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Friday, November 02, 2012

What is at stake on Tuesday

Last night I attended a panel discussion of the election featuring three political scientists. Two of them argued that this was a very important election, a point with which I thoroughly agree. What was at stake, they said, was the preservation of the New Deal. I was reminded of another discussion 32 years ago, immediately after the election of Ronald Reagan and a Republican Senate, when a colleague remarked that he hoped we could save the New Deal, even if we lost the Great Society. In recent months I have realized how wrong he was, and I spoke up at question time last night because I could not agree.

To say that we are still fighting for the New Deal completely misunderstands what the New Deal was and what it accomplished. The metaphor itself had a meaning now lost: it treated the national economy as a card game in which a tiny number of players held all the high cards, and promised to redistribute them. And this was not just a moral issue, even though Roosevelt struck moral chords in his first inaugural address. The New Deal economists saw inequality and rampant market freedom as the source of economic misery and they were determined to do something about it. They did so, almost at once.

In practical terms, the New Deal meant a drastic reorganization of the financial industry separating commercial banking from investment banking, as codified in the Glass-Steagall Act. It meant creating the SEC to regulate the stock market. It meant recognizing the right of unions to organize and bargain collectively, a new right of which literally millions of workers took advantage from the mid-1930s onward. It meant effective limitations on hours and a minimum wage. Eventually it meant vigorous enforcement of the anti-trust laws. The New Deal gave the government a role in providing energy--public power was its watchword. And it made the government an employer of last resort in hard times, using manpower to build a new infrastructure for the country. Last but hardly least, it eventually pushed top marginal tax rates--already at around 60% thanks to the Hoover Administration--up to 91%, where they remained until 1964. That made it impossible for people like the Koch brothers to accumulate fortunes big enough to buy the American political system. The New Deal did these things, to repeat, because New Dealers from FDR on down saw them as essential to a healthy economy and society--and they were right.

Today, all of those reforms and policies are either dead, or moribund, and Barack Obama has done very little to reverse that trend. He could have nationalized the big banks in 2009, sold them off as separate units, and called for a new Glass-Stegall Act, but he didn't. He has done nothing for labor. The minimum wage remains well below what it was half a century ago in real terms, and hours, as a brilliant New York Times piece showed last weekend, are now much too short, not too long--too short to allow jobholders to live. Obama could not even summon the courage to let all the Bush tax cuts expire and let the top bracket go back up to 39%. He has not even proposed doing away with the "carried interest" scam that allows Romney to pay 14% on his millions. Labor has been retreating steadily for decades. And with the Republican majority dug in in the House, none of this would change in a second Obama term even if he wanted it to.

What we are fighting for now are the most important legacies of the Great Society and its aftermath under Richard Nixon. These include Social Security payments that retirees can actually live on (a Nixon legacy); Medicare, Johnson's signature achievement after civil rights; and Medicaid, which passed along with it. Roosevelt did start Social Security, but it remained too modest to keep recipients out of poverty for its first three decades. Two other threatened legacies from LBJ are the Voting Rights Act, which now seems more needed than it has been for thirty years, and spending on education. That is the legacy that Obama is trying not only to preserve, but to build on with Obamacare. But because of that, we face an ironic prospect. While we may still take care of people when they are old or sick, working adults and their families get worse off every year.

The difference between the Roosevelt and Obama Administrations is reflected in the political trends of the last four years. FDR, to be sure, was luckier in certain respects. Not only did he come into office at a moment of much worse misery, but he also came in when the Depression was finally bottoming out. But his vigorous measures, as well as his crusading spirit, made an enormous difference in the lives of millions of Americans during his first four years in office. That is why the Democrats gained seats in both houses in the Congressional elections of 1934, and why Roosevelt won the biggest electoral majority in modern history in 1936. Curiously enough, Barack Obama's auto bailout has made a difference--a huge difference--in the lives of hundreds of thousands, if not millions, of families in Michigan and Ohio, and that may ensure his re-election. But those are the only families who feel that way, and that is why the Democrats lost more than 60 seats two years ago and why Obama is now poised to be re-elected by a razor-thin margin along with a largely hostile Congress.

Mitt Romney's victory remains possible, if less likely, and we are all wondering which Romney would be sworn in on January 20 if he won. Looking realistically at his life, he has gone with the flow at every turn. As a young man he jumped on the private equity bandwagon without caring in the slightest what the impact of leveraged buyouts would be. When he went into electoral politics in Massachusetts he took the positions necessary to appeal to the electorate, and as Governor he worked with a Democratic legislature to pass impressive liberal reforms because that was the only way he could make a record. He obviously has no interest in making the country more like Massachusetts (which, by the way, has one of the lower unemployment rates in the nation even now.) I am not hopeful that he would arrest the Republican tide, and I doubt very much that even a small Democratic Senate majority would do much to stand in its way.

For the sake of the next decades it is important that we at least preserve the government that we have now. We may not, partly because the Republicans and the media have persuaded many voters--including well-educated younger voters, as I have found--that there really isn't much difference between the two parties and that they are equally partisan. But if we do, future generations will have more to build on when our intellectual and moral tide turns, and we begin once again to realize the promise of prosperity and equality which the Founders bequeathed to us.


tructor man said...

You say -- "(President Obama) could have nationalized the big banks in 2009, sold them off as separate units, and called for a new Glass-Stegall Act, but he didn't. He has done nothing for labor. The minimum wage remains well below what it was half a century ago in real terms, and hours, as a brilliant New York Times piece showed last weekend, are now much too short, not too long--too short to allow jobholders to live".
Well said! But let's not forget it was Pres. Clinton that signed the emiose of Glass-Steagall in 1999, and mostly Democrats who built the Fannie Mae house of cards...
The key to any reform is an Obama win next week, so that the least he can do will be to choose a Supreme Court that will reverse camp[aign finance laws enabling billionaires to buy our democracy.

Bozon said...

Great capsule history of the New Deal, and Great Society, key themes and sequences.

Not often spelled out so succinctly.

For a variety of reasons I am not as confident as you re the new renaissance in American ideas politics or spirit in future generations.

Hope will need and require some drastic reform measures, and or politidal shocks,

none of which Americans have been preparing to make, or which they are prepared to endure.

All the best,

tructor man said...

I might add most financial gurus I follow predict horrendous turmoil, regardless of who is President. They claim there is no way to finance US and Euro debt, and some predict civil war in Europe and riots in the streets here! Others predict collapse of the remanants of Bretton Woods/IMF & World Bank agreements, and that the US will have no choice other than to declare it will not honor its debts... Please show me they're wrong.
I really hope some other ways are found, and don't want to be this pessimistic, but Bernanke's solution of printing ever more paper money will ultimately bring on Weimar-style inflation ($1000/gal gas, $500 bread, etc).