An Obama victory on Nov. 4 will be greeted with exuberant optimism by American liberals. But if the New Deal is any guide, they may have to wait for a second term for President Obama to deliver the change they believe in.
In 1932, FDR, like Obama, ran as a uniter. Indeed, the 100 Days was all about business, labor, right, left, all working together. That’s what the National Industrial Recovery Act was supposed to do: ignore the differences between right and left, business and labor, and have everyone acting as a team.
It was only in 1936 that FDR became, well, FDR, running against the economic elite. And it’s very possible that after an initial foray in being a “uniter” and not a “divider,” Obama will do the same. Indeed, both our great presidents, FDR and Lincoln, took office looking for a center, a way to unite everyone, and then found themselves being pushed (and sometimes leading) to the left.
Both our great presidents, FDR and Lincoln, took office looking for a way to unite everyone, then found themselves being pushed to the left.
The New Deal was, after all, Hoover’s creation. Many economic historians, including Ben Bernanke, credit Hoover with coming up with the single most effective measure to deal with the Great Depression: the creation of the Reconstruction Finance Corporation. The purpose of the RFC was to pump capital into failing institutions, including banks. (Sound familiar?) Arguably, it was more effective than anything FDR did. But there’s a less arguable point: it was not a Democratic but a Republican administration that scrapped a true free market regime. FDR didn’t have to “break” with Hoover, but just go on in the same way.
Obviously, Bush has now put in the RFC for our time. It means that not just Bush, but the GOP Congressional leadership, even in the House, has given Obama a license to “be like Bush.” In a sense, it’s a bigger license than we can afford to use.We may run out of cash to carry on the kind of command economy that Bush’s best and brightest have in mind. Even some progressives might blanch at the idea that we ourselves might run the banks. It’s all going a little fast, isn’t it?
The First New Deal did go farther than the RFC: too far, in one sense. When Congress passed the National Industrial Recovery Act, which had a planning mechanism for every industry, it didn’t work. And the Supreme Court, including left wing judges like Louis Brandeis, did Roosevelt a favor by declaring it unconstitutional. And by then, FDR found out that a government of “national unity” would not work either. The business community, the rich and well to do, FDR’s own classmates at Harvard, did not want to give relief to the unemployed, higher wages to the working poor, or help for farmers: they did not want FDR making mortgage loans.
The need to do those things pushed FDR to the left, and he ran in 1936 on a frankly populist agenda.
Something similar may happen in the first Obama’s term. The Democrats will pile on more relief, until Obama has to choose between placating Mr. Paulsen’s people or placating Ms. Pelosi. Of course it won’t be as bad at 1936: for one thing, Wall Street has a lot more people like Joe Kennedy, not ideologically hostile to the left, and at any rate capable of common sense. But just as there were Wall Street types for Al Smith who turned sour on FDR, there are Obama bankers now who will soon turn against him. Not as many, but some.
As in the New Deal, it will take time for the Democrats to realize just how far they can go for their constituents now that the free market has been so discredited.Right now, “Wall Street” is like the Han dynasty after it has lost the Mandate of Heaven. We even blush to look at once mighty CEOs.
Already we own Wall Street more than Wall Street owns us. As this reality sinks in, ordinary people will be less inhibited by them in speaking up and in what they choose to say. They will be less deferential.
In the first term, the Democrats may cling to the cautious platform it developed under siege. But this will change when we get to our “1936.” On Election Night, we should start working on the second term.