Charting America's Future: 2. Those New Deal Years (1933-1938)

...Practically, however, FDR was unable to extricate himself from the inherent contradictions in such a policy and tied himself repeatedly in fiscal knots...

...Six days after he was inaugurated, on March 10,1933, Roosevelt submitted a budget that called for a cut of several hundred million dollars, primarily at the expense of veterans and both military and civilian employees of the Federal government...

...He excoriated Herbert Hoover for "the greatest spending Administration in peacetime history...

...To punish his party's defectors the President threw himself into the 1938 Congressional primaries...

...But by 1938 it was back to business, in the spirit of Calvin Coolidge's immortal reminder that the "business of government is business...

...The years from Roosevelt to Reagan were marked by repeated shifts from liberalism to conservatism, and vice versa...

...Public works offered one avenue for doing this—under titles such as WPA, PWA, CWA, CCC, NY A-with the Federal government acting either as direct or indirect employer...

...By those standards, the "liberalism" (if that is what it was) of the decades from 1933-81 was a failure: The stated objectives were never attained...

...Another is that the New Deal placed the nation in the grip of "liberalism" from 1933 up to 1981 ?tightly under Democratic and loosely under Republican Presidents...

...Some of the programs and policies were in conflict with one another, and many of them were on an ad hoc and improved basis...

...Roosevelt's liberalism was less an "ism" than an ad-liberalism...

...Direct cash relief was another...

...The reality is that in the half century following Hoover the political weather vane swung back and forth repeatedly, with its Left or Right direction roughly determined by the party in the White House...

...The income from government initiatives made available the purchasing power to buy goods and services to put others to work in a self-accelerating process of economic growth...

...Necessity dictated that the economy should have a market, an enlarged body of purchasing power that the private sector could not generate on its own...

...The Republicans agreed to withdraw all the troops of occupation from the South, to put an end to Radical Reconstruction, to name a Southerner with vast patronage power to the Cabinet, and to forget about the freed-man...

...The GOP picked up seven seats in the Senate and 80 in the House, supplying a lusty legion to the anti-New Deal cohort and producing a Congress that was officially Democratic but unofficially conservative...

...Moley saw the NIRA as away for companies to get rid of the antitrust laws and combine in their fashion for their own best interests...

...it was the by-product of a pragmatic approach, simply doing what had to be done in whatever way it could be done...

...The liberal Republican, William Allen White, held that the reforms were "long past due," a "belated attempt to bring the American people up to the modern standard of English-speaking countries...

...At the same time, there was the "other" Roosevelt, who said in his campaign: "If starvation and dire need on the part of any of our citizens make necessary the appropriation of additional funds which would keep the budget out of balance, I shall not hesitate to ask the people to authorize the expenditure of that additional amount...

...and they put people to work...

...From 1935 toearly in 1937, the economy moved upward...

...He enlisted the talents of the "Gold Dust Twins," professors George F. Warren and Frank A. Pearson, to guide him through the mire of monetarism with their theories about the "commodity dollar...

...Roosevelt had many trusted brains...

...Tugwell saw the NIRA as a means for governmental planning of the economy, a halfway house to collectivism...

...Similarly, no one besides the government was going to care for the families of jobless breadwinners, fortheaged, for the children without earning parents, for the handicapped...

...Hence, public investment was the only way to provide the initiative in these vital areas...

...In those years FDR began to smell like another Hoover as the country sniffed the foul air of the Roosevelt recession...

...According to Leon Key-serling, one of the earliest New Dealers, the legislative craftsman for Senator Robert Wagner, and chairman of President Harry Truman's Council of Economic Advisers, "The New Deal had many good programs and policies...

...In his After Seven Years, Raymond Moley wrote of FDR's first two terms: "To look upon these policies as the result of a unified plan was to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, a carpenter's tools, geometry books, and chemistry sets in a boy's room could have been put there by an interior decorator...

...Philosophically, Roosevelt's view was a kind of "Tory socialism," a Disraelian conservatism that meted out a measure of governmental compassion for the poor without fundamentally disturbing the system that perpetuated the poor...

...If liberal government continues over another 10 years, we ought to be contemporary somewhere in the late Nineteen Forties...

...Within a year, Roosevelt recognized that while the devaluation of the dollar might help exports and halt imports, the cheap buck did virtually nothing to lift prices in the United States...

...labor relations acts...

...In fact, worthy as they were, they did not-And do not-compose the Alpha and Omega of a modern liberalism...

...So did the liberal Justice Benjamin Cardozo, who criticized FDR's scheme as a "delegation [of power] running wild...

...Things are seldom what they seem Skim milk oft parades as cream...

...His promise was not merely campaign talk...

...The roots of the conservative alliance ran back at least a century to the Whigs, who chose their very British name as a symbol of resistance to royal tyranny, to "King Andrew the First," the populist Democratic President...

...Aware of their shortcomings, Roosevelt himself set forth a more demanding set of standards "of security and prosperity...

...The second group was given the reins when the NIRA was declared unconstitutional by the U.S...

...Win-the-War...

...Cheap money, he believed, was necessary not only to allow farmers to ease their backbreaking burden of debt, but also to lift prices-A sine qua non of recovery...

...To see the policies of the last five decades for what they truly were is more than an academic journey into the recent past...

...Since then, born-again whigs have consistently inhibited the liberals' impulse during the "liberal" years...

...He lost...

...Soon America would find itself involved in a world conflict and would hear Roosevelt announce that he was replacing Dr...

...That year, 1938, marked the end of the New Deal, the first phase of the liberal decades...

...In this conviction he was supported by Lewis Douglas, Director of the Budget, and Henry Morgenthau, Secretary of the Treasury...

...The pivotal years in the Congressional turn to the Right were 1937-38: a bad time for FDR, a good time for his foes...

...In 1934, he tried-As he did in 1933-to hold down spending, except this time a runaway Congress did its own thing, overriding the President's vetoes to respond to constituent claims...

...The first is that President Franklin D. Roosevelt (or his Brain Trust) had a well-formulated ideology-sometimes referred to as Keynes-ian economics...

...By 1939, that Congress moved unabashedly to undo the New Deal, slashing relief, refusing to ratify Roosevelt appointments, and reversing the tax code to eliminate whatever was left of the progressive undistributed-profits tax...

...The Congress of the United States was run by a conservative coalition over the entire period, with brief exceptions...

...In subsequent years, the government stepped up demand with massive funds for education, research, hospitals, highways, rural electrification, mass transportation, job training, veterans' benefits, urban renewal, valley developments, housing...

...If Keynesian formulas had been applied consistently in the half century from the '30s to the '80s, the nation would still be plagued by profound economic problems that evolved in the years since the Great Depression...

...The opening piece, "The Great Deliale, " appeared in The New Leader of November 30...

...His attempt to "pack the Supreme Court" lent truth to the charge that the man in the White House was behaving like a man on a white horse...

...Finally, there is the notion that had Keynesian economics-Adequately heavy dosages of deficit spending-been applied consistently during those years, America would today enjoy an economy sans stagflation...

...This was not a policy...

...About 1938?as the New Deal actually was grinding to a halt-Roosevelt confided to Anne O'Hare McCormick: "In five years I think we have caught up 20 years...

...for all-regardless of status, race or creed " in his 1944message to Congress, in which he recited a litany of" economic rights...

...Indeed, the record strongly suggests that Roosevelt was never comfortable with the idea of using Federal deficits to nurse or nourish the economy...

...The sectional schism within Whig-gery continued right up to the election of 1876, when both Republicans and Democrats claimed to have won the contest...

...Unfortunately for the Whigs, they were soon torn apart by intensified North-South divisions as the nation drifted toward civil war...

...What transpired from 1939 to 1981 will be the subject of the next chapter...

...Federal aid for housing, education and health...

...the return too low and too slow...

...In any event, this politicized noblesse oblige had nothing at all to do with a Keynesian philosophy of balancing an economy by unbalancing the budget when necessary...

...The retrospective turns up an ironic insight: Throughout, there were conservative forces at work that frustrated liberal efforts and brought on disappointments and dissatisfactions that put conservatives in power...

...It wanted, said Brandeis, to "come back to the little unit" in a system of "regulated competition...

...As early as 1934, John Maynard Keynes tried to peddle his theory to Roosevelt about combating unemployment by deliberately unbalancing the budget, but FDR got lost in the "rigmarole of figures" that the British economist expounded...

...Among these were the right to a job, the right to earn enough for food, clothing and recreation, the right to a decent home, the right to adequate medical care, and the right to a good education...

...But in meeting the nation's social needs the New Deal measures also served to increase employment...

...The idea was to use the government's tax and borrowing powers to put money into the pockets of people who had little or none, to stimulate the economy by expanding "aggregate demand...

...FDR and his intellectual aides had no shared philosophy...

...A third was the Agricultural Adjustment Act underwriting farm income...

...Government had to do the job...

...Berle saw it as enabling businessmen of good conscience to restrain the evil-doers in their midst, and also to set minimum wages for each trade and industry...

...The net contribution of the government to the economy fell from $4.1 billion in 1936 to $800 million in 1937, a decline of $3.3 billion-with a resultant crash: national income down by 13 per cent, payrolls by 35 per cent, durable goods by 50 per cent...

...To carry through its programs, the Federal government incurred debt...

...Roosevelt's monetary policies were no less ambivalent than his policies on the budget and the structure of the economy...

...The truth is quite different from the popular notions...

...Roosevelt had no comprehensive plan of action," agrees John A. Garraty in The American Nation...

...In the First Hundred Days, the "planners" dominated through a Brain Trust that included Adolf A. Berle, Rexford Guy Tugwell and Raymond Moley...

...But in June of that year, FDR-typically worried about a Federal deficit?slashed spending severely, leaving both the Works Progress Administration (WPA) and the Public Works Administration (PWA) bleeding badly...

...Nor did FDR's accomplishments in his first two terms really forge any new frontiers in social exploration on this planet: America was catching up with the 20th (urban-industrial) century, doing things that many European nations had already done...

...Still another is that the Congress of the United States provided the continuum for liberal (New Dealish) policies, no matter who was in the White House...

...FDR promised to cut the budget...

...Social Security...

...That Great Compromise of 1877 was aquiet entente, agentlemen'sagreement between genteel classes, a pact of the American "nobility" against the ever-restless "mobility," of the "snobs" against the "mobs," of the propertied eager to protect their property against the unpropertied whom they saw as a danger...

...And while the ship of state veered repeatedly from starboard to larboard, its long-range drift was to the Right under Democrats as well as Republicans-notwithstanding the contrary popular belief that the years from Roosevelt to Reagan constituted a liberal era, including the 16 years Republicans Eisenhower, Nixon and Ford occupied the White House...

...help for the poor...

...for although he may seek to weaken them, he is unlikely to abolish the pillars of the New Deal...

...As America dived down-ward toward a Hooverian Hell once more, Roosevelt reluctantly accepted the necessity for spending in his 1938 budget...

...Nonetheless, he managed to evolve something resembling a consistent economic policy under the guidance of a brain-truster called Ananke, otherwise known as the Greek God of Necessity...

...in the Second Hundred Days (still in FDR's first term), the "trust-busters" prevailed through men like Louis D. Brandeis, Felix Frankfurter and Thurman Arnold...

...The coalition's theater of operations was Congress with its convenient four-party system: the two parties of Democrats and Republicans before the election, and the two other parties of liberals and conservatives after theelec-tion...

...All these programs were dual purpose: They served the needs of communities in the country...

...Taken as a whole, the planners of the First Hundred Days had no plan...

...To a large extent the impression is based on the persisting presence of Roosevelt's reforms: unemployment insurance...

...In 1877, inadeal whose details were a mystery for many years, the "whigs"-the economic elites of both North and South????reunited, not as a party but as partners in the running of the nation...

...The latter myth has arisen in part from conservative charges that the Republican Presidents were me-tooers, co-opted by the Democrats...

...It was the initial group that sponsored the National Industrial Recovery Act (NIRA), a device to bring businessmen together in their separate sectors of the economy and end cutthroat competition by voluntary action and agreement...

...the Democrats agreed not to resume the Civil War (considered then to be a real threat) and to dump their "President" Samuel Tildenin favor of Republican Rutherford B. Hayes...

...Thus Roosevelt embarked on a conscious policy of inflation...

...Under the leadership of Franklin Roosevelt," records historian William Leuchtenburg, "the budget balancers had won a victory for orthodox finance that had not been possible under Hoover...

...To deflate the dollar and inflate prices, FDR went into the world market to buy gold at artificially high rates "again and again...

...He and his eager congressional collaborators proceeded in a dozen directions at once, sometimes wisely, sometimes not, often at cross purposes with themselves and one another...

...Supreme Court...

...The ad-lib approach of the opening New Deal days became the style for what would be a zig-zag trek of Federal policy...

...When Franklin Delano Roosevelt ran for the Presidency in 1932, he saw salvation in fiscal conservatism...

...Unemployment insurance and Social Security continued purchasing power for those who were out of work for economic or age reasons...

...Just as his fiscal approach was influenced by old-fashioned conservatism, and his macroeconomic programs embraced socialism, populism, Theodore Roosevelt's New Nationalism, and Woodrow Wilson's New Freedom, so FDR's monetary views were deeply affected by the bimetallism and greenbackism of an earlier century...

...Conservatives in the Democratic Party began to break openly with their leader and join forces with Republicans: Democrat Josiah W. Bailey of North Carolina co-authored a "conservative manifesto" with Republican Senator Arthur Vandenberg of Michigan...

...minimum wages...

...But this was only "roughly" so, because after 1938 the Democratic Presidents who wished to move in a liberal direction were repeatedly restrained by a conservative Congress...

...One of the group, Justice Brandeis, voted to kill the Blue Eagle, the symbol of the NIRA...

...Rhetorically, Roosevelt reconciled his conservative saving with his liberal spending by maintaining that he would save on the normal operations of government while spending on emergency undertakings-like public works and relief...

...Roosevelt's ambivalence on fiscal policy was paralleled by an even deeper uncertainty on the issue of centralization versus decentralization-the clash between the futurists, who looked upon concentration in business ownership as inevitable and sought solutions accordingly, and the nostalgists, who wished a return to the competitive times of small business...

...The internal contradictions in Roosevelt's policies extended to his stand on tariffs, taxation, banking, and farm policy...

...Athough this conservative coalition surfaced at a given moment, it was not an accident of the hour, some spontaneous reaction against the New Deal...

...In 1840, the Whigs elected "Tippecanoe and Tyler, too," with a hokey kind of appeal to the common man that showed promise of making them the party of "the people," while continuing as the partisans of the propertied...

...Encouraging unionization-through Section 7a of the NIRA, then through the Wagner Act-provided a built-in dynamic for wage increases with their concomitant expansion of buying power...

...Heseized upon the felicitous euphemism "reflation," concocted by Yale's Irving Fisher, in a drive to take the country off the gold standard...

...it never fused these into a consistent and comprehensive overall policy and program...

...New Deal with Dr...

...Despite all his huffing and puffing, though, FDR was no more successful in his plan to inflate prices by monetary manipulations in the '30s than were Richard Nixon, Gerald Ford, Jimmy Carter and the Federal Reserve Board in their plans to deflate prices by manipulation of the money supply in the '70s...

...Opposition to the court-packing plan cemented this conservative alliance in the victory over FDR on a "constitutional " issue...

...A similar team operated less formally but more effectively in the House Rules Committee, bossed by conservative Democrat Eugene E. Cox of Georgia with the advice and consent of his colleague, Joseph Martin of Massachusetts, the Republican floor leader...

...He harkened to Ananke if not to Keynes, who to him was an incomprehensible "mathematician and not an economist...

...For a few brief New Deal years, especially in the Congress elected in 1934, the old coalition seemed to be a thing of the past...

...Gilbert and Sullivan About the New Deal there are many illusions...

...But if the simple preservation of these institutions were the ultimate test of liberalism, then Ronald Reagan would also qualify as a liberal...

...Many needs had been going unmet because the private sector did not find it profitable to put its money into hospitals or homes, schools or sewer systems, mass transport or highways: The investment was too high and too risky...

...He agreed with the highly respected Walter Lipp-mann that "to maintain the gold parity of currency condemns the nation which makes that decision to the intolerable strain of falling prices...

...The second Brain Trust was antitrust-opposed to all bigness, whether corporate or governmental...

...agricultural price supports...

...Sit-in strikes in major industries allowed FDR's critics to declaim against the advancing anarchy that the President had unleashed upon the land...

...a moment when a resistant Congress asserted itself as a force to be reckoned with in the making of domestic policy...

...In January 1934, he proposed to stabilize the gold content of the dollar, setting it at 59.6 cents as measured by its worth in 1932-A policy that was neither hard nor soft money, but rather a sort of half baked waffle...

...Too often in recent history," he told Congress, "liberal governments have been wrecked on rocks of loose fiscal policy...

...And when Ronald Reagan in his First Two Hundred Days pushed his budget and tax package through a Democratic House of Representatives by enlisting the votes of the "boll weevils," he was merely rein-voking the conservative spirit of '77 as resurrected by the recomposed conservative coalition in 1938...

...Minimum wages, written into National Industrial Recovery Act codes in the First Hundred Days, were a fourth way to spur demand...

...there really was no specific Brain Trust...