Paul Krugman, winner of the Nobel Prize in Economics in 2008, has written a cogent and timely op-ed in the New York Times illuminating what is currently going on at the nexus of economics and politics. For Krugman's biography click here. What is especially fascinating is his analysis of how reminiscent the present situation is of the dynamics existing in 1938 during the New Deal. Then as now, the United States stood at the crossroads of deciding whether to continue or contract government stimulus of the economy.
Krugman's piece, "1938 in 2010," begins with a setting up of the parallel scenario: "Here's the situation: The U.S. economy has been crippled by a financial crisis. The President's policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections." Sound familiar? It ought to. The situations facing Franklin Roosevelt in 1938 and Barack Obama in 2010 are eerily alike.
Krugman goes into how FDR listened to the deficit hawks in 1937 and pulled back New Deal expenditures, only to see the economy begin to soften alarmingly. He was able to rush some emergency funding through, which stabilized the situation, but public opinion had begun to set against any more deficit spending-just like today. The Gallup poll in March 1938 found that 63% favored cutting taxes on business and only 15% favored additional spending to improve the economy. In the midterms the Democrats "lost 70 seats in the House and 7 in the Senate."
Fortunately for the economy, the situation was retrieved by the need to rearm as the clouds of war began to gather over Europe in 1939. You ought to take a look at Krugman's piece to see how massive this government stimulus on an epic scale really was. For in economic terms, that is what the war footing essentially was from 1939 to 1945, an immense government spending and jobs program that achieved full employment and actually reduced the debt as a percentage of GDP as the national economy exploded.
Today we are again faced with the same dynamics, though there appears to be little chance of an overwhelming set of circumstances arising (such as the need to prepare for and fight WWII) to fortuitously restore the consensus for government spending to prime demand and end the Recession. In that sense, Krugman is right to make the case that we seem too often not to learn from history, that too many politicians and economists have been "unlearning the lessons of the 1930s" and appear ready to commit "all the same mistakes."
Krugman is right on the mark in closing with, "But always remember: this slump can be cured. All it will take is a little bit of intellectual clarity, and a lot of political will. Here's hoping we find those virtues in the not too distant future."
Showing posts with label Franklin Roosevelt. Show all posts
Showing posts with label Franklin Roosevelt. Show all posts
Sunday, September 12, 2010
Tuesday, January 13, 2009
Obama and Roosevelt, Continued
The overriding challenges confronting Franklin Roosevelt in 1933 and Barack Obama this year are similar in that both concerned the economy. The major difference is one of degree. As serious as the financial and economic problems today are, those faced by FDR in 1933 were incomparably worse.
By the time Roosevelt took office the Great Depression had been underway for nearly three and a half years. Over that time the Gross National Product of the American economy had been cut nearly in half, falling from $104 billion in 1929 to $56 billion in 1933. Five thousand bank failures had erased nine million bank accounts. Unemployment stood at 25%. Underemployment, including both the unemployed and those with meager or part-time employment insufficient to maintain their financial obligations, may have reached 50%. No one knows for sure. The price of industrial stocks had plummeted by 80%. People were so desperate that when the Soviet trade office in New York announced a need for 6,000 skilled workers to go to Communist Russia, 100,000 Americans applied.
In agriculture, farm income had fallen from $12 billion in 1929 to $5 billion in 1932. Wheat sold for twenty-three cents a bushel. Overall, farm prices had dropped 50%, far below the cost of production. In response, farmers plowed corn under, poured milk into the ground and allowed cotton to rot in the fields. The governors of several states shut down their school systems, there being no money to pay for them. Other states mobilized their national guards to control fighting over farm foreclosures. Health researchers estimated 90% of the citizens of Kentucky and West Virginia suffered from malnutrition.
Today’s figures are of a far different magnitude. The recession has lasted 13 months to date. GDP appears to have fallen 0.7% in the fourth quarter of 2007 and will perhaps come in at a four to five percent loss for the fourth quarter of 2008. Twenty-five American banks failed in 2008, the biggest of which, Washington Mutual, was taken over by JP Morgan Chase. The stock market index has fallen 40% since its peak at over 14,000 in October of 2007. Unemployment is currently at 7.2%, with fears it may reach 10. If you add in the underemployed as reported this week, that figure could be as high as 13%. States and municipalities are strapped; in California Governor Schwarzenegger is contemplating cutting school funding by 4%, cutting the school year by a week and furloughing state employees two days a month. In a current sore spot for the ag sector, milk prices are once again below the cost of production. The bottom line is that if the 2009 Inaugural will be held in difficult times, 1933 took place during unmitigated catastrophe.
Looking at the campaigns that brought them to office, there were several similarities. Roosevelt pledged serious change, what he called “a new deal for the American people.” He ran against the record of the incumbent, Herbert Hoover, whom he blamed for the state of the nation’s ills. Obama also hammered home the change message, in the form of “change we can believe in” and later, “the change we need.” Although the incumbent, George W. Bush was not running, Obama attempted to tie his opponent John McCain as closely to Bush as possible so that he too would have an advantage as though he were running against an unpopular incumbent.
Both Roosevelt and Obama were accused of dangerous radicalism by their opponents. Hoover called the Democrats “the party of the mob” and likened FDR’s ideas to those of Soviet Communism. McCain similarly attempted to paint Obama as out of the mainstream, calling him a “socialist” and accusing him of questionable associations. Neither charge appeared to resonate with the voters as both FDR and Obama were elected by comfortable margins.
Though both won solid election victories, Roosevelt surveyed the crowd at his inaugural secure in the knowledge that his election was an immense landslide and Congress stood ready to approve more or less anything he proposed. Of the two, Roosevelt’s victory was much the more decisive. Because conditions were so much worse in 1933, a larger majority were eager to make a change. Roosevelt captured 57.4% of the popular vote to Hoover’s 39.7%. FDR won 42 of the 48 states and captured the electoral vote 472-59. His party controlled the House of Representatives by almost three to one, 310-117, and the Senate 60 to 36.
When Obama turns from taking the oath to begin his Inaugural Address, he may face a sea of as many as 1,500,000 faces. But he will probably not have quite Roosevelt’s political muscle. Obama won a substantial victory, though not an overwhelming one. He took 52.9% of the popular vote to McCain’s 45.7% and won the electoral vote 365 to 173. His party will enjoy a margin of 258-177 in the House and probably 59-41 in the Senate.
The country had to wait longer for the Roosevelt inauguration, too. According to the original Constitutional wording it took place on March 4, seventeen weeks after the election. The Twentieth Amendment, passed in 1932, has meant that in every election since Roosevelt’s in 1933 the inaugural is held on January 20th, a full six weeks earlier.
And Obama has had a more cooperative relationship with the man he is succeeding than Roosevelt did. Hoover beseeched FDR to make public statements supporting his policies in order to bolster confidence in the economy. Roosevelt pointedly refused, both because he strongly disagreed with Hoover’s laissez-faire approach to combating the Depression and also because he wanted to make no commitments until he had the authority to act. Their ride together to the Capitol steps took place in icy silence.
In contrast, once the slings and arrows of the 2008 campaign were over, President Bush and President-elect Obama have been most gracious to each other. Bush has invited Obama to the White House twice and has seemingly sought to coordinate some of his anti-recession actions, such as the auto bailout and in moving to make more of the recovery funds available when Obama takes office. For his part, though Obama is deferring to President Bush on foreign matters he has been making frequent statements on economic affairs, almost as though he is already president. This is very different from Roosevelt’s pre-inaugural practice.
Of course, no comparison of the two inaugurals would be complete without mention of the groundbreaking nature of the two men themselves. Roosevelt broke precedent as the first disabled president. Afflicted with polio as a young man, FDR was usually confined to a wheel chair and could only stand with the aid of leg braces or walk laboriously supported by the arm of a strong man. At his public appearances this was often one of his sons. His 146-foot walk to the dais at his Inauguration earned the respect of many. Radio broadcaster Ed Hill remarked, “If this man had the courage to lift himself by sheer willpower from the bed of invalidism…then he must have within him the qualities to lead the nation to recovery.”
For his part, Obama’s election as the nation’s first president of African-American descent will be remembered as a great historic watershed as long as the nation’s history is told. His inauguration is a powerful signal of the nation’s progress toward its founding dream of universal human equality. And just as Roosevelt marshaled America’s hope and will by memorably declaring, “The only thing we have to fear is fear itself,” so will Obama seek to unite his fellow citizens in the shared vision of the possible and the best we can become. A presidential inauguration has traditionally been a time when Americans of all parties come together in wishing the new president well, when optimism and hope reign supreme. As such, it remains one our most important and unifying civic rituals, as essential to the fabric of our democracy in 2009 as it was in 1933.
By the time Roosevelt took office the Great Depression had been underway for nearly three and a half years. Over that time the Gross National Product of the American economy had been cut nearly in half, falling from $104 billion in 1929 to $56 billion in 1933. Five thousand bank failures had erased nine million bank accounts. Unemployment stood at 25%. Underemployment, including both the unemployed and those with meager or part-time employment insufficient to maintain their financial obligations, may have reached 50%. No one knows for sure. The price of industrial stocks had plummeted by 80%. People were so desperate that when the Soviet trade office in New York announced a need for 6,000 skilled workers to go to Communist Russia, 100,000 Americans applied.
In agriculture, farm income had fallen from $12 billion in 1929 to $5 billion in 1932. Wheat sold for twenty-three cents a bushel. Overall, farm prices had dropped 50%, far below the cost of production. In response, farmers plowed corn under, poured milk into the ground and allowed cotton to rot in the fields. The governors of several states shut down their school systems, there being no money to pay for them. Other states mobilized their national guards to control fighting over farm foreclosures. Health researchers estimated 90% of the citizens of Kentucky and West Virginia suffered from malnutrition.
Today’s figures are of a far different magnitude. The recession has lasted 13 months to date. GDP appears to have fallen 0.7% in the fourth quarter of 2007 and will perhaps come in at a four to five percent loss for the fourth quarter of 2008. Twenty-five American banks failed in 2008, the biggest of which, Washington Mutual, was taken over by JP Morgan Chase. The stock market index has fallen 40% since its peak at over 14,000 in October of 2007. Unemployment is currently at 7.2%, with fears it may reach 10. If you add in the underemployed as reported this week, that figure could be as high as 13%. States and municipalities are strapped; in California Governor Schwarzenegger is contemplating cutting school funding by 4%, cutting the school year by a week and furloughing state employees two days a month. In a current sore spot for the ag sector, milk prices are once again below the cost of production. The bottom line is that if the 2009 Inaugural will be held in difficult times, 1933 took place during unmitigated catastrophe.
Looking at the campaigns that brought them to office, there were several similarities. Roosevelt pledged serious change, what he called “a new deal for the American people.” He ran against the record of the incumbent, Herbert Hoover, whom he blamed for the state of the nation’s ills. Obama also hammered home the change message, in the form of “change we can believe in” and later, “the change we need.” Although the incumbent, George W. Bush was not running, Obama attempted to tie his opponent John McCain as closely to Bush as possible so that he too would have an advantage as though he were running against an unpopular incumbent.
Both Roosevelt and Obama were accused of dangerous radicalism by their opponents. Hoover called the Democrats “the party of the mob” and likened FDR’s ideas to those of Soviet Communism. McCain similarly attempted to paint Obama as out of the mainstream, calling him a “socialist” and accusing him of questionable associations. Neither charge appeared to resonate with the voters as both FDR and Obama were elected by comfortable margins.
Though both won solid election victories, Roosevelt surveyed the crowd at his inaugural secure in the knowledge that his election was an immense landslide and Congress stood ready to approve more or less anything he proposed. Of the two, Roosevelt’s victory was much the more decisive. Because conditions were so much worse in 1933, a larger majority were eager to make a change. Roosevelt captured 57.4% of the popular vote to Hoover’s 39.7%. FDR won 42 of the 48 states and captured the electoral vote 472-59. His party controlled the House of Representatives by almost three to one, 310-117, and the Senate 60 to 36.
When Obama turns from taking the oath to begin his Inaugural Address, he may face a sea of as many as 1,500,000 faces. But he will probably not have quite Roosevelt’s political muscle. Obama won a substantial victory, though not an overwhelming one. He took 52.9% of the popular vote to McCain’s 45.7% and won the electoral vote 365 to 173. His party will enjoy a margin of 258-177 in the House and probably 59-41 in the Senate.
The country had to wait longer for the Roosevelt inauguration, too. According to the original Constitutional wording it took place on March 4, seventeen weeks after the election. The Twentieth Amendment, passed in 1932, has meant that in every election since Roosevelt’s in 1933 the inaugural is held on January 20th, a full six weeks earlier.
And Obama has had a more cooperative relationship with the man he is succeeding than Roosevelt did. Hoover beseeched FDR to make public statements supporting his policies in order to bolster confidence in the economy. Roosevelt pointedly refused, both because he strongly disagreed with Hoover’s laissez-faire approach to combating the Depression and also because he wanted to make no commitments until he had the authority to act. Their ride together to the Capitol steps took place in icy silence.
In contrast, once the slings and arrows of the 2008 campaign were over, President Bush and President-elect Obama have been most gracious to each other. Bush has invited Obama to the White House twice and has seemingly sought to coordinate some of his anti-recession actions, such as the auto bailout and in moving to make more of the recovery funds available when Obama takes office. For his part, though Obama is deferring to President Bush on foreign matters he has been making frequent statements on economic affairs, almost as though he is already president. This is very different from Roosevelt’s pre-inaugural practice.
Of course, no comparison of the two inaugurals would be complete without mention of the groundbreaking nature of the two men themselves. Roosevelt broke precedent as the first disabled president. Afflicted with polio as a young man, FDR was usually confined to a wheel chair and could only stand with the aid of leg braces or walk laboriously supported by the arm of a strong man. At his public appearances this was often one of his sons. His 146-foot walk to the dais at his Inauguration earned the respect of many. Radio broadcaster Ed Hill remarked, “If this man had the courage to lift himself by sheer willpower from the bed of invalidism…then he must have within him the qualities to lead the nation to recovery.”
For his part, Obama’s election as the nation’s first president of African-American descent will be remembered as a great historic watershed as long as the nation’s history is told. His inauguration is a powerful signal of the nation’s progress toward its founding dream of universal human equality. And just as Roosevelt marshaled America’s hope and will by memorably declaring, “The only thing we have to fear is fear itself,” so will Obama seek to unite his fellow citizens in the shared vision of the possible and the best we can become. A presidential inauguration has traditionally been a time when Americans of all parties come together in wishing the new president well, when optimism and hope reign supreme. As such, it remains one our most important and unifying civic rituals, as essential to the fabric of our democracy in 2009 as it was in 1933.
Saturday, January 10, 2009
Obama and Roosevelt: How Similar?
On Tuesday the twentieth of January the American republic will observe one of its most profound quadrennial rites, the inauguration of a president. Article II, Section 2 of the U.S. Constitution establishes the requirement with these words:
January 20, 2009 will mark the fifty-sixth Inaugural Ceremony since the first for George Washington in 1789, and Barack Obama will embark upon the forty-fourth separate American presidency. With the acceptance of this oath a private citizen assumes the executive authority of the American government, is symbolically invested with the hopes of the American people and becomes the single most powerful person on Earth.
As we prepare to welcome the new chief executive and wish him and our country a successful next four years, it is difficult not to think back nineteen inaugurations and seventy-six years ago, to March 4, 1933. Consider the parallels between now and that distant time beyond the memories of most now living, when Franklin D. Roosevelt took the oath of office. As he looked out to an estimated crowd of 150,000 gathered at the steps of the Capitol, the former Governor of New York had much to contemplate.
A new president was set to be inaugurated, a new kind of candidate who personified can-do optimism and dramatic change. He was to replace an unpopular predecessor in the midst of economic turmoil and uncertainty. Huge financial institutions had closed their doors. Millions had lost their jobs, their savings and their homes. Millions more feared they would be next. Not only was the confidence of the people shaken from within, but purveyors of violent ideologies threatened aggression from without.
If you feel that sounds a lot like today, you are not alone. There are a number of interesting parallels between 1933 and 2009, but there are important differences as well. We'll take a closer look in the next edition.
Before he enter on the Execution of his Office, he shall take the following Oath or Affirmation:--"I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States."
January 20, 2009 will mark the fifty-sixth Inaugural Ceremony since the first for George Washington in 1789, and Barack Obama will embark upon the forty-fourth separate American presidency. With the acceptance of this oath a private citizen assumes the executive authority of the American government, is symbolically invested with the hopes of the American people and becomes the single most powerful person on Earth.
As we prepare to welcome the new chief executive and wish him and our country a successful next four years, it is difficult not to think back nineteen inaugurations and seventy-six years ago, to March 4, 1933. Consider the parallels between now and that distant time beyond the memories of most now living, when Franklin D. Roosevelt took the oath of office. As he looked out to an estimated crowd of 150,000 gathered at the steps of the Capitol, the former Governor of New York had much to contemplate.
A new president was set to be inaugurated, a new kind of candidate who personified can-do optimism and dramatic change. He was to replace an unpopular predecessor in the midst of economic turmoil and uncertainty. Huge financial institutions had closed their doors. Millions had lost their jobs, their savings and their homes. Millions more feared they would be next. Not only was the confidence of the people shaken from within, but purveyors of violent ideologies threatened aggression from without.
If you feel that sounds a lot like today, you are not alone. There are a number of interesting parallels between 1933 and 2009, but there are important differences as well. We'll take a closer look in the next edition.
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