What Would FDR Have Done?

Roosevelt did not accept the simplistic conservative meme that MACROeconomics and MICROeconomics have the same fundamental principles and that government has to “live within its means like families do”… a juvenile concept that the “rabble” can understand, even as they would be hard-pressed to describe the differences.

In fact, even today (August 8, 2011), in the wake of a 630 point loss in the Dow after the downgrading of the US credit rating for the first time in our history, Eric Cantor (R-VA) is STILL telling is colleagues (those RESPONSIBLE for the downgrading) to, “resist pressure to compromise on tax increases”.. exacerbating the problem even more.

FDR understood that economic downturns not only restricts the debt to the levels of the day.. but they actually REDUCE NATIONAL INCOME…  and that reduced national income LEADS TO FURTHER DOWNTURN, creating a deflationary cycle that can only be broken when GOVERNMENT STEPS IN TO PUT PEOPLE BACK TO WORK and break the cycle… a consideration that came SECOND to balancing the budget.

At a campaign speech on Oct. 1, 1936, in Pittsburgh, Roosevelt outlined exactly this case:

“To balance our budget in 1933 or 1934 or 1935 would have been a crime against the American people. To do so we should either have had to make a capital levy that would have been confiscatory, or we should have had to set our face against human suffering with callous indifference. When Americans suffered, we refused to pass by on the other side. Humanity came first.

No one lightly lays a burden on the income of a Nation. But this vicious tightening circle of our declining national income simply had to be broken. The bankers and the industrialists of the Nation cried aloud that private business was powerless to break it. They turned, as they had a right to turn, to the Government. We accepted the final responsibility of Government, after all else had failed, to spend money when no one else had money left to spend.

I adopted, therefore, the other alternative. I cast aside a do nothing or a wait-and-see policy.”

Now… even where Obama and Roosevelt could be seen to agree on economic principles, the SELLING of those principles has been FAR DIFFERENT. Obama’s stimulus bill was a RESOUNDING SUCCESS by any measure, as was the billions spent to prop up the American auto industry at its nadir.

In BOTH OF THESE CASES, the PUBLIC SECTOR (the federal government, in other words) stepped in to CREATE DEMAND AND INFUSE CAPITAL when the PRIVATE SECTOR was INCAPABLE of doing so, SAVING MILLIONS OF JOBS and an ENTIRE AMERICAN INSTITUTION IN THE PROCESS.

And now, as in Roosevelt’s time, the Republicans advocate a do-nothing and a wait-and-see policy.

The DIFFERENCE, however, has been that Roosevelt seemed more willing to OWN THE POLICY AND DEFEND THE PRINCIPLES that were such a success, whereas Obama has LET THE NOTION that the stimulus failed become conventional wisdom.. DESPITE THE FACTS.

Again, from Roosevelt’s 1936 speech:

“As for the other six and a half billions of the deficit we did not just spend money; we spent it for something. America got something for what we spent—conservation of human resources through C.C.C. camps and through work relief; conservation of natural resources of water, soil and forest; billions for security and a better life. While many who criticize today were selling America short, we were investing in the future of America.”

Indeed, it is certainly true that Roosevelt did NOT have to contend with the same RECKLESS IDEOLOGUES  who currently control the House of Representatives, and there is NO DELUSION that, were Roosevelt president today, he would have FORCED Boehner to bring to the floor, much less pass, any legislation that increased the government’s role in the economy or provided more badly needed stimulus.

But it is a fair bet to say that the conversation surrounding the deadlock would have been QUITE DIFFERENT from what it is today: Roosevelt had NO HESITANCY about using the BULLY PULPIT to make a PASSIONATE of what GOVERNMENT CAN and SHOULD do for people and the economy.

And while Obama did not explicitly rule out using the 14th Amendment as a pretext for unilateral action (as he should have done), Roosevelt’s history would seem to indicate that he would have NO PROBLEM WHATSOEVER taking ANY ACTION HE DEEMED NECESSARY and DARING THE SAME HOUSE REPUBLICANS who had been advocating against his popular policies to go ahead and IMPEACH HIM for taking action to SAVE THE CREDIT OF THE UNITED STATES.