Milestones

 My draft history of the US based upon presidential addresses is now complete through 1981 and I am doing the research for the Reagan years.  They were, I now see, a turning point comparable and parallel to Franklin Roosevelt's New Deal.  Like the New Deal, the Reagan years set the country on a different path, and we have been on that path for as long as we remained on FDR's.  And that is why we have seen no federal response whatever to the economic crisis that we now face, and why our elite political system has become so disconnected from the lives of ordinary Americans.

The great change in the role of the government wrought by the New Deal had begun to emerge thirty years earlier, when Theodore Roosevelt began to talk about the need for the government to help make our economic order more just.  Woodrow Wilson built upon that legacy with some modest specific steps, but the momentum towards a new government role died out in the 1920s.  FDR in 1933 came to power in the midst of the greatest economic crisis in our history and made it the government's business to get us out of it.   He was only intermittently successful during the 1930s, but he did put millions of people to work, and he also created the modern American safety net by passing the Social Security Act, while organized labor secured new rights under the Wagner Act.  The government also spent billions on infrastructure.  When inflation emerged as a problem during the Second World War, the government imposed price controls to keep it in check, and they worked quite well until they were lifted.

By the time of Roosevelt's death in 1945, the federal government had a clearly defined role in promoting full employment (codified in the Full Employment Act of 1946) and trying to control inflation.  Presidents from Truman through Carter followed FDR's lead by making broadcast addresses to the American people in response to economic downturns or inflationary surges, trying to explain what was happening and what they planned to do about it.  Congress passed the single biggest federal infrastructure program, the Interstate Highway System, under Eisenhower, and it transformed the country.  Beginning in 1965, however, inflation--fueled in part by the war in Vietnam--and then the energy crisis presented the government with problems that it could not solve.  Nixon, Ford and Carter all vainly struggled with them, and Ford and Carter both lost elections because of them.  That brought Reagan into power.

Reagan stood by--as his predecessors would not have--while Paul Volcker raised interest rates to unheard-of heights, plunging the country into a deep recession that finally slowed inflation to much lower levels.  Meanwhile, he preached, again and again, a new gospel: that government was the source of, not the solution to, our economic problems, and had to leave taxpayers with more money and reduce its size and role.  Reagan's actual success was actually as uneven as Roosevelt's.  Unemployment, which had averaged 7.2 percent in 1980 and risen to 10.8 percent in 1982, had only fallen to 7.3 percent in 1984, and inflation remained at 3.9%.  But Reagan, like FDR, used numerous broadcast addresses to convince the American people that he had gotten the country on a new and better path, and his overwhelming re-election victory in 1984 was comparable to Roosevelt's in 1936.  Organized labor was also losing ground, and economic inequality began to increase.  Those trends have continued to this day.

George H. W. Bush also lost the White House largely because of a severe recession in 1992, but his successor Bill Clinton made only one change in the Reagan recipe--a tax increase, which, added to a previous one under Bush, eventually produced a balanced budget.  But Clinton famously declared in January 1996 that the era of big government was over.  NAFTA, which became law under Clinton, took a great deal of economic activity out of the government's control.  George W. Bush shifted the nation's attention overseas in his first year in office, but meanwhile signed two tax cuts that undid Clinton's work and recreated the permanent federal deficit.

The great crash of 2008 paralleled that of 1929, but Barack Obama never thought seriously about using it to get the country back on the New Deal track.  He and his conservative advisers yielded the initiative to the Fed--as Reagan had done--and allowed it to refinance the bankrupt big banks at very generous terms while doing nothing for the millions of Americans who lost their homes to foreclosures.  That decision helped cost him the control of Congress and the rest of his tenure focused on budget cutting.  Then came Trump and the at least temporary end of the enlightenment experiment in the US.

The pandemic led to another vast infusion of cash into our leading economic institutions, both from the Fed and from the federal government.  That in turn has fueled the first big inflationary surge we have experienced since the Vietnam years, while international crises have once again led to much higher energy prices.  President Biden however has not made any nationwide broadcast addresses either to try to explain what has happened or what we might do about it.  Even Presidents Nixon and Ford imposed some energy price controls on domestic sources in the 1970s, but I have not heard such an idea even mentioned this year, even though the US now produces all the energy that it needs. Biden has for the moment yielded the political initiative within his own party to the House committee investigating January 6.  Whether that will win many voters over in November remains to be seen.

Joe Manchin's refusal to vote for any energy legislation has drawn a lot of comment, but he is also threatening to block critical international promises on corporate taxes.  Secretary of the Treasury Yellen has negotiated a broad agreement to impose minimum corporate taxes around the world, to prevent multinationals from evading taxes by moving their headquarters.  The agreement will fail if Manchin blocks a US minimum tax.  Here we see a direct confrontation between the modern state's claim to control resources for the common good, and our new financial aristocracy which has become more powerful than national governments--as Henry Adams was already noting during the Gilded Age.  And simultaneously, the nation is more divided than ever by bitter, emotional social issues, which stand in the way of consolidating the lower economic half of the population behind a more egalitarian economic program.  We do seem to be in a new era.