Biden as the new FDR: It’s the same old bad deal for jobs
President Biden doesn’t want merely to showcase Franklin Roosevelt. He wants to replicate him. As President Roosevelt once did with the New Deal, Biden intends to spend to spur growth, though Biden’s proposals are magnitudes greater. As Roosevelt once did, Biden argues that helping unions helps the worker, and he hopes to undo 27 states’ “Right to Work” option.
As Roosevelt did, Biden headlines jobs — the term “jobs” appeared more than 40 times in his recent address to Congress. The president suggests that endeavors to meet his social or environmental targets can simultaneously, synergistically serve his greatest economic goal, employment. “When I think ‘climate change,’ I think ‘jobs,’” he remarked.
As Roosevelt did, Biden calls for tax hikes on the rich as a moral imperative. And as Roosevelt did, Biden dares others to disagree, declaring that in “another era when our democracy was tested, Franklin Roosevelt reminded us — in America, we do our part.” Biden skeptics, the implication is, aren’t doing theirs.
Still, a review of the record of Roosevelt’s New Deal suggests that a sentient voter, slimed or not, might pause before signing up for the newest new deal.
When Roosevelt ran for office in 1932, a shocking one in four workers was unemployed. Roosevelt promised to get employment back to usual levels, which then as now meant one in 20 out of work, or 5 percent joblessness. He blamed the downturn in part on “obeisance to Mammon” — an unwillingness of wealthy Americans to share. To recover, the president suggested, America needed the federal government to provide “more equitable opportunity to share in the distribution of national wealth.” The gravity of the crisis, Roosevelt argued, warranted emergency authority for the chief executive — license to play around, applying even conflicting theories seriatim through “bold persistent experimentation.”
Once elected, Roosevelt hiked taxes on the rich and kept them high, even pushing an “undistributed profits tax” to eat at business savings. He ramped up tax authorities’ investigations and urged the authorities into punitive audits. The “green” component of the New Deal was reforestation: Roosevelt promised to employ 1 million men in restoring forests, parks and fields. To create additional jobs, Roosevelt poured hundreds of millions of dollars, then a large sum, into infrastructure: bridges, schools, power plants, and the establishment of new institutions such as the Tennessee Valley Authority. In the name of helping the working man, the New Deal instituted minimum wages. Roosevelt’s 1935 Wagner Act, a tiger of a law, gave the labor movement such power that unions were able to force large companies such as automakers to accept collective bargaining, willy nilly.
Meanwhile, the New Deal regulated — nonsensically — both business and agriculture.
Some results were positive. The Civilian Conservations Corps gave temporary jobs to hundreds of thousands, who were so grateful at the time that, down through generations, they passed nostalgic stories of lifting a shovel. The tens of thousands of government projects funded tens of thousands of short-term jobs. Some workers in some unions got better pay than they otherwise might have done. Income distribution in America indeed became more equal. That is why some refer to the period of the Great Depression as the “Great Compression.”
But while Americans may have been more equal, they were still broke — and, stunningly, unemployed. After all, a large share of those New Deal jobs were temporary, or often makework “boondoggles” — that’s when the phrase was coined. Experts fight like ferrets over different measures of 1930s unemployment: Some say unemployment was 14 percent in a given year; others say 15 percent or 18 percent. But these are trivial differences. The headline is that joblessness remained well over 10 percent for a decade. The artificially high wages and unionization forced strapped employers into paying more than they could afford. Those employers reacted by rehiring more slowly, or not at all.
Not until World War II did joblessness finally begin to subside, in good measure because of military mobilization — important, but not the same as peacetime employment.
As often discussed, errors in monetary policy contributed to the misfortune that was the 1930s. The cause of the duration of the Depression, though, was Washington’s persistent intervention. The chief economist at Chase, Benjamin Anderson, noted that after failing by playing God, the government chose not to retire but simply “to play God more vigorously.”
The first lesson of this sorry account is that an arbitrary national economic campaign from atop generates damaging uncertainty in the economy. However charmingly it reverberates, the very phrase “bold persistent experimentation” stifles growth.
The second point is that what helps the union hurts the worker. President Biden’s proposal to end “Right to Work,” if it becomes law, will dramatically stifle employment.
The third point is that synergy is overrated. “Synergy” sounds great in a political speech — or, for that matter, in a boardroom sales pitch. Synergy’s political allure can even befuddle voters, as it befuddled those who supported Roosevelt, and massively so, in his 1936 reelection campaign. But synergy falls short when it comes to delivering the economy those voters long for. Companies, and therefore most often workers, do better when companies serve a single master: the profit motive, or “Mammon,” as Roosevelt disparaged it.
For many years after the New Deal, Americans recalled the devastating record. The results of the Wagner Act so horrified Congress that, postwar, it neutered that legislative tiger with the Taft-Hartley Act, establishing the very “Right to Work” provision which President Biden would now abolish. When President Eisenhower bemoaned the military-industrial complex, he was bemoaning the inflexible statism that the New Deal had established. Ironically, the growth of the economy after corrections of Rooseveltian excesses may be the reason President Biden can elevate Roosevelt’s playbook with such impunity. Lulled by decades of prosperity, America has finally forgotten the defeats that playbook caused.
To replay the New Deal is to ready the field for trouble, or even tragedy. The only way to prevent that sorry outcome is to deny the administration the chance to substitute nostalgia for facts.
Amity Shlaes is the author of “Great Society: A New History” (2019) and “The Forgotten Man: A New History of the Great Depression” (2007). She chairs the board of the Calvin Coolidge Presidential Foundation. Follow her on Twitter @AmityShlaes.