Saturday, April 14, 2012

Mister, we could use a man like Herbert Hoover again

Readers of a certain age will recognize today's title, but few if any will anticipate where I am going with it. A couple of years ago, in a critical post, I speculated whether Obama was going to turn out like Hoover or Harman Muller and heinrich Bruning, the last democratically chosen German chancellors under the Weimar Republic, rather than like FDR. I'm afraid there is still a chance that he will, although at the moment the odds still favor his re-election. Even if he is re-elected, however, he will never be the new FDR--and the brief research I've been doing on the Hoover Administration shows why.

Franklin Roosevelt was an extraordinary President, but like the other progressive icons of our century, including Wilson, Kennedy, and LBJ, he could hardly have done what he did alone. Our whole twentieth century tradition began with the Progressive era, the climax, it appears in retrospect, of the era that began with the Enlightenment, in which two generations--the aging Progressives (born about 1842-1862) and the Missionaries (about 1863-1884) decided that social science and reason could solve social problems, increase economic justice, and build a healthier and more equitable society. They also concluded that money should not be allowed an unlimited influence over politics, and that enormous fortunes were inevitably destructive to democracy. Such views appear to have become stronger and stronger within universities during the first half of the twentieth century. (They became much weaker in the second half, but that's a story for another day.) Granted, believers in unfettered capitalism still remained strong, and they took over the reins of government during the 1920s. But Herbert Hoover--at that time--was not one of them. He had risen to fame under the Wilson Administration as a genuine progressive. And thus, it is interesting to look at the requests he made of the last Congress that met while he was fully in power, in December 1931, and at what the Congress did with his proposals.

Although economic distress was much worse then than it is right now and no recovery was as yet in progress, the federal budget was a source of enormous concern. By today's standards it was paltry: receipts for fiscal 1932 (ending in July of 1932) were forecast at $4.4 billion, less than 10% of the GDP of about $58 billion, and thus at least 50% smaller in GDP terms than it is today. But revenues were only about $2.2 billion, meaning that the government was nearly 50% a year in deficit, a much higher figure than today's. The budget had already been cut. What was to be done? Hoover decided to raise taxes, including taxes on the highest brackets, as an emergency measure. In particular, he wanted to double the surtax on incomes over $100,000 (in the neighborhood of $1 million today) from 20% to 40%. He also proposed a new lending agency similar to the First World War War Finance Corporation--one which became the Reconstruction Finance Corporation, a powerful institution all through the New Deal and the Second World War.

The debate on Hoover's proposals was long and difficult, all the more so since the Democrats, having won almost 60 new House seats in the 1930 elections and subsequently, now controlled the lower chamber. They rejected a federal sales tax in the spring of 1932. When the House finally passed a bill in April, it adopted Hoover's top 40% income tax rate--one substantially higher, of course, than the top rate today. But in Senate hearings, a progressive Republican from Michigan names James Couzens argued that the nation, in the midst of an emergency, should return to the wartime tax rates of 1918, with a top marginal rate of 60%. This initially failed along with Hoover's sales tax proposals in the Senate, but a conference committee adopted an income tax schedule with marginal rates rising to 55% for incomes over $1 million--that is, about $10 million today. It also set the corporate profits tax at 14%--much less nominally than today's theoretical rate of 34% that Republicans constantly complain about, but considerably higher than what today's corporations actually pay.

Please think about that for a moment. In the midst of an economic crisis and a Presidential election year, the Congress, faced with a huge deficit and having already cut expenditures, passed a large tax increase, including a 55% marginal tax rate on the highest incomes. Today the Republican Party unanimously, without exception, opposes any tax increase of any kind and, indeed, refuses to cooperate with President Obama on anything at all.

Thus it is not the difference between Obama and FDR--real though it is--that differentiates our time from 1932; it is the almost complete lack of civic virtue throughout our political class, reflected in an almost universal inability to state problems clearly, face them, and propose adequate solutions. Our irresponsible political class, like that of the Progressive era and the New Deal, has taken two generations to grow. Unfortunately it will probably take at least two more to replace, as well. To anyone curious about today's Congress's failure to function I cannot recommend too highly this episode of the NPR radio program, This American Life, which gave me a new look into the world of Congressional fund-raising. We have not only created huge fortunes in our time, but we have now allowed them to buy our political system, and they are taking full advantage of the opportunity. Meanwhile, we have suffered a general erosion of any common values, sense of common purpose, or obligation to one another. If Obama wins, he will do so largely by mobilizing the aspirations and fears of certain demographic groups, not by creating a real sense of national purpose. (That I and many of my friends belong to those groups does not change that fact.) If he loses, we shall sink much lower. So far, only the strength of the edifice erected by our parents and grandparents has saved us from complete collapse.


Bozon said...


Great stuff. Many thanks.

No one any longer would get much traction for a national purpose, of any kind, other than in some military conflict, unfortunately;

and that purpose would be largely a chimera, other than actual defense or real security issues, rather than largely faux ones.

Because we did not pull together as a nation at the onset of now looming civilizational rivalries, we are now even less likely to do so successfully, going forward, I am afraid. Nation building really should have begun at home.

All the best,

James50 said...

Sorry, David but this reads like another of your "Midnight in Paris" views of the 1930's. These are totally different times and may require the opposite of the solution you yearn for. The most revealing statistic in your essay concerns the relative size of government then versus now.

The "edifice" you speak of as saving us does not end with economic supports. It is a vast and menacing regulatory behemoth for people like me. It is more a concrete anchor than support.

The words of a recently retired foreign service officer may interest you.

"I am increasingly concerned about the state of liberty in our country. Speech codes, endless expressions of outrage, demands for apologies, increasing intrusion into our private lives, and a national and local bureaucratic presence cast an increasingly dark shadow over our lives. DMV, IRS, EPA, TSA, a host of law enforcement agencies, and legions of prosecutors, investigators, etc., threaten our freedom."

Like this man, I grow sick of it all. TSA alone would be a good reason to bring it all down.

Ed said...

One point that is usually forgotten. The shorthand view of the Democrats being the more "liberal" party, favoring wider income redistribution, is mostly a consequence of the New Deal itself. Until FDR's administration, the Republicans were assumed to be the more liberal of the two parties.

The parties realigned because when presidential administrations in the 1930s, 1940s, and 1960s proposed expanding the welfare state and civil rights, to deal with problems such as the Great Depression and challenges from countries that had rejected liberal ideologies, their parties increasingly tended to back them and the non-presidential party opposed them. These administrations happened to usually be Democratic. But its an accident of history that we associate the New Deal and the Great Society with the Democrats.

I actually have a slim hope that it turns out to be a Republican president, coming from the populist right, turns out to be the one to curb the increasing concentration of wealth in the U.S. Probably the system is too stagnant for something like this to happen. But in the U.S. system, political ideology is weak, its the actions of the government that produces the ideology and not the other way around.

galacticsurfer said...

Your suggestion that it will take a generation or two to get back to responsible govt. assumes, I would imagine, that the corruption of govt. by business is somehow to be cleaned up in the meantime. That this could happen voluntarily seems unlikely as it feeds upon itself until we get some sort of collapse or a banana republic that does not function in any real way in terms of tax collection or doing business.

People talk about govt. defaults everywhere being somehow relatively imminent, some sort of domino effect starting maybe in Southern Europe and being exacerbated by energy costs allowing no more growth, which it is all based upon. The democratic republic is based upon a businessman's freedom to make a living allowing an opposite pole to nobility(landed gentry) in towns based on trade and the trades, which always expanded starting in Benelux, Northern Italy and Britain way back when the middle class starting blossoming post middle ages.

The corporate interests are just crushing the middle class now and destroying democracy like some articles I read about history of debt in Rome, etc. shows that it was all about debt peonage which caused civil wars again and again way back then. Anyway without growth no middle class and no democracy. We are back to something else. A static system controlled by a permanent upper class which probably inherits or at least in a small circle switches leadership posts for appearances sakes.

Midterm integration of USA with Mexico/Central American population will change things considerably over the next couple of generations shifting the emphasis from East Coast European alliances to West and South US caribbean Latin American Axis despite the NYC and D.C. power money/Media/political power centers currently in control. This might give you your new Civil War if you want to project one or a Latino president and large parts of congress over time could ameliorate that prospect.

I know the new generations should be coming up as honest kids deperate to change things and that is really your point according to generational theory but if the new leadership in biz and govt. are like the princelings (sons of CP power brokers) in China controlling everything then what hope is there for real change?

galacticsurfer said...

good article with lots of historical perspective on progressive era, etc. at the Rolling Stone:

publion said...

First let's (no, not the lawyers) get rid of the PACs.

This mid-70s scam effectively eliminated the requirement for large bags of cash to be transferred to pols at midnight in a wooded area and cut the Hill loose from any boundaries at all in matters of cash.

I read recently a great mock headline on "The Onion" site: American People Hire Expensive Lobbyist To Represent Their Interests On Capitol Hill.

mysticalsea said...

I'm afraid this time things will go the way they have for every second saeculum. We'll have such a meandering, decentralized mess of a situation that it will be hard for our younger generation to come out of it looking like heroes. Think of the Glorious Revolution culminating in the New England witch hunts and the "missing" hero generation of the Civil War. We'll stumble into the new era of freedom but the result may be so inconclusive and controversial that you'll hardly see the shining armor of the heroes through the dirt, smoke and ash. That will be more our fault than theirs.