So This is the New Deal
In addition to what Steve Benen says on the subject of the New Deal, it’s important to distinguish between the structural reforms (i.e., “New Deal”) that FDR implemented during his time in office and FDR’s efforts to bring about an economic recovery.
The first Social Security check didn’t go out until 1940. Under the circumstances, it obviously wasn’t a very effective Depression-fighting initiative for a President inaugurated in 1933. But that wasn’t the point — it was just a good idea that would have been a good idea to implement in the 1920s or 1890s or whenever, but it took until the 1930s to create a political situations in which it could be enacted. Social Security does act as something of an economic stabilizer in preventing or mitigating recessions now that it’s in existence, but clearly it didn’t do much of anything to ameliorate the Depression of the 1930s.
So when people talk about a new New Deal, it’s useful to separate two different ideas. One is to say that we should respond to the current downturn with large-scale fiscal stimulus. The other is to say that we should take advantage of downturn-born progressive majorities in congress to pass a lot of worthy structural reforms. These both sound like good ideas to me, but they’re separate ideas and one could accept one and reject the other.
40 Responses to “So This is the New Deal”
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November 24th, 2008 at 12:27 pm
Well, on a slightly related topic, isn’t it a little peculiar that ALL of Obama’s “economic” people are part of Robert Rubin’s Goldman Sachs/Citibank circle?
I’m no expert on economics, but doesn’t this bring to mind how in 2000 Bush came very close to picking the CEO of Enron as his Treasury Secretary?…
November 24th, 2008 at 12:29 pm
Yes and no. We can think of the reforms as taking advantage of a more receptive legislative climate after the economy turned America against the Bushies. But we can also see them as a legitimate response in two ways. Such reforms can protect people against the impacts of a crisis, in some cases even immediately, although not always. They can help avoid a repetition of the crisis. But also immediately, they can increase public confidence, so that consumption and investment do not lag years behind the fiscal stimulus. As that graph that was circulating right after the Will-Krugman debate showed, FDR pretty much did get investment to increase very early and, except for one brief period of a reactionary change in policy, almost linearly.
November 24th, 2008 at 12:31 pm
…and I have no resolutions
for self assigned penance—
for problems with easy solutions
November 24th, 2008 at 12:37 pm
Part of FDR’s rhetoric did very much have to do with trying to have fewer people starving to death and living in utter misery, particularly our elderly citizens. Remember, the point was, in FDR’s words, “the great task of furthering the security of the citizen and his family through social insurance”.
But given that the ‘New Deal’ and any other aspects of FDR’s agendas were politically extremely controversial (i.e., the nut squads who called him Communist), I really don’t think you were likely to see FDR clarifying that, well, ‘This here reform is a good idea, but not 100% necessary right now, while this is absolutely necessary for the survival of our economy, but I’d rather you pass it all than just the super-important stuff.’
November 24th, 2008 at 12:43 pm
Unlike many European nations, U.S. social security “insurance” was supported from “contributions” in the form of taxes on individuals’ wages and employers’ payrolls rather than directly from Government funds.
What idiot wrote that?
“Oh, it’s completely different. You see, in France, pensions are funded by the Government, but in America they’re funded by taxes!”
November 24th, 2008 at 12:44 pm
isn’t it a little peculiar that ALL of Obama’s “economic” people are part of Robert Rubin’s Goldman Sachs/Citibank circle
ALL? Christina Romer? Melody Barnes? Heather Higginbottom? Peter Orszag? Was Larry Summers ever connected with Goldman/Sachs/Citibank? Was Tim Geithner??
Does have experience working for the US Treasury Dept in the 1990s automatically count now as the “Goldman Sachs/Citibank circle?”
November 24th, 2008 at 12:48 pm
The economy of the 1930s (80 years ago) was as different from the one we have today as that one was from the economy of the 1850s. I doubt FDR looked to Fillmore, Pierce and Buchanan as a guide to his economic policies.
All the Krugman happy talk about New Deal II is simplistic. We have another economist who is touted as an “expert” on the New Deal, one that (we are told over and over again) knows the “lessons” of the 1930s and won’t repeat the mistakes – Ben Bernanke. Yet it was the Fed that oversaw and even encouraged the insane banking practices and easy credit policies that lead to the current mess without seeming to understand the risks it was taking.
Massive deficit spending and easy credit from the Fed were the policies of choice BushCo choose in 2001 and they led to the weakest recovery we’ve seen since WWII. Then there’s the lesson of Japan in the 1990s. I really wish there were more non-establishment, loose cannon types on Obama’s economic team, the kind that would question the conventional Krugman/Bernanke wisdom.
November 24th, 2008 at 12:53 pm
ajay: I suppose the archive author’s point was the difference between a general fund-supported pension system and the sort of program the U.S. came up with, which was tied to a worker’s own wages to a great degree, such that FDR could declare that no politician could ever take that away.
(That doesn’t mean Republicans won’t keep trying to give Social Security to Wall Street, but it’s hardly necessary now that Wall Street realized they could just ask for hundreds of billions directly instead of having to privatize SocSec.)
November 24th, 2008 at 1:12 pm
DTM + Ethel-to-Tilly:
Actually, I should have been more precise in my choice of words…
What I should have said is that Robert Rubin was about as closely identified with Goldman and Citibank as Bush’s 2000 near- Treasury pick was identified with Enron…
And an amazing fraction of Obama’s entire senior “economics” team consists of Rubin protegees, as described in this morning’s front-page NYT article, linked below:
http://www.nytimes.com/2008/11/24/us/politics/24rubin.html?_r=1&hp
Of course, maybe the front-page of the NYT just isn’t very reliable on such things, given Judy Miller’s past reporting…
One major difference is that Bush never tried to get a government bailout for Enron, though I vaguely recall that Robert Rubin actually did…
November 24th, 2008 at 1:17 pm
“ajay: I suppose the archive author’s point was the difference between a general fund-supported pension system and the sort of program the U.S. came up with, which was tied to a worker’s own wages to a great degree, such that FDR could declare that no politician could ever take that away.”
Not actually something that’s unique to the US at all.
November 24th, 2008 at 1:28 pm
This is a good point to make, because the current wingnut talking point involves conflating everything FDR did in domestic policy under the rubric “New Deal,” so as to claim that the discredited (by FDR himself, during his term of office) central-planning efforts of the Early New Deal somehow discredit every domestic-policy initiative he undertook.
November 24th, 2008 at 1:46 pm
Not quite right. What we now know as Social Security was actually Title II of the Social Security Act of 1935. It phased out a different program under Title I: “Grants to States for Old-Age Assistance” which was a straight out welfare program paid for out of the General Fund, and which paid out better average benefits than Title II right until 1951.
http://www.ssa.gov/history/briefhistory3.html
(This by the way is the source of the myth that Social Security was supposed to be temporary. True of Title I, not true for Title II.)
I suppose it is an open question how much Title I served to ameliorate the Depression but it is just not true that there was no effect at all from the 1935 Social Security Act until Ida Mae Fuller got her first Title II check in 1940.
I don’t know that this totally undercuts Matt’s attempts to distinguish between structural reforms and economic recovery, it is just a matter of history that in relation to old-age assistance FDR addressed both through the same legislative vehicle.
November 24th, 2008 at 3:31 pm
Ajay:
Would it be better if the idiot had said taxes on wages and payroll versus general taxation?
November 24th, 2008 at 3:33 pm
Bruce:
Actually, Title I was meant to be permanent – it was supposed to do two things: 1. provide immediate income during the period before Social Security could kick in and to seniors who had already retired before the system came into effect, and 2. provide economic security to the elderly poor who weren’t covered under Title II (since less than 50% of workers were covered under the original terms of OAI). It still exists, in the form of SSI or Supplemental Security Income.
November 24th, 2008 at 4:57 pm
RKU – the description would be meaningful if these people had worked with with Rubin on the Street – then went into the government with him – and then went back to the Street with him. But I don’t think anyone who has been named an economic advisor has worked on the Street at all – they are all either career government or academics. It’s kind of a smear to group them all up and label them ALL as “Goldman Sachs/Citibank circle” when none of them worked at those places at all.
Suddenly Rubin seems to be the bad guy. Two days in a row the NYT is turning on him (When it comes to Judith Miller though, consider the source). If McCain had won, do you thing the NYT and/or Judith Miller would be saying similarly smearing things about presumed McCain Treasury Secretary Phil Gramm?
November 24th, 2008 at 9:31 pm
Obama’s problem is that he’s worked with so few nationally prominent people to get big things done that he doesn’t know who is for real and who is an empty suit. He was an Illinois legislator just four years ago and he’s spent most of the time since then either writing a bestseller or running for President.
The only people he really knows well are Chicago sleazeballs like David Axelrod, Rahm Emmanuel, the Daleys, Tony Rezko, Blagojevich, Valerie Jarret, Penny “Superior Bank” Pritzker and the like. And there is only so many of them you can bring to Washington before even the new media start to notice.
The other people he knows well are all the unhousebroken leftists like Jeremiah Wright and Bill Ayers that he hung with in the 1980s and 1990s.
So, he’s just picking out Clinton Administration retreads whose names he knows from reading the newspapers in the 1990s.
November 24th, 2008 at 9:34 pm
“Suddenly Rubin seems to be the bad guy. Two days in a row the NYT is turning on him …”
Well, it might have something to do with Rubin’s Citicorp going belly up at vast expense to the taxpayers at the very moment when Rubin’s proteges are taking over the economic controls of the Obama Administration.
November 25th, 2008 at 11:30 am
ZOMG, Chicago!
Chicago people are scary – especially the ones from the Sout Side, right, Steve?
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