Feb. 19, 2009
In a cedar chest at my home is a woolen thermal shirt. This is not just any thermal shirt; it is a part of history and a reminder. The shirt was a government issue, given to my grandfather. As a young man during the Great Depression, he worked with the Civilian Conservation Corps planting trees, building parks, and working on other public conservation projects. My grandfather earned a dollar a day.
The debate still continues among economists as to whether or not those vast public works projects that President Roosevelt launched through the CCC and the Works Progress Administration (WPA) along with other government spending helped end the nation's worst economic crisis.
Regardless, FDR's New Deal and the opportunities that it offered were significant to the many struggling families who were unemployed during a time when unemployment stood at almost 25%. Between 1935-1943 over 8 million Americans were on the payroll of the WPA alone.
FDR's actions were controversial as he took the counterintuitive approach promoted by English economist John Maynard Keynes to increase government spending during hard economic times. They called it "priming the pump." FDR's efforts led to a radical and lasting expansion of the power and reach of the federal government.
Parallels have been drawn between the New Deal and the present government response to the financial crisis - but there are vast differences. The stimulus measure signed by President Obama this week, which according to estimates by the Congressional Budget Office will cost about $1.3 trillion, will, according to the President, preserve or create 3-4 million jobs. Keep in mind that adjusted for inflation this stimulus measure will probably cost 3 times what the New Deal cost.
The overall cost of government spending designed to revive the economy will go even higher as the President announced a mortgage bailout this week that could cost up to another $250 billion dollars.
There is a vast difference between spending government money to create short-lived public works jobs and expanding the size and scope of federal agencies and directly bailing out bad mortgages. It may sound simplistic, but a government inspired hand up is much different than a government handout, and the implications will be lasting and far reaching, not only on the size of government but also on the American ethic.
The effect of FDR's economic philosophy was so pronounced that 30 years later in 1971, President Richard Nixon said "We're all Keynesians now." The impact of this present economic approach is even more powerful -- so much so that before it has even been implemented, a recent cover story of Newsweek declared: "We are all Socialists Now."