Monday, September 5, 2011

Obama Should "Welcome Their Hatred"

It's Labor Day, and on Thursday President Obama is scheduled to speak to a joint session of Congress  about the ongoing jobs crisis. Many on the left are urging the president to "go big" and push Congress for a New Deal-style jobs program.

The attraction of the FDR model is obvious. The economy created no net jobs last month (due to continuing government layoffs that totally offset private sector hiring), making it clear that the very weak recovery that was underway has now stalled.

But as I argued over a year and half ago, the circumstances of Obama's administration are significantly different. FDR took over at the absolute depths of the depression in early 1933, while Obama's administration began in the equivalent of 1931 and helped prevent the recession from becoming another Great Depression.

Moreover, Obama's political circumstances are radically different. FDR brought in huge Democratic majorities with him in the 1932 election, and the remaining Republicans were pliant and did not represent meaningful opposition to his policies. The 1934 election enlarged the Democratic majority in the Senate to 69-25 and in the House to 322-103. With those numbers, FDR could largely get Congress to pass whatever economic recovery measures he proposed.

Obama, by contrast, has from day one faced an obstructionist minority in the Senate that has effectively created a minority veto over all legislation by abusing the rules of the Senate, and now faces a Republican majority in the House.

There is, however, one aspect of FDR's early presidency that is often overlooked by his supporters: its failure to bring about quick improvement in the economy, and FDR's political response to that failure. And here, Obama may find some instructive lessons.

The signature policy of what is often called the "first New Deal" was the National Recovery Administration, the NRA. It was a decidedly pro-big business idea, whose premise was that the main problem in the economy was over-supply of goods. The NRA suspended the anti-trust laws and created what were, for all intents and purposes, government-sanctioned cartels in major industries to limit production.

It was an abysmal failure. It combined the worst aspects of government bureaucracy with the complacency of monopolistic business. By the time the Supreme Court struck it down as unconstitutional in 1935, FDR was glad to see it go.

Politically, by 1935, FDR was under increasing pressure from the left to do more, and especially to give up trying to work with big business. Dr. Francis Townsend proposed giving the elderly $200 a month, and the popularity of his plan helped push the adoption of Social Security that same year.

Louisiana Senator Huey Long proposed the "Share Our Wealth" plan, which would have capped personal fortunes at $50 million and yearly income at $1 million. Long would then have redistributed the income among the poor. FDR feared the populist appeal of Long's plan might lead the Senator to challenge him for the presidency.

FDR believed people wanted jobs, not relief or redistribution, and in response proposed to Congress the largest single peacetime appropriation to that date: the Works Progress Administration, the WPA.

Its initial appropriation was $1.4 billion, the equivalent of about $1 trillion today. It eventually employed 8 million Americans. It never solved the unemployment problem, but it did significantly improve it.

It is the WPA people have in mind when they tell Obama to "go big."

The problem, of course, is Congress. Republicans would block any such proposal by Obama, and, given his pragmatic bent, he seems unlikely to propose something he knows will fail.

In trying to get anything at all through Congress, Obama faces roadblocks FDR simply did not have. But politically, the advantages of following FDR's approach are clear.

By 1936, the depression had not ended. Unemployment was still perhaps as high as 16-17%. But it was down from the 25% of early 1933. FDR's resounding re-election in 1936 was not because happy days were here again--it was because things were getting better, and, most importantly because people who still had not benefitted from the recovery knew Roosevelt stood for them.

In a powerful speech on the eve of the election, FDR drew the contrast with his opponents clearly:
Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent.... We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.
FDR spent the first two years of his administration trying to placate business interests. In return, he got nothing but their enmity. By 1935, he gave up trying to win them over, and began trying to defeat them.

That is what Obama needs to do.

What FDR said in 1936 is as true today (maybe more true than) it was then.

Obama cannot make Republicans bent on his political destruction pass policies that will put people to work. He won't get from Congress what he asks for Thursday. So he might as well tell the people of this country what should be done. When Republicans say "no," as we all know they will do, he can make sure the public knows who wanted to help, and which party believes "Government is best which is most indifferent."

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