Great Recession

By GREGORY N. HEIRES

The New Deal era beginning in the 1930s set up the government structure we enjoy today. But ever since, conservatives have waged a protected war on “Big Government.”

The assault on government deepened with the presidency of Ronald Reagan, and more recently deficit phobia greatly hindered the Obama administration’s policy response to the Great Recession. The Republican campaign to destroy Obamacare is not so much about health care as chipping away at the size of government.

“When Government Helped: Learning from the Successes and Failures of the New Deal” (Oxford University Press: 2013), edited by Sheila D. Collins and Gertrude Schaffner Goldberg, examines how President Franklin D. Roosevelt’s government policies established our welfare state and helped the United States recover from the Great Depression. Collins is a professor emerita of political science from Williams Paterson University and an executive committee member of the National Jobs for All Coalition. Goldberg is a professor emerita of social policy from Adelphi University and chair of the national Jobs for All Coalition.

Lessons from the New Deal

Drawing lessons from the New Deal, the book’s contributors also study the accomplishments and shortfalls of the Obama administration in dealing with the Great Recession. They argue that more activist government is needed today as the country continues to face a long-term jobs crisis, economic malaise and growing inequity.

The depth of the crisis that the country faced during the Great Depression was, of course, greater than what it confronted when the financial implosion occurred in 2008. Still, the contrasting policy responses of FDR and Obama speak to the changing American attitudes about the role of government in our society.

When FDR came to office in 1933, unemployment was 25 percent, the Stock Market had crashed, the banking system had collapsed, thousands of businesses had failed, homeless Americans lived in shanties known as “Hoovervilles,” and bread lines were common in major cities, as Collins notes.

The economic crisis of the 2000s is widely viewed as the country’s worst since the Great Depression. But when Obama became president in January 2009, unemployment, while high at 7.9 percent, was only a third of that of the Great Depression. The Bush administration’s $700 billion bailout of the banks and subsequent action by the Federal Reserve Bank stabilized the banking system, arguably preventing the 2008 financial meltdown from morphing into a depression.

The triumph of conservatism since the 1970s significantly constrained Obama’s policy options, though his centrist ideology and ineffective political skills also limited the reforms he sought. About 40 percent of the Obama stimulus package consisted of tax cuts. Assistance for homeowners who were victims of corrupt mortgage practices was lacking while banks were given access to billions of credit from the Fed. For ordinary Americans, the blow of the economic downturn was weakened by New Deal reforms like unemployment insurance and food stamps, as well as by Medicare and Medicaid.

Economic assistance to the states initially helped prevent widespread layoffs in the public sector, but hundreds of thousands of public employees eventually lost their jobs as states and municipalities coped with falling tax revenue. The Obama administration provided funds for several hundred thousand jobs, but most of those were in “shovel-ready” projects already in the works.

By contrast, FDR helped millions of unemployed and underemployed Americans through federal jobs programs like the Civilian Conservation Corps, the Federal Emergency Relief Act, the Public Works Administration and the Tennessee Valley Authority. The administration’s projects included reforestation, dams, a public banking system, building and loan associations, rural electrification, and infrastructure development (tunnels, roads, bridges, highways, sewer systems, highways, waterworks, low-income housing and college dormitories).

FDR’s government activism was influenced deeply by the social unrest and dissent in the country in the 1930s. His economic reforms and the establishment of the modern welfare state saved U.S. capitalism. Ultimately, it was the Keynesian full-employment and government spending policy of World War II that turned the economy around.

The support for FDR’s strong government intervention would be out of sync with today’s political climate. The Right, especially tea baggers, relentlessly attacks Obama, accusing him of being a “socialist,” and deep-pocketed Republicans like the Koch brothers are out to cripple government. As Goldberg points out in a chapter on popular movements and the New Deal, FDR faced pressure from Communist-backed groups, the unemployment workers movement, jobless veterans, organized labor, African-American workers, southern tenant farmers, the elderly and levelers, such as Sen. Huey Long and Father Charles E. Coughlin, who pushed for a more equal distribution of wealth. This pressure helped create the political climate for the creation of Security and the passage of the Wagner Act and the National Labor Relations Act. Progressives have largely given Obama a pass despite his centrist policies.

Within the administration itself, FDR was influenced by a progressive “Brain Trust,” appointees and advisors like Labor Secretary Francis Perkins, Harry Hopkins, Harold Ickes, Henry Wallace and Henry Morgenthau Jr., with backgrounds in social work and progressive politics. Many of Obama’s team, in contrast, were Clinton era appointees with Wall Street ties and shaped by what Goldberg describes as a “deregulatory and anti-government ethos” that contributed to the 2008 financial meltdown.

FDR responded to the needs of workers by supporting legislation that strengthened collective bargaining rights and policies that contributed to a more vibrant labor movement, according to contributor Richard McIntyre. But, McIntyre also argues that the New Deal labor system has limited the ability of unions to push for radical change and “made labor vulnerable to the politics of class fragmentation pursued by the New Right.”

Over 50 years, labor’s ties to the Democratic Party have failed to produce a legislation to promote representation in the workplace. Unions are virtually nonexistent in the private sector, and they are under siege in the public sector, where about a third of workers enjoy collective bargaining rights. Obama, while promoting an increase in the federal minimum wage, pay equity and a more labor-friendly National Labor Relations Board, betrayed the labor movement by not using his political muscle to push the Employee Free Choice Act (which would have made it easier for workers to join unions) through the Democratic-controlled House of Representatives and Senate during his first term.

Obstacles and Hope

The path to progressive change that would lead to good jobs and improve the lot of the poor and middle class in our country faces great obstacles: globalization, an anti-government ideology, disappearing unions, deindustrialization, the pension crisis, deficit hysteria, as well as rising inequality and the resulting weakening of our democratic institutions.

But, as the contributors to “When Government Helped” argue, the record of the New Deal offers a framework for change. FDR’s unfulfilled “Economic Bill of Rights,” for instance, speaks to our current needs. It called for the right to a job at a livable wage, as well as the right to adequate health care, housing, old age security and quality education.

Today’s progressive movement is promoting a number of reforms that reflect the spirit of the New Deal: a Robin Hood tax, an expansion of social services, an improvement in unemployment insurance, the reduction of the military budget to free up funds for domestic spending, green policies and infrastructure development. But without a rethinking of the role of government in our society, these proposals will likely remain illusory.