Wayne O’Leary

Enacting Real Stimulus Plan

Much of the talk about domestic public policy since the November elections and the onset of the financial crisis-cum-recession has centered on the need for a new New Deal. This presupposes that Barack Obama is the philosophical reincarnation of Franklin D. Roosevelt, a supposition that at this writing is by no means certain.

FDR was a committed liberal, an adherent to Wilsonian progressivism well before he became the original New Dealer; the incoming president, by contrast, has left the impression, in the initial formulation of his administration, that his politics may be less left-liberal in the Roosevelt tradition and more centrist in the Clinton tradition. On balance, his announced presidential cabinet tends toward the mildly hawkish on foreign policy and the conventionally establishmentarian on domestic affairs. With the exception of Labor Secretary designee Hilda Solis, Obama has made no department appointments reminiscent of such iconoclastic FDR stalwarts as Harold Ickes (Interior) or Henry Wallace (Agriculture), and none in high-profile regulatory positions comparable to crusading New Deal mavericks like Federal Reserve chairman Marriner Eccles or SEC chairman William O. Douglas.

Still, it’s early, and events may push Obama and his safe, uncontroversial cabinet picks - - Republicans, Wall Street, and the Pentagon find them reassuring - - in a further progressive direction, as indeed they did even Roosevelt and his more left-leaning governing team. It’s worth recalling that the so-called Second New Deal of 1935-38 was considerably more radical than the First New Deal of 1933-34. We’ll have to see if Obama reacts similarly to his times and responds to evolving circumstances.

One way the new chief executive can burnish his progressive credentials, and also do some good for the country, is to commit to an expansive public-jobs program to deal with the rising specter of unemployment. This should be a principal element in any Democratic economic stimulus program for early 2009. Individual rebates like those issued last year will no longer do the trick; neither will financial bailout packages on the order of the Bush-Paulson no-fault giveaway to the Wall Street megabanks. Rebates are too small to make a difference, and replicating the $700 billion rescue plan for the financial sector would be throwing good money after bad.

President Obama needs a liberal bubble-up economic plan, not a continuation of the conservative trickle-down plan put in place late last year. The theory behind Bush-Paulson was that throwing money at the banks would free them from a preoccupation with paying down their subprime-based securitization debts and encourage them to offer credit to businesses and consumers, thereby stimulating economic growth. The billions provided to Wall Street’s financial baronies without restrictions or demands went instead to shareholder dividends, CEO bonuses, and the acquisition of smaller competitors; the credit strings, meanwhile, have not loosened, one reason why customers of Detroit’s struggling “Big Three” can’t buy cars.

While the Bush-Paulson Wall Street bailout was busy not working, the financial crisis morphed into a full-blown recession with depression potential. Official unemployment, which was 6.1% last September, surged to 6.5% in October, to 6.7% in November, and to 7.2% in December. Continuing claims for unemployment benefits, meanwhile, reached 4.4 million last month, the highest level in 34 years. Employers eliminated jobs during every month of 2008, a sure sign of hard times ahead, with job losses approaching 3 million for the year.

The reality behind these statistics is actually worse than appears on the surface. When the Labor Department announced the November unemployment rate as 6.7%, the actual figure (counting discouraged job seekers, part-timers in search of full-time work, and those whose unemployment insurance had run out), was, according to various estimates, between 12 and 15 percent. The National Jobs for All Coalition, an advocacy group for the unemployed and underemployed, calculated true unemployment at 23 million workers, or 14.4% of the labor force. That’s short of the peak 25% unemployment level of the Great Depression, but not by all that much, and projections for the coming year suggest it will easily surpass 15%. Enter Obama and the Democrats, who have job-creation work to do. Luckily for them, FDR, the father of modern liberalism, left behind a blueprint they can follow and adapt to current needs should the private sector falter, as seems likely. Although a myriad of federal alphabet agencies, including the PWA (Public Works Administration), CCC (Civilian Conservation Corps), and CWA (Civil Works Administration), provided emergency jobs during the 1930s—the PWA hired unemployed Americans to build such public-works icons as the Grand Coulee, Bonneville, and Boulder (Hoover) dams, and New York City’s Triborough Bridge—the New Deal public employer par excellence was the Works Progress Administration, better known as the WPA.

Created by executive order in 1935, the WPA injected $10 billion into the prostrate economy and provided meaningful work for roughly a third of the Depression’s unemployed; it hired 3.3 million jobless Americans at its peak and remained a viable employer of last resort well into World War II, before being phased out in 1943. Three-quarters of the WPA’s workers engaged in construction projects; they built or repaired thousands of schools, playgrounds, parks, hospitals, airfields, bridges, and highways—an important consideration for a nation in need of massive infrastructure renewal in 2009. However—and this is key for a workforce that is no longer largely blue collar—fully one-quarter of WPA employees performed non-construction, white-collar tasks in the agency’s art, theater, writing, music, and historical records programs.

The precedent set by the WPA was briefly revived on a smaller scale a generation later by the public-service jobs programs of Lyndon Johnson’s Great Society and later still by the CETA jobs program implemented by the Carter administration. Both rescued hundreds of thousands of Americans by-passed by the private economy.

If the employment picture further deteriorates in coming months to the degree economists predict, and if Barack Obama elects to genuinely walk the walk on economic stimulus with a bottom-up, Keynesian approach, he could do worse than look to the past for inspiration. The policy experience of the WPA and its successors is there to be tapped. Public-service employment as an integral component of a broad stimulus package appears to be an idea whose time has come again.

Wayne O’Leary is a writer in Orono, Maine.

From The Progressive Populist, Feb. 15, 2009

Home Page

Subscribe to The Progressive Populist

Copyright © 2009 The Progressive Populist.