Before my spirited exchange with my esteemed friend Amity Shlaes about the New Deal reaches the point of diminishing returns, it should be possible to agree on some points that may be applicable to current economic questions.
I think we agree that Obamanomics has not succeeded, beyond a tentative stabilization, easily shaken by lack of public confidence in the regime and the absence of any serious deficit-reduction plan. We seem also to agree that unfocused fiscal profligacy on the scale of the $800 billion stimulus bill has not led to significant reductions in unemployment, that more of the same will not succeed any better, and that the ability of the federal government to keep hurling money out of the airplane on that scale has probably passed anyway.
Where we agree in interpreting the economic experience of the Thirties is that U.S. unemployment on Inauguration Day 1933 was between 25 and 33 percent; that it was between 12 and 16 percent in late 1934, and between 9.8 and 14.2 percent just before the 1940 election; and that unemployment was effectively eliminated in the U.S. before America’s entry into World War II in December 1941.
Beyond this, we seem to part company, as on that record, I do not see how Amity could write, as she did last week on NRO, that “Roosevelt did fail to end the Depression.” She applies the criterion of “getting back to where we were before.” When Roosevelt died in office in April 1945, after more than 12 years as president, U.S. GDP had more than doubled from 1933, and was half the economic product of the entire war-ravaged world.
Amity acknowledges that within a year of taking office, Roosevelt could claim that more than 60 percent of the unemployed were “gainfully employed,” albeit about 60 percent of the reduction was in the giant New Deal workfare infrastructure and conservation programs. Yet she describes this as an “Obamaesque argument.” I don’t think so, as these were real jobs, and after $1.4 trillion of deficit spending, President Obama is reduced to implausible arguments about saving jobs that would otherwise have been lost, rather than creating new ones.
Where I hope we do agree is that this administration — to engage the unemployed until the private sector could absorb them — should have emulated Roosevelt’s workfare programs at much less cost and to much greater benefit to the nation than the Santa’s bag of toys of the stimulus bill. There is going to be an extended process, as the economy reorients itself from consumption (especially of foreign oil and luxury goods) to more saving and investment, manufacturing and extractive industry. It was naïve to imagine that the overladen Christmas tree of stimulus could achieve much of what was needed.
Now, since the firehose of unaimed spending is running dry, the best alternatives are New Deal workfare, coupled with income-tax reductions and increases in taxes on gasoline, luxury-goods sales, and financial transactions, but apart from a few words from Paul Volcker, there is no sign of this.
Three points of disagreement seem to remain: Amity declares, as do most historians, that only the official numbers of employed can be counted, but I think the New Deal’s workfare participants were just as much employed people as the military conscripts and defense-production hires of other advanced countries in the Thirties, who are traditionally considered to be employed, while the New Deal relief workers are not. I do not accept, and neither should any other historian, unemployment figures that treat fully employed relief workers, in far more useful work than the cogs of bloated pre-war defense preparedness, as statistical unemployment.
Second, on the matter of the possible precedent of 1937–38, I don’t believe that it furnishes any guidance at all for the current conditions. In 1937, Roosevelt rolled back his public-works programs and shrank the deficit at the request of the hard-money elements of his administration and the Congress. Economic conditions began to deteriorate and he restored the upward trajectory of the business and employment cycle with another massive levee of workfare. This has nothing to do with the current administration’s argument for doubling down on its rather unimpressive pursuit of stimulus, which is a bogus concept, as it immobilizes as much stimulus through borrowing as it creates, and is only secondarily productive of jobs. Roosevelt’s 1937–38 pause followed and preceded huge reductions in unemployment.
Third and finally, we seem to part company over the extreme distress that Roosevelt found on entering office. When the proverbial one-third of a nation had no visible means of support and the banking system had collapsed, there was little empirical evidence of how best to deal with a severe economic depression, and no time for sequential experimentation. I must call Amity on her claim that Roosevelt was viscerally anti-business. He did object to what he considered an unacceptably uneven prosperity in the Twenties, and excessive and imprudent borrowing in the financial markets coming into the crash. He also resented what he considered business ingratitude for his rescue of the capitalist system with only modest concessions to the forces of egalitarianism.
It was naughty of Amity to claim that Roosevelt said, of the business community, on Oct. 31, 1936, at Madison Square Garden, in one of his most famous political addresses: “I welcome their hatred.” He had already appreciatively referred in that address to “the vast majority of law-abiding businessmen.” Those whose opprobrium he professed to welcome were the confected bogeymen of business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, and war profiteering.” He thus channeled the anger and frustration of the time into a harmless cul-de-sac of fictitious enemies.
I withdraw previous claims that Amity Shlaes is a member of the Roosevelt assassination squads that compulsively attack FDR at any opportunity, no matter how obscure. But I think she made a mistake in assimilating his economic policies to Hoover’s in her otherwise excellent book about the Great Depression, shortchanges FDR for the economic progress he made in each of his full terms, and imputes unjustly base motivations to him (though he was far from a political saint). As a result, Amity is being used as a stalking horse by ahistorical kooks who swaddle themselves in her well-earned reputation as a rigorous historian and commentator, to assault the imperishable Roosevelt piñata.