During his convention speech accepting renomination, President Obama didn’t offer much in the way of policy specifics. Charles Krauthammer described it as “one of the emptiest speeches [he] had ever heard,” and then in a devastating critique observed:
“At least Romney had a five point plan. What we heard from Obama was a vision. And he pulls numbers out of a hat. 100,000 new math and science teachers. 600,000 more people working in natural gas. Two million more trainees, and he doesn’t say how we get from A to B. It’s a vision. I have a vision of an America where there is no disease and everybody has a private airplane, but unless I tell you how we get there, I’ve said nothing.”
While Obama may not have offered any specific plan to get to his arbitrarily envisioned goals, he did at least endorse an historical plan, which if taken literally offers a concrete and frightening litany of proposals the President would like to duplicate, or at least emulate, in his second term. What I’m referring to is the President’s promise to do the “kind of bold persistent experimentation” seen under FDR during the Great Depression.
Let’s take a look at history and see exactly what that means. What follows are some of the policies with which FDR boldly experimented:
1) Used the National Recovery Administration (NRA) to create cartels. The NRA provided power for industry leaders to collude to set minimum prices and wages, maximum work hours and “codes of fair competition.” The NRA’s goal was to end the “destructive competition” wrongly blamed for causing the Great Depression. A majority in each industry was given power to determine and legally force their dictates on every aspect business operation. Historian Burton Folsom, Jr., in New Deal or Raw Deal, explained their motivations:
“Why would Roosevelt and certain New Dealers be so eager to see higher wages and prices, without an increase in productivity, and with less competition? As part of their faith in the underconsumption theory, they believed that artificially higher wages meant greater purchasing power, which they believed would help Americans out of the Great Depression. If people earned more, they could buy more, and that would stimulate industrial and economic recovery. In this “high wage” theory, the efficient businessman, the innovator and price cutter, was evil because he was believed to contribute to lower wages and therefore diminishing purchasing power. He was a violator of “fair competition.” His gain was not just the loss of his competitors, but of the whole country.”
The NRA was predictably disastrous. Roosevelt critic John T. Flynn described its bureaucratic nightmare in The Roosevelt Myth:
“The NRA was discovering it could not enforce its rules. Black markets grew up. Only the most violent police methods could procure enforcement. In Sidney Hillman’s garment industry the code authority employed enforcement police. They roamed through the garment district like storm troopers. They could enter a man’s factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant. Night work was forbidden. Flying squadrons of these private coat-and-suit police went through the district at night, battering down doors with axes looking for men who were committing the crime of sewing together a pair of pants at night. But without these harsh methods many code authorities said there could be no compliance because the public was not back of it.”
2) The Agricultural Adjustment Act (AAA) payed farmers not to farm. AAA did to farming what the NRA did to manufacturing. Its purpose, again, was to artificially inflate prices by restricting competition and reducing inventory. It accomplished the latter by paying farmers not to farm and to kill off livestock, and the former by empowering the Secretary of Agriculture to set price targets for commodities. The result was a massive expansion of the Department of Agriculture, which needed an army of new bureaucrats to micromanage ever farm in America.
The results were again disastrous. For the first time in its history the US become a major food importer. In 1933 the AAA resulted in the killing of 6 million piglets, and by 1935 the US was importing 2 million pounds of ham and bacon. The program, in other words, produced exactly the sort of mismatch between supply and demand as one would expect from central planning, but the bold persistent experimenters had an agenda to pursue. Rexford Tugwell, part of FDR’s academic “Brain Trust” that helped usher him into office, was not only a significant intellectual force behind the New Deal, he also served under FDR as Undersecretary of Agriculture. Here’s what he had to say about farms in his diary, as recounted by Burton Folsom:
The visionary Tugwell was skeptical of capitalism and even the ownership of private property. “I personally have long been convinced that the outright ownership of farms ought to be greatly restricted,” Tugwell explained. “My own view,” Tugwell added, is “that under intelligent state control it should be possible to introduce a planned flexibility into the congestion and rigidity of our outdated economic system.”
3) The Works Progress Administration (WPA) was effective only as a tool of political patronage. Designed as an improvement over a failed effort at direct relief, WPA on paper offered to encourage work by requiring it in order to receive relief. In reality, WPA jobs were often pointless, make-work activities that squandered the labor potential of millions of Americans. Burton Folsom recounts a reporter’s coverage:
Of the make-work projects, reporter Frank Kent of the Baltimore Sun studied the WPA in action and wrote, “Boondoggling on a gigantic scale is about to begin. Millions are to be spent giving piano lessons to the children of those on relief. Millions more will pay 7,000 men to write a guide book of America. A disgusted Congressman was here the other day telling of discovering seven men in an automobile going around his district counting caterpillars.”
Perhaps worse than the inefficiency and waste of the program was its blatant politicization. FDR had considerable discretion in distributing WPA money, and he used it to reward political allies and punish his enemies. Burton cites Gavin Wright, an economic historian, as demonstrating through a state-by-state analysis of New Deal spending that politics was the key variable in allocating funds. Safe Democrat states, particularly in the south and despite their greater need, received fewer dollars than richer battleground states in the North and West. It was also common for workers to be denied federal jobs, or fired from the ones they had, because of their political views. The success of this political patronage program factored strongly in FDR’s reelections, and it took the Hatch Act of 1939 to depoliticize the agency.
The first two programs on the list were declared unconstitutional by the Supreme Court, which initially resisted FDR’s attempt to eviscerate economic liberties. But when he engaged in a public intimidation campaign and threatened to pack the court, it reversed itself and began rubber stamping the New Deal agenda. Barack Obama similarly engaged in an intimidation campaign against the Supreme Court in the run up to its ruling on his signature health care law, and it’s quite possible the effort contributed to the rumored switch of Chief Justice Roberts vote.
Other similarities have also already been seen between Obama’s policies and FDR’s disastrous Great Depression initiatives, such as a partisan distribution of stimulus funds, spending on wasteful boondoggled and pointless jobs, and a consistent affinity for asserting price controls as the solution for issues such as rising tuition costs, Medicare’s unsustainability, and health care reform.
FDR’s boldly unconstitutional and anti-competitive experimentation extended the Great Depression an estimated 7 years longer than it otherwise would have lasted. Obama’s counterproductive stimulus bill and onerous new health care law, along with other regulatory burdens, have already helped prevent a robust recovery. If given a second term in which to further emulate FDR’s failed experiments, we’ll find out just how much longer he can keep the economy down and hold prosperity at bay.