Free Markets, Free People

FDR


Nate Silver, FDR and Obama

Nate Silver, a guy I respect and enjoy reading, dances around the point of a Weekly Standard comparison of FDR and Obama.

The WS points out:

If Franklin Delano Roosevelt were president today [...] liberal health care reform would have been enacted already. [...]

Silver, a man of numbers (he was tweeting Olympic goalie shot blocking stats during the US/Canada gold medal hockey game for heaven sake), goes to them and wonders why FDR’s (and LBJ as a comparison) congressional majorities weren’t mentioned by the Standard.

Silver goes on to talk about the huge size of the majorities FDR enjoyed, the implication being that they made a significant difference.

But that wasn’t the Standard’s point as seen in these paragraphs that Silver also quotes:

The reason is tied to what is probably the greatest difference between FDR and Obama. Roosevelt took command of Washington. Obama hasn’t. “FDR became the father of the modern presidency by moving the Chief Executive to the center of the American political universe,” John Yoo writes in his new book on presidential power, Crisis and Command. “Roosevelt’s revolution radically shifted the balance of power among the three branches of government.” [...]

FDR seized legislative authority. The bills that Congress passed in his first 100 days and beyond were produced by the Roosevelt administration and ratified reflexively by Congress.

Those three highlighted quotes are the reason for Obama’s problem – quite simply a lack of leadership. Where FDR was proactive, wrote the legislation and then twisted arms to get it passed in a majority Democratic congress, Obama has done none of that.  He outsourced it. He instead left it up to Congress to write the legislation (with predictable results) and squandered a majority by passing nothing of his big ticket agenda. He’s now reduced to parliamentary tricks to try to pass health care reform legislation.

Whether or not Obama’s majorities are as big as those of FDR or LBJ enjoyed isn’t the point – the point is he had majorities and he squandered them by sitting back, leaving it all to Congress and letting party infighting slow and then stall his agenda. Had he, as the Standard notes about FDR, taken “command of Washington” and the legislative process the outcome might have been very different.  Had he introduced legislation written by the administration, he had a very good chance of having health care done by last year.

He didn’t. So the point isn’t about the size of majorities. It isn’t clear Obama would have been in any better shape had he had FDR’s majorities. The point is Obama is no FDR because he lacks the leadership qualities, skills and abilities of FDR, not because he had a smaller majority in Congress.

~McQ


Loser Spouts Off

Bob Shrum, perhaps best known for his masterful performance in shepherding John Kerry’s presidential race to…uh…it’s…conclusion, now sounds off about economic myths.

One of the most stubborn [myths] is what [John] Kennedy denounced at Yale—the notion that deficits are always evil and the balanced budget an inherent public good. This myth is now constantly exploited by do-nothing opponents of Obama’s recovery plan. On Sunday, George Stephanopoulos read a viewer’s complaint to Treasury Secretary Tim Geithner: “How do you justify printing money out of thin air?” Isn’t the inevitable consequence “hyperinflation?” Geithner calmly rebuked the cliché by pointing to the Federal Reserve’s capacity to counter inflation by raising interest rates once the economy is back on track.

Well, he’s cartainly right about that.  The Fed can always just raise interest rates.  It’s what Paul Volcker did as Fed Chairman in the late 70s and early 80s.  If by “back on track” he means that we can have an unemployment rate of 12%, as we did in 1982, and a Fed Funds rate of 14%, then, I guess he’d be right.  It certainly got rid of inflation.

After all, cutting spending now would accelerate, not reverse, the downturn, and trigger a spiral of declining federal revenues that could leave budget balancing out of reach no matter how deeply we cut.

And raising short-term interest rates by the Fed at some point in the future would…not?

This is elementary economics.

I certainly wouldn’t contradict that.

In reality, Roosevelt increased spending overall by 40 percent from 1933 to 1934, and the deficit by nearly a third. In the first five years of the New Deal, the gross domestic product rose more than 40 percent. The New Deal faltered not when FDR disdained conservative advice on deficits, but only when he briefly followed it. After Roosevelt drastically cut the deficit in his 1937 budget, the economy promptly tanked. When FDR reversed course, the economy turned around.

In reality, Roosevelt also increased tax rate; the top tax rate climbing from 63% to 79%.  No doubt his conservative critics encouraged that, too.  In other words, Roosevelt both decreased spending and increased taxes. In addition, there were new Social Security taxes in 1936 and 1937.  And a new corporate tax on undistributed earnings went into effect in 1937, too. If only we had some way to know what effect tax increases have on economic growth!

Oh, and the Fed doubled reserve requirements on banks from 1936 to 1937.

I wonder–pure speculation of course–if significant tax increases and contractions in the money supply might have, in some mysterious way, contributed to the economic downturn of 1937-1938.

Sadly, we may never know.

In 1933, FDR blew up a London economic summit that sought to set fixed currency exchange rates, a virtual return to the gold standard that would have hobbled his economic strategy.

In other words, FDR was a unilateralist cowboy who intentionally flaunted international consensus for his own political ends, and, incidentally, reversed course a year later.

There was a lot more stuff going on in 1933-1940 than simply government spending.  Not that you’d know it from reading Mr. Shrum’s amusing little article.