Why Obama Was Never Going to Be the Next FDR

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Each party has their sweeping historic narrative leading to eventual triumph, and this slotted neatly into what you I'd call the Ur-Myth, the Creation Story, of the modern Democratic Party.  In that heroic tale, before 1932, the earth was ruled by evil, Laissez-Faire Republicans who ruined the economy with their speculative excesses.  The result was the Great Depression.  Thankfully, the people saw that Republicans had made the earth a terrible place, and they annointed elected FDR to make things right.  With a combination of massive government spending and tight regulation, FDR was able to put things right, to restore balance in the world.  

Thus was the Great Depression ended, and in grateful recognition, the American public made Democrats king-for-life for another generation.  Every time you see Rachel Maddow make an MSNBC commercial standing in front of the Hoover Dam, or something similar, you are seeing a reference to that still-powerful foundation story.

So it's not surprising that many Democrats assumed that financial crises and recessions are, well, good for Democrats and/or progressive policy advocates.  I always thought this was nonsense: financial crises and recessions aren't good for Democrats; they're bad for whoever happens to be in charge, which merely means they're good for whoever isn't in charge by default.  Hoover was indicted by history not because he'd done nothing--he had actually done quite a bit--but because the Depression had continued to worsen despite the things he did do.

I see that there are now liberals coming to the same conclusion.  Robert S. McElvaine, a history professor at Millsaps, seems bewildered and almost hurt:

Under Roosevelt, national policies eased the harsh impact of the Great Depression and turned public opinion strongly in favor of a more active government. Obama's 2008 election appeared to pave the way for a similar turn against the economic approach that had produced the collapse -- as well as a renewal of popular support for government action in the public interest.

Instead, public opinion has turned against government, and many middle-class people support a movement that favors the low-tax, anti-regulation, concentrate-the-income-at-the-top policies that led to economic catastrophe in both 1929 and 2008.

. . . Rather than precipitating a New Deal, as had similar circumstances before FDR won the presidency, the economic disaster under President George W. Bush has produced calls for a return to the tried-and-failed very Old Deal of Calvin Coolidge and even William McKinley.

Why?

A significant part of the answer, as I argued here, is that Obama took office only four months after the collapse of 2008, while Roosevelt did not take office until 3½ years after that of 1929. By 1933, there could be no question in the minds of most people that the Depression was the fault of the Republican leadership of the 1920s and its economic philosophy, with its absolute faith in an unregulated market.

Yet even recognizing that FDR got tremendously lucky in his choice of election years does not cause McElvaine to question the Ur-Myth; instead, he segues into a complaint that Obama needs to be feistier, like FDR was.


Smart progressive Ezra Klein, however, offers what I think is the correct take:

The pat story behind FDR's victory and the ensuing decades of mostly Democratic dominance is that the president got the policy right and the politics followed. Whatever you believe about FDR's policies, a more international perspective will disabuse you of the notion that the golden age for the Democratic Party was an ideological triumph rather than an accident of history. As Larry Bartels, a political scientist at Vanderbilt University, has written, globally, the pattern is clear: Whichever party was in power when the Great Depression hit was booted out of office, and whichever party was in power when the global recovery took hold reaped huge political benefits.

"In the U.S.," wrote Bartels, "voters replaced Republicans with Democrats and the economy improved. In Britain and Australia, voters replaced Labor governments with conservatives and the economy improved. In Sweden, voters replaced Conservatives with Liberals, then with Social Democrats, and the economy improved.

But this shouldn't have come as a surprise.  It was, I think, predictable in 2008, if you had read much history of the Great Depression.   How do I know?


Er, ahem . . . 

Is it 1932?

I heard that a fair amount last night, and over the past few days. This is faulty economic history. It is not 1932. It is 1929.

Outside of the economics profession, the FDR mythos is strong among Democrats: Hoover did nothing, and then FDR came in with his magic Keynesianism, and through the mighty power of massive government spending and a huge increase in the social safety net, got America moving again.

Economic historians know better. You can argue whether FDR, on net, helped a lot, helped a little, or mildly hindered recovery. But you cannot argue that if FDR had gotten into office on January 20th, 1930, America would have avoided most of the pain of the next three years. The progression of the bank panics and industrial slowdown throughout the next two years is well described, but not well understood. But the problem was clearly not merely a lack of government activity, or fiscal stimulus. Hoover was, contra popular myth, fairly active. It's just nothing he did worked. Neither did most of the things FDR tried.

FDR did some things right, don't get me wrong--and I think some of those really made a difference, notably bank audits and the creation of the FDIC. But he also benefitted tremendously from stepping in just as the banking system, and hence the economy, were bottoming out. By the time of the second banking panic, the system really didn't have much of anywhere to go but up.

Obama has the benefit of better economic theory--but not nearly as much better as we thought six months ago. There is no economic consensus--or even a revolutionary school like the Keynesians--with a coherent program for getting us out of the crisis. The happy, utterly wrong narrative of Democrats striding in and boldly reversing Republican errors with stiff regulation, an expanded safety net, and massive fiscal stimulus, is wrong when applied to FDR. It won't save Obama either.

If the crisis is as bad as some people fear, Obama will have no magic bullet to fire at it. The very best he can hope for is a fairly successful process of trial and error. To the electorate, that will look like bumbling as Rome burns.
I just came across that today.  It reads a little eerie, even to me.  But this wasn't genius speaking; it's just long seemed obvious to me that some presidents get lucky economic breaks, and some . . . don't.

Subsequent events have only made the parallel stronger.  It turned out that we didn't have any economic magic tricks up our sleeve; economic policy is not even as advanced as we thought in 2008.  Stimulus may somewhat ease the pain of a recession, but it is at best an expensive palliative, not a way to shorten the illness.  And Reinhart and Rogoff seem to be right that financial crises are long, painful, and accompanied by persistently high unemployment.  FDR's biggest policy contribution to GDP growth in the early years was going off the gold standard, followed by shoring up the banking system, and the FDIC; these are not remedies that are open to Obama, since we already did them eighty years ago.  

As Ezra goes on to discuss, this suggests that there's a decent possibility Obama may end up a one-term president, with stimulus and other signature achievements discredited in the way that Hoover's term was supposed to have discredited Laissez-Faire.  He was never likely to be the second coming of FDR . . . but he could well end up as the reincarnation of Herbert Hoover.

I doubt the reaction will be as strong--the Great Depression was really a whole lot worse than our current problems in almost every way you can think of.  Still, it would be a savage blow for what was supposed to be the progressive moment, and it won't be any fairer than it was to Hoover.  

But if you want to make history, you take the risk that you'll get panned by the critics.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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