William Galston on President Obama's Choice of Reform over Recovery

In a superb op-ed in the Wall Street Journal, entitled "[h]ow Obama's Economy Spawned Trump," William Galston of the Brookings Institution contends that the weak economic recovery that began in 2009 fueled the popular discontent that begat the presumptive Republican nominee. While Galston gives the President credit for securing passage of the 2009 "stimulus package" and formulating the "bailout" of General Motors and Chrysler, he also contends that the President had no follow up plan for bolstering the recovery which, as previously explained on this blog (see also here), has been exceedingly slow. Instead, Galston says, the President chose to spend his scarce political capital on securing passage of the so-called "Affordable Care Act" and regulatory efforts to combat "Global Climate Change."  Had the President remained focused on nurturing the recovery, Galston says, he could have expended his political capital on advocating and securing additional deficit spending on various infrastructure projects, such as highways, thereby further stimulating the economy and bolstering the recovery.

Galston's trenchant analysis bolsters the adage that those who ignore the lessons of history are doomed to repeat it. This is not the first time that a President facing a deep recession has chosen reform over recovery.  In 1933, Franklin Delano Roosevelt secured passage of the National Industrial Recovery Act, his administration's central economic recovery plan.   Among other things the NIRA imposed so-called "codes of fair competition," along with above-market minimum wages and requirements that firms recognize and negotiate with labor cartels also known as unions.  As John Maynard Keynes explained in a letter to the New York Times, the NIRA's wage and price fixing provisions were tools of "Reform and probably impeded recovery."  Subsequent analysis has verified Keynes' prediction, finding that the NIRA's wage-fixing provisions in particular, while furthering what Keynes called "redistribution," also helped deepen and lengthen the Great Depression by several years.  (See here and  here)  If Galston is correct, then President Obama, too, chose reform over recovery, with negative consequences for the nation's overall economic well-being.

At the same time, Galston overstates his case in a couple of ways. First, he likely overstates the impact of the initial stimulus package. For one thing, the $800 Billion package was spread over several years, thus constituting a very small share of overall GDP each year. Indeed, in 2009, Galston himself opined that some of the package's proposed projects would "take effect slowly over many years, muting their stimulative consequences." Like Martin Feldstein, Galston proposed allocating stimulus funds to immediate military spending (see also here discussing Feldstein's proposal.). Moreover, as this blog explained at the time, the net impact of the 2009 package was likely smaller than its nominal price tag, insofar as some such deficit spending simply displaced debt and resulting spending that states would have incurred anyway.  (See this testimony by John Taylor at Stanford, who summarizes research finding such a displacement effect.)  Second, as previously explained on this blog, any claim that the auto bailout was worth the cost does not survive scrutiny.  All in all, however, Galston makes a powerful point.  It would be ironic indeed if the President choice of reform over recovery leads to the election of a President hostile to those reforms.

FDR's and Churchill's 1941 Christmas Eve Addresses to the American People

   

 

On Christmas Eve 1941, less than three weeks after the Nation entered World War II, the two leaders of the Free World, President Roosevelt and Winston Churchill, delivered consecutive addresses to the American people from the White House.  President Roosevelt spoke first and ended his address with an introduction of the British Prime Minister.  Both addresses are reproduced below in full. 

 

"Fellow workers for freedom:  There are many men and women in America --- sincere and faithful men and women --- who are asking themselves this Christmas:  How can we light our trees? How can we give our gifts?  How can we meet and worship with love and with uplifted spirit and heart in a world at war, a world of fighting and suffering and death?  How can we pause, even for a day, even for Christmas Day, in our urgent labor of arming a decent humanity against the enemies which beset it?  How can we put the world aside, as men and women put the world aside in peaceful years, to rejoice in the birth of Christ?  These are natural—inevitable—questions in every part of the world which is resisting the evil thing.  And even as we ask these questions, we know the answer. There is another preparation demanded of this Nation beyond and beside the preparation of weapons and materials of war. There is demanded also of us the preparation of our hearts; the arming of our hearts. And when we make ready our hearts for the labor and the suffering and the ultimate victory which lie ahead, then we observe Christmas Day—with all of its memories and all of its meanings—as we should.  Looking into the days to come, I have set aside a day of prayer, and in that Proclamation I have said:

'The year 1941 has brought upon our Nation a war of aggression by powers dominated by arrogant rulers whose selfish purpose is to destroy free institutions. They would thereby take from the freedom-loving peoples of the earth the hard-won liberties gained over many centuries.  The new year of 1942 calls for the courage and the resolution of old and young to help to win a world struggle in order that we may preserve all we hold dear.  We are confident in our devotion to country, in our love of freedom, in our inheritance of courage. But our strength, as the strength of all men everywhere, is of greater avail as God upholds us.

 

Therefore, I... do hereby appoint the first day of the year 1942 as a day of prayer, of asking forgiveness for our shortcomings of the past, of consecration to the tasks of the present, of asking God's help in days to come. We need His guidance that this people may be humble in spirit but strong in the conviction of the right; steadfast to endure sacrifice, and brave to achieve a victory of liberty and peace.'

Our strongest weapon in this war is that conviction of the dignity and brotherhood of man which Christmas Day signifies-more than any other day or any other symbol. Against enemies who preach the principles of hate and practice them, we set our faith in human love and in God's care for us and all men everywhere.  It is in that spirit, and with particular thoughtfulness of those, our sons and brothers, who serve in our armed forces on land and sea, near and far- those who serve for us and endure for us that we light our Christmas candles now across the continent from one coast to the other on this Christmas Eve.  We have joined with many other Nations and peoples in a very great cause. Millions of them have been engaged in the task of defending good with their life-blood for months and for years.

 

One of their great leaders stands beside me. He and his people in many parts of the world are having their Christmas trees with their little children around them, just as we do here. He and his people have pointed the way in courage and in sacrifice for the sake of little children everywhere.  And so I am asking my associate, my old and good friend, to say a word to the people of America, old and young, tonight Winston Churchill, Prime Minister of Great Britain."

 

Prime Minister Churchill then addressed the American people as follows:

 

"I spend this anniversary and festival far from my country, far from my family, yet I cannot truthfully say that I feel far from home.  Whether it be the ties of blood on my mother's side, or the friendships I have developed here over many years of active life, or the commanding sentiment of comradeship in the common cause of great peoples who speak the same language, who kneel at the same altars and, to a very large extent, pursue the same ideals, I cannot feel myself a stranger here in the centre and at the summit of the United States.  I feel a sense of unity and fraternal association which, added to the kindliness of your welcome,  convinces me that I have a right to sit at your fireside and share your Christmas joys.

This is a strange Christmas Eve.  Almost the whole world is locked in deadly struggle, and, with the most terrible weapons which science can devise, the nations advance upon each other.  Ill would it be for us this Christmastide if we were not sure that no greed for the land or wealth of any other people, no vulgar ambition, no morbid lust for material gain at the expense of others, had led us to the field.  Here, in the midst of war, raging and roaring over all the lands and seas, creeping nearer to our hearts and homes, here, amid all the tumult, we have tonight the peace of the spirit in each cottage home and in every generous heart.  Therefore we may cast aside for this night at least the cares and dangers which beset us, and make for the children an evening of happiness in a world of storm.  Here, then, for one night only, each home throughout the English-speaking world should be a brightly-lighted island of happiness and peace.

Let the children have their night of fun and laughter.  Let the gifts of Father Christmas delight their play.  Let us grown-ups share to the full in their unstinted pleasures before we turn again to the stern task and the formidable years that lie before us, resolved that, by our sacrifice and daring, these same children shall not be robbed of their inheritance or denied their right to live in a free and decent world.

And so, in God's mercy, a happy Christmas to you all."

FDR's 1942 Thanksgiving Proclamation

Fighting for Liberty

Including the Liberty to Give Thanks

By the President of the United States of America

A Proclamation

It is a good thing to give thanks unto the Lord.  Across the uncertain ways of space and time our hearts echo those words, for  the days are with us again when, at the gathering of the harvest, we solemnly express our dependence upon Almighty God.

The final months of this year, now almost spent,   find our Republic and the Nations joined with it waging a battle on many fronts for the preservation of liberty.   In giving thanks for the greatest harvest in the history of our Nation, we who plant and reap can well resolve that in the year to come we will do all in our power to pass that milestone; for by labors in the fields we can share some part of the sacrifice with our brothers and sons who wear the uniform of the United States. 

It is fitting that we recall the reverent words of George Washington, "Almighty God, we make our earnest prayer that Thou wilt keep the United States in Thy holy Protection," and that every American in his own way lift his voice to heaven.

I recommend that all of us bear in mind this great Psalm:

"The Lord is my shepherd; I shall not want.

"He maketh me to lie down in green pastures; he leadeth me beside the still waters.

"He restoreth my soul: he leadeth me in the paths of righteousness for his name's sake.

"Yea, though I walk through the valley of the shadow of death, I will fear no evil: for thou art with me; thy rod and thy staff they comfort me,

"Thou preparest a table before me in the presence of mine enemies: though anointest my head with oil; my cup runneth over.

"Surely goodness and mercy shall follow me all the days of my life: and I will dwell in the house of the Lord forever."

Inspired with faith and courage by these words, let us turn again to the work that confronts us in this time of national emergency: in the armed services and the merchant marine; in factories and offices; on farms and in the mines; on highways, railways, and airways; in other places of public service to the Nation; and in our homes.

Now, Therefore, I, Franklin D. Roosevelt, President of the United States of America, do hereby invite the attention of the people to the joint resolution of Congress approved December 26, 1941, which designates the fourth Thursday in November of each year as Thanksgiving Day; and I request that both Thanksgiving Day, November 26, 1942, and New Years Day, January 1, 1943, be observed in prayer, publicly and privately.

* * * * * 

Americans understandably take both Thanksgiving and the liberty to give thanks, in their own way, for granted.  But in November 1942, less than a year after the Axis Powers initiated war on the United States, liberty was in peril throughout the world.  Fortunately, America and her allies, including the United Kingdom, were fighting back.  Leaders like FDR and Winston Churchill, both pictured above on the HMS Prince of Wales concluding the Atlantic Charter, understood the threat and rallied their respective Nations to victory.  As we give thanks today, let us also remember leaders such as these and the innumerable sacrifices by those who followed them in a war that preserved both Democracy and Liberty.

How Much Incivility Can We Tolerate?

Paragon of Incivility?

Probably Not a Fascist

On May 1, President Obama, speaking at the University of Michigan’s Commencement, denounced those who, on the left and right, use extreme rhetoric to demonize their opponents. For instance, he criticized those who characterize his own policies as socialistic or “soviet style.” At the same time, he also criticized those who refer to those on the right as “fascists” or “right wing nut jobs.”

The very next day, in a column that did not mention the President’s address, George Will noted that “hysteria about domestic fascism . . . is a liberal tradition[,]” a hysteria fanned by none other than FDR himself. According to Will:

In his 1944 State of the Union address, FDR identified opponents of his domestic agenda as fascists. Declaring that his "one supreme objective" was "security," including "economic security, social security, moral security," he issued a dire warning: Woodrow Wilson's progressive policies had been frustrated by "rightist reaction" and "if history were to repeat itself and we were to return to the so-called 'normalcy' of the 1920s -- then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home.

FDR’s remarks, it should be noted, were not off the cuff or unreflective. They were, to reemphasize, prepared and delivered as part of the State of the Union address. Moreover, they were, to be frank, a bit goofy. To the extent that FDR’s economic agenda involved greater economic centralization --- and it usually did --- it’s hard to see how resistance to that agenda could be equated even remotely with Fascism. Indeed, in the early 1930s it was FDR, over the existence of some Republicans, who proposed and then enforced legislation, e.g., the National Industrial Recovery Act, the Agricultural Adjustment Act and the Bituminous Coal Act, each of which facilitated and immunized from antitrust attack state-sanctioned cartels, all in the name of stimulating the economy. Fortunately, the Supreme Court unanimously struck down the National Industrial Recovery Act and also struck down the Coal and Agricultural Acts as well, thereby voiding provisions that had to that point discouraged economic recovery by interfering with the natural functioning of the price system. Indeed, after the Court struck down the NIRA, it is said that Justice Brandeis asked a lawyer from the Department of Justice to convey to President Roosevelt that the Court would tolerate no more “centralization.” Still, in the late 1930s, FDR's allies in Congress re-regulated numerous industries, including trucking, air transportation and agriculture, all with a view toward limiting entry and increasing prices.

FDR’s resort to the sort of tactics that President Obama decried contains two possible lessons, lessons that may not be mutually exclusive.

First, the sort of incivility that President Obama identifies is deeply-rooted and will be difficult to eliminate.

Second, our Republic seems to tolerate this sort of unsupported and extreme rhetoric, perhaps on the theory that the voters can sort the wheat from chaff. It's hard to imagine, for instance, that many took seriously FDR's claim that resistance to his agenda would lead to or was motivated by Fascism. It's even possible that this sort of rhetoric boomeranged. Indeed, by 1946, Republicans were in charge of both Houses of Congress, after what the Chicago Tribune called "the greatest Republican Victory since Appomattax." (The Republicans picked up 55 seats in the House and 13 in the Senate.) One doubts that the American people believed they were electing Fascists when they gave the Republicans the landslide that made William Martin of Massachusetts, pictured above, Speaker of the House.

By the way, to read Will's column, go here:

http://www.chron.com/disp/story.mpl/editorial/outlook/6985367.html

Should Presidents Use Thanksgiving Proclamations to Advocate Their Policies?

Do We Need More (or less) FDR?

Over at the Nation, John Nichols, is criticizing the tone and content of President Obama's Thanksgiving proclamation, calling for "another helping of FDR." According to Nichols, FDR departed from George Washington's example and used the proclamations as a platform to defend his policy initiatives. Nichols thinks this is a good thing and that Obama should do the same.

http://www.thenation.com/blogs/thebeat/500820/another_helping_of_fdr_please

Nichols quotes some of FDR's proclamations at length.

For instance, FDR's 1933 proclamation included the following:

"May we be grateful for the passing of dark days; for the new spirit of dependence one on another; for the closer unity of all parts of our wide land; for the greater friendship between employers and those who toil."

Moreover, his 1934 proclamation included the following:

"During the past year we have been given courage and fortitude to meet the problems which have confronted us in our national life. Our sense of social justice has deepened. We have been given vision to make new provisions for human welfare and happiness, and in a spirit of mutual helpfulness we have cooperated to translate vision into reality,"

Nichols criticizes Obama for being like Washington and George W. Bush and using the proclamation to emphasize themes that all Americans can endorse, regardless of party affiliation.

I respectfully disagree with Nichols.

1. Roosevelt was obviously referring to his economic recovery package, particularly the National Industrial Recovery Act (NIRA), passed in the summer of 1933. The plan fostered "unity," "dependence," and "social justice" by coercively requiring members of more than 500 different industries to fix prices and adopt other practices, including minimum wages, that disproportionately raised the costs of small businesses and thus fostered the exercise of market power by large entenched firms. The NIRA also required participating firms to bargain collectively with labor cartels known as unions, thereby further enhancing wages above the market level and further disadvantaging small business and racial minorities.

The Supreme Court unanimously declared the NIRA unconstitutional in 1935, and economists from both sides of the spectrum, including the Chair of President Obama's Council of Economic advisors, Christina Roemer, a William and Mary alumna, have argued that the NIRA significantly slowed economic recovery and thus exacerbated the misery caused by the great Depression. Empirical tests have confirmed this result.

The Supreme Court also struck down the Agricultural Adjustment Act and the Bituminous Coal Act, provisions that had similar price-raising, and recovery-stalling, effects.

In short, FDR's unconstitutional economic recovery plan was nothing to celebrate, and it's unfortunate to say the least that he enshrined arguments, albeit somewhat indirectly, for his plan in his Thanksgiving proclamation. Such proclamations should withstand the test of time and speak to timeless values. Roosevelt's arguments for his plan do not pass this test.

2. Some traditions and days should be above politics. Presidents should follow in George Washington's footsteps and use such proclamations to celebrate that which brings us together, not what divides us. Many small businessmen and racial minorities were anything but thankful for President Roosevelt's policies. Kudos to President Obama for taking the right approach here.