WASHINGTON
(AP) — The New Deal was really a series of new deals, spread out over
more than six years during the Great Depression — a menu of nationally
scaled projects that were one part make-work and many parts lasting
impact. They delivered a broad-shouldered expression of presidential
authority whose overall benefits were both economic and psychological.
Not
all of them worked. Some failed badly. But it was a try-anything moment
by Franklin D. Roosevelt at a time of national despair. And it remade
the role of the federal government in American life.
Men
were hired to plant trees in Oklahoma after the Dust Bowl and to build
roads, bridges and schools. Writers and artists were dispatched to
chronicle the hardship, employing authors like Saul Bellow and Ralph
Ellison. In most every state, you can still see murals or read local
histories or walk into enduring projects like LaGuardia Airport and
Dealey Plaza in Dallas.
These
programs were designed to provide get-by wages in exchange for work.
But others were crafted to remake society. Social Security was
instituted to save the elderly from poverty, federal insurance on banks
to renew trust in the financial system, minimum wage and labor rights to
redistribute the balance of power between employer and employee.
In
this March 26, 1937, file photo, Works Progress Administration (WPA)
workers make copper utensils for a hospital. (AP Photo, File)
Now,
nearly 90 years later, the United States is fighting a disease that
presents the country with wrenching life-and-death challenges. Yet at
the same time, it has served up something else as well: a rare
opportunity to galvanize Americans for change.
And
as the U.S. confronts its most profound financial crisis since the
Depression, brought on by the most deadly pandemic in a century, there
are early soundings of a larger question: What would a “new” New Deal
look like?
For
the historian Doris Kearns Goodwin, whose latest book is “Leadership in
Turbulent Times,” the very act of discussing such a possibility is
productive in itself. “It at least allows you to think of something that
could come out of this that could be positive.”
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The
New Deal’s legacy still provides support today. Unemployment insurance.
Retirement and disability income. Transparency in the stock markets.
Infrastructure that ensures a steady flow of electricity and supply of
water.
Yet the
coronavirus outbreak has also revealed how ill-equipped the government
was to address the rapidly escalating fallout of 26 million job losses,
overwhelmed hospitals and millions of shuttered businesses only weeks
away from failure.
“We
basically have a 21st-century economy wobbling on a 20th-century
foundation,” said Rahm Emanuel, the former mayor of Chicago and chief of
staff to President Barack Obama. “We need to upgrade the system to have
a 21st-century economy in all respects.”
In
this March 9, 1936, file photo Works Progress Administration (WPA)
workers build a new farm-to-market road along Knob Creek in Tennessee.
(AP Photo, File)
Among the questions at hand:
—How
can Americans have greater access to savings for retirement and
financial emergencies? There are fewer workers than a generation ago,
and many face higher costs for housing and school.
—How
can the government ensure greater resources for medical care in a
crisis? This would mean that mission-critical workers, from nurses to
grocery-store clerks, have stockpiles of equipment to stay safe. It
would mean people could get tested and treated without crippling
hospital bills. And it would mean researchers have incentives to develop
vaccines and bring them to market faster.
President
Donald Trump has talked up infrastructure programs and affordable
healthcare but offered few details. Democratic lawmakers must work with a
president their base of voters distrusts and despises. The likely
consequence: Any mandate for change will come from the ballot boxes this
November.
Just
this past week, Sen. Kirsten Gillibrand (D-N.Y.) and Sen. Michael Bennet
(D-Colo.), leaned hard on programs of the New Deal to offer legislation
to create a federal “health force” to employ workers “for future public
health care needs, and build skills for new workers to enter the public
health and health care workforce.” It is unlikely the
Republican-controlled Senate would consider such legislation, but it
also shows what Democrats might have in mind as voters contemplate
upcoming elections.
Both
parties have an uneasy relationship with how states and the federal
government should share their power, and any reprise of the New Deal
would likely enhance Washington’s authority.
Trump
has yet to offer a systemic solution to the crisis. though he has
approved record levels of direct assistance to businesses and
individuals. Joe Biden, the presumptive Democratic nominee, has talked
more about combating the pandemic than he has about reimagining what
kind of country might emerge from it.
So
far, Congress has committed more than $2 trillion to sustaining the
economy during the outbreak. But most economists see that unprecedented
sum as relief, not recovery or reform — just one of the “three Rs” of
the New Deal.
Any
recovery will rely on government programs to catalyze the economy so
that hiring and commerce can flow again. The public will also expect
reforms that make the nation more resilient against future emergencies,
so people feel comfortable enough to take the risks that lead to
innovation and prosperity.
Investing
in infrastructure holds bipartisan appeal. Trump has repeatedly called
for upgrades to roads, bridges and pipelines. Democrats would like to
ensure that internet connectivity, including next-generation 5G, exists
in rural and poorer communities.
But
other options have existed mainly in the white papers of think tanks,
academics and advocacy groups. There is a newfound appetite for them,
which could overpower even the highly polarized politics of this moment.
“The
question people always ask is, what would it take to break through that
extreme partisanship?” Goodwin said. “It takes a crisis. This is what
happens during wars.”
After 9/11, much of the criticism of the federal government focused on a collective “failure of imagination.”
Nineteen
years later, that phrase has a new context as Washington tries to
fashion a response to the coronavirus. It’s a challenge at a scale the
nation has not seen since 1932, when Roosevelt, a Democrat, defeated
Republican President Herbert Hoover with a promise of better days ahead —
a “new deal” for the “forgotten man.”
When
New Deal programs were unveiled, no one definitively knew what had
caused the U.S. economy to collapse, unlike now, when the culprit and
the vulnerabilities are clearer.
The
political climate was fundamentally different then. Roosevelt,
celebrated for his optimism and empathy, had muscular Democratic
majorities in Congress. But he also sought to unite the country. His
first radio “fireside chat” in 1933 was devoted to asking Americans to
trust the banking system again. “He promised them that they could get
their money back,” Goodwin said. The next fireside chat called for
systemic change that Roosevelt argued would regulate capitalism’s
extremes and provide a safety net.
“Roosevelt
was very concerned with the idea of one body politic,” said Allan
Winkler, a professor emeritus at Miami University of Ohio, who testified
before Congress about the New Deal in 2009 during the height of the
financial crisis. “I worry about that in the current situation, that we
don’t have a willingness to work together.”
But
the New Deal programs stemmed from bold visions that could be
implemented by political leaders, he cautioned. “In our fragmented body
politic, it would take an extraordinary politician to do what is
necessary.”
In this Oct. 2, 1936, file photo, President Franklin Roosevelt at the
new 21-story medical unit which he dedicated in Jersey City, N.J.,
assuring the medical profession that the New Deal contemplated no action
detrimental to it in carrying out the Social Security Act. (AP Photo,
File)
This
is why a debate is starting among policy thinkers about the components
needed for recovery and reform: so that leaders can feel empowered to
take action.
Emanuel sees two needed chapters — one to provide immediate aid and a second with more lasting change.
“We
need another bill to jump start the economy,” Emanuel said. He says it
should be followed by investments in infrastructure to improve online
connectivity so that learning, medicine and work can get through
stay-at-home orders.
The
case for a major rebuilding may become clear if dire forecasts of a
second-quarter decline in annual economic output ranging from 30% to 50%
come true.
“I
think we are going to see an epic lockup in the mortgage markets as
people are going to be unable to make their payments,” said Louis Hyman,
a historian at Cornell University.
This
same cascade of defaults existed in the Great Depression. The New Deal
swung to the rescue with the Home Owners’ Loan Corporation, which bought
past-due mortgages with government bonds and blocked a wave of
foreclosures. Government officials also developed what would become
30-year mortgages. The loan’s stable interest rates helped spur new
construction.
But
now, Hyman says, there’s a “painful truth”: The bulk of most people’s
wealth is tied up in their homes — and inaccessible in a crisis.
“The
policy that would undo that is to enable people to accumulate wealth in
other ways,” he wrote in an email. Those include better pay, capital
market investment incentives and, especially, “building lots of houses
for the under-housed.”
Any attempt at updating a New Deal will reflect ideological differences between Democrats and Republicans.
Framing
this divide is a simple choice: Is it better to establish a government
firewall that can protect the economy during future downturns? Or should
the tax code and regulations be re-engineered so that private companies
and individuals can more easily adapt to pandemics?
Heather
Boushey, president of the Washington Center for Equitable Growth, says
allowing government aid to automatically increase as the economy began
to fall would have been one of “our best defenses so that the
coronavirus recession does not turn into a full-scale economic
depression.”
“Responding
to the crisis without also making our economy more resilient against
future shocks would be a mistake,” she said. Automatic triggers for
expanded jobless benefits, increased medical aid and new construction
spending would ease the pain of a downturn and speed recovery.
More conservative economists believe adjustments to the tax code and regulations will improve growth and resilience.
“This
is not one of those things where if you send checks you can jump-start
the economy,” said Douglas Holtz-Eakin, a former Congressional Budget
Office director and economic adviser to Republicans.
Price
Fishback, an economist at the University of Arizona known for his work
studying the Depression era, proposes another, more abstract notion as a
key to fashioning a New Deal for the 21st century: humility.
Even
New Deal programs that improved lives did not insulate the American
people. There was stagflation in the 1970s. Untamed financial markets
fueled a housing bubble during the 2000s. And at the end of 2019, no
major economist forecasting this year envisioned that a pandemic would
throw the world into turmoil.
This
Aug. 26, 2010, file photo shows the Timberline Lodge in Timberline
Lodge, Ore. The Lodge, a National Historic Landmark, was built as a
Works Progress Administration (WPA) project during the Great Depression.
(AP Photo/Rick Bowmer, File)
The
United States would be stronger with improved internet connectivity,
more housing, government programs that can cushion a downturn and a
health care system that can handle crises and emergencies. Life would be
better. But the nation would be far from impervious.
So stay humble, Fishback urges.
“Once we think we got it licked,” he says, “we get slammed in the face again.”
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