The New New Deal

January 29, 2009

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The New New Deal

Same as the Old New Deal

Happy days are here again—not for America, but for meddlers promising to scheme the nation out of the doldrums. Ideas that would have been derided during the presidencies of Bill Clinton (“the era of big government is over”), George H.W. Bush (“A president…. must see to it that government intrudes as little as possible in the lives of the people”), and Ronald Reagan (“government is not the solution to our problem; government is the problem”) are now de rigueur. That those presidents were unfaithful to their rhetoric does nothing to blunt the sense that they strode the stage during a different act. America has again crossed a Rubicon. Not since the Great Depression have cranks had the ear of the nation as they do now.

For much of the past year, a strange breed of past-pining progressive has demanded a “new” New Deal. Time pictured an in-color Obama on its black-and-white cover as a bespectacled Franklin Roosevelt triumphantly titling his cigarette upwards. Politico labeled Obama’s program “a twenty-first century New Deal.” Paul Krugman dubbed the new president “Franklin Delano Obama” in the New York Times and contended that the New Deal had much to impart to Barack Obama, particularly the lesson that the 32nd president’s “economic policies were too cautious.”

The “new” New Deal recidivism reveals a sclerotic movement stuck in the past. The ubiquitous prefix “new” stamped on any old program reflects the movement’s horror that its ancient pedigree might be discovered. What self-respecting “progressive” xeroxes the past to boldly remake the future? The old New Deal was a mish-mash of the populist, progressive, and social gospel movements that antedated it. If the New Deal’s abandonment of the gold standard did not spark flashbacks to William Jennings Bryan, and its National Recovery Administration did not immediately bring Woodrow Wilson’s War Industries Board to mind, then its very name should have jogged memories. The Madison Avenue-style marketing ploy, an amalgamation of Woodrow Wilson’s “New Freedom” and Theodore Roosevelt’s “Square Deal,” served as a clue to the atavistic nature of the New Deal. The “new” New Deal, then, recycles a 75-year-old political gimmick that, even when first unveiled, was stale.

There is nothing inherently wrong with not reinventing the wheel. But when the wheel is a concrete rhombus supported by popsicle-stick spokes and a gingerbread axle, then, by all means, invent a new wheel. The New Deal failed. It intensified and prolonged the Great Depression. The frenetic spending and erratic meddling made the Great Depression longer and more painful than other contractions in American history and the contemporaneous depressions experienced in other industrialized nations. Who, but a masochist, would seek to relive the New Deal? 

Parallels abound. Both Roosevelt and Obama enjoyed strong Democratic majorities in Congress on day one. Both presidents confronted financial crises and contracting economies—and the openness to crank solutions that invariably accompany tough times. “This nation is asking for action, and action now,” Roosevelt declared on inauguration day. Channeling his distant predecessor, Obama proclaimed in his inauguration address, “The state of the economy calls for action, bold and swift.” But what action? Not until after Election Day did the “action” or “change” the candidates promised take on specificity. Candidate Obama characterized the Bush administration as an “orgy of spending and enormous deficits.” Candidate Roosevelt lambasted the Hoover administration for adding “bureau on bureau, commission on commission.” Said Roosevelt during the 1932 campaign, “I accuse the present administration of being the greatest spending administration in peace times in all our history.” But upon taking office, presidents 32 and 44 upped the spending ante. When confronted with the Depression’s recalcitrance to the New Deal’s spending, Roosevelt invoked a magic word, “Hoover,” to absolve himself of responsibility. One needn’t be blessed with clairvoyance to envision Obama using the name “Bush” to similar effect for years to come as his policies fail.

The inconvenient truth is that Bush and Obama, like Hoover and Roosevelt, are more alike than different. Just as Hoover’s ventures into social engineering and a managed economy not only softened up America to Roosevelt’s New Deal but also undercut the credibility of Republican opposition to it, Bush’s big-government “conservatism” has enabled Obama’s designs. This is the historical parallel that retread enthusiasts of a “new” New Deal want everyone to forget:

The New Deal, and the “new” New Deal, actually began during Republican administrations.

“Advocates of the free market must confront the fact that both the Great Depression and the current financial crisis were preceded by years of laissez-faire economic policies,” Katrina Vanden Heuvel and Eric Schlosser insisted in the Wall Street Journal during the heat of 2008’s presidential campaign. This narrative, of too much freedom hampering private commerce, worked so well as a brickbat against capitalism during the Great Depression that it has been called for an encore in the wake of the Bush presidency. Though an agnate economic vision binds Hoover and Bush, the source of that vision owes little to free-market economics.  

Continuity, rather than renewal, marks the transition from Bush to Obama. Spotlighting the linkage is the banker bailout. What Bush propelled from the White House, Obama advanced on Capitol Hill. The 43rd president spent the first $350 billion. The 44th president will spend the second installment. Rather than “years of laissez-faire economic policies,” the Bush presidency extended Big Brother’s hand out to senior citizens through an expensive prescription-drug entitlement, inside political campaigns through restrictive campaign-finance laws, and into previously private businesses—resulting in the nationalization of airport security and the partial nationalization of nine of America’s largest banks, two American auto-manufacturing giants, and the largest insurance company in the world. Not since the Hoover-Roosevelt years has there been such a drastic reorientation of federal economic policy.

For Obama to break from the last eight years of government gluttony, he might outline a series of spending cuts or identify a federal department for elimination. Instead, the president champions the most expensive piece of legislation ever. The stimulus package, nicknamed the American Recovery and Reinvestment Act, approaches one trillion dollars—roughly the sum total of federal receipts when George H.W. Bush assumed office. The congressional summary of the 647-page stimulus package highlights $6 billion for rural broadband internet access, $400 billion to NASA for global warming research, $2 billion for car battery research, $650 million in coupons to convert old televisions from analog to digital, $600 million for alternative-fuel vehicles for the federal government, $350 million to the department of defense to research renewable energy fueling weapons systems, and $20 billion to “modest-income families” for “nutrition assistance.”

Just as continuity rather than conflict marks the transition between George W. Bush and Barack Obama, it is helpful, though anathema, to speak of the Hoover-Roosevelt years. As Murray Rothbard pointed out in America’s Great Depression,

For if we define ‘New Deal’ as an anti-depression program marked by extensive governmental economic planning and intervention—including bolstering of wage rates and prices, expansion of credit, propping up of weak firms, and increased government spending (e.g., subsides to unemployment and public works)—Herbert Clark Hoover must be considered the founder of the New Deal in America. Hoover, from the very start of the depression, set his course unerringly toward the violation of all the laissez-faire canons.

The federal public-works projects that historians credit Roosevelt with jumpstarting actually began under his maligned predecessors. The Hoover Dam, one would think, would be an obvious reminder. As evidenced by the Reconstruction Finance Corporation, the alphabet-soup of federal agencies planning America out of the depression also predated Roosevelt. Like his successor, Hoover was a hands-on interventionist. He signed the Smoot-Hawley Act that skyrocketed tariff rates. He more than doubled the top marginal income-tax rate from 24 to 63 percent. What is laissez faire about all that? 

“To scoff at Hoover’s tragic failure to cure the depression as a typical example of laissez-faire is drastically to misread the historical record,” Rothbard noted in America’s Great Depression. “The Hoover rout must be set down as a failure of government planning and not of the free market.” But it wasn’t. And the louder voices drowning out the more reasonable ones, such as Rothbard’s, has resulted in a remake of the New Deal with Barack Obama starring as the hero FDR and George W. Bush playing the villain Hoover.

In New Deal historiography, facts and ideology collide—and ideology wins. The mythic Hoover is a devoteé of free-market economics rather than a longtime progressive. The New Deal of fable slays the Great Depression. These dubious postulates, by repetition and volume, have been established as the dominant historical narrative: capitalism made a mess, big-government liberalism cleaned it up. 

Whatever inspiration Franklin Roosevelt (or his 21st-century imitator) provided to the downtrodden, his policies did not end hard times. Ill-thought-out programs paid farmers to uproot crops during a drought and destroy livestock amid hunger, jailed a tailor for pressing a suit of clothes for a nickel less than the competition, and separated the dollar’s value from gold and attached it to presidential fiat. Was it any wonder that farms turned into dust bowls, businesses closed, and lending all but ceased? What the disease didn’t kill, the medicine did. The Dow Jones Industrial Average, the gross domestic product, and unemployment didn’t meet pre-crash levels until the Eisenhower presidency, the first year of Roosevelt’s third-term, and midway through World War II, respectively. In other words, Roosevelt had been in office longer than any other president by the time economic indicators recovered.

The New Deal failed terribly as an economic program but succeeded wildly as a public relations gambit. That is why unimaginative progressives seek to revive it. That is why they are getting away with it. The clear lesson is that losing yesterday’s historical debate may guarantee failure in today’s political debate. 

The price America paid for the New Dealers winning the political battle during the Hoover-Roosevelt years was a more painful, deeper depression. By losing the battle over the history of the New Deal, we condemn ourselves to more of the same during the Bush-Obama years.

Daniel J. Flynn, the author of A Conservative History of the American Left, blogs at

Photo: Time Magazine, Nov. 24, 2008.

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