed the stock market crash of October 1929, his laconic message of self-reliance was helpless before FDR’s charismatic, new media—savvy campaign on behalf of the “forgotten man,” who had languished while corporate profits had soared, then had been left out while Hoover tried to rescue the banks and big business. Drawing a stark contrast to the Republicans’ “sift through”—i.e., trickle-down—approach to spreading the wealth, Roosevelt promised to rebuild the economy from “the bottom up,” a phrase Obama used in his campaign. Hoover, who hadn’t even taken his opponent seriously until September, lost the electoral vote 472 to 59. “Overnight,” writes Brands, “the Republicans were transformed from the dominant party in the country to a footnote.”
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.