Expanding the Role of Uncle Sam: The Excesses of the New Deal

In the last article, we covered how utopian dreaming and rationalistic faith in planning undermined the fundamentally conservative nature of the old Hamiltonian tradition and brought about a deformed and idealistic Progressivism.

In this article, we will cover how that idealistic Progressivism led to a government, under Franklin Roosevelt, that placed too much of an emphasis on short-term projects and consumption, in service of perfecting life and remedying the ills of the human condition. This was done at the expense of long-term planning and thinking, and the deficiency of such thinking plagues our government to this very day.

In his column, The Role of Uncle Sam, the New York Times’ David Brooks writes of the fundamental short-sightedness of the New Deal:

“Franklin Roosevelt was right to energetically respond to the Depression. But the New Deal’s dictum — that people don’t eat in the long run; they eat every day — was eventually corrosive. Politicians since have paid less attention to long-term structures and more to how many jobs they “create” in a specific month. Americans have been corrupted by the allure of debt, sacrificing future development for the sake of present spending and tax cuts…

 

…A government that was trusted and oriented around long-term visions is now distrusted because it tries to pander to the voters’ every momentary desire.” – David Brooks, New York Times

President Franklin Roosevelt’s New Deal mixed Teddy Roosevelt’s government activism with Woodrow Wilson’s techno-utopianism, thus polluting the Hamiltonian tradition further. This is unfortunate, for the New Deal did indeed produce some good Hamiltonian ends, particularly in infrastructure construction, financial regulation, national service programs, and industrial development. It produced them on a scale larger and more significant than any national program before or since.

But it brought with it a pernicious side effect; namely, an institutionalization of the here-and-now tendency, which has shackled the American government to costly entitlement systems and pork-barrel projects, while simultaneously preventing the establishment of long-term strategic planning of infrastructure, entitlements, education systems, and every other area of public policy.

Forward-thinking Americans lament the short-term mindset that politicians and pundits alike tend to act within, and the real culprit isn’t short terms in office or media sensationalism. At a base level, the normalization of short-term thinking under the New Deal is the ancestor of this corrosive modern mindset.

To pay for the massive social programs of the New Deal, President Roosevelt invoked the idea of the ‘emergency budget’ and soon had the country running unprecedentedly huge deficits. While the logic behind this was sound — George Washington believed that times of emergency made increased public expenditures necessary — it unfortunately legitimized a Keynesian habit of spending huge sums of federal money in a quest to stimulate growth in the short run.

This spending chiefly financed what the Breakthrough Institute has referred to as ‘consumptive spending,’ like entitlements, social programs, and pork-barrel projects, rather than ‘productive investment,’ like education, infrastructure, and technological research. Generations of New Deal-raised politicians would continue that habit, as would conservatives who favored the repeal of New Deal programs like Ronald Reagan.

Under the National Recovery Administration and Agricultural Adjustment Administration, the New Deal entered the realm of demand-side economic adjusting. Industrialists and retailers were encouraged to set the prices of their products and services against fluctuation, while farmers were encouraged to destroy their excess crops and livestock to keep prices artificially high.

This sort of economic engineering was well-intentioned with the hope of preserving the market in uncertain times, but its perpetuation did not make the market any more competitive, nor did it contribute to innovation and development — it merely froze the market in a single period of time and preserved incomes and jobs for Americans. Again, while it was a noble goal, this was symptomatic of the short-sightedness which characterized most economic programs surrounding the New Deal.

The chief keystone of the New Deal was the Social Security Administration and the various programs it contained. In many ways, it looked very much like the progressive legislation of FDR’s cousin, Theodore: universal retirement insurance, unemployment insurance, and guaranteed subsidization for those handicapped who were fully unable to help themselves. That said, it was a wholly unsustainable model not adequately designed for a population whose birthrate would decline and whose average age of death would continue to increase year by year.

Additionally, in primarily advantaging the elderly and incapacitated, it did not provide the young and enterprising with further opportunities to succeed and build fortunes of their own.

Finally, by promising government support for welfare roles traditionally taken on by civil society, it is likely that the New Deal — like the Great Society after it — helped to undermine the family structure and the formation of organic local communities by providing an alternative to one of the chief services those communities had historically provided. The absence of pro-family and pro-civil society entitlements in the midst of these individualistic entitlements sealed the deal.

Though the Social Security Administration has overall been a net positive for the American people, it has proved itself unsustainable, riven with unintended consequences, and is an example of the short-term thinking the New Deal institutionalized in America.

Despite the many drawbacks and failures of the New Deal, there were indeed some successes that testified to the lingering presence of the Hamiltonian tradition among the New Deal Democrats of the 30s.

The Glass-Steagall Act separated the financial and commercial sectors of banking to preclude the ill effects of speculation, putting an important reform into the mandate of the Federal Reserve. This stabilized the financial system in the United States for some time, and the economic blessings of such central banking are too numerous to list here.

Though the Social Security Administration has overall been a net positive for the American people, it has proved itself unsustainable.
Luke Phillips, IVN contributor
Additionally, such infrastructure-building agencies as the Public Works Administration, some components of the Works Progress Administration, and the Civilian Conservation Corps were able to provide temporary relief and employment for the masses of unemployed Americans, as well as lay down crucial public infrastructure across the nation, some of which is still visible and widely-used today.

The various rural electrification projects, including the Tennessee Valley Authority, brought modernization to new populations of Americans.

The components of the New Deal that focused on traditional Hamiltonian strategies — sound infrastructure and sound finance, among them — were the most enduring, least problematic, and most successful legacy of that historic program. We now enjoy, with equal fervor, the other legacy of the New Deal: short-term thinking politics, the legislative equivalent of bread and circuses, in the place of crucial long-term strategy and sagacious planning.

It is interesting to note that in the Republican Party of the 1940s, there was a resurgence of Hamiltonian nationalist sentiment in the form of various presidential candidates who sought to maintain the best parts of the New Deal while shedding its short-sightedness and utopianism.

Thomas E. Dewey and Wendell Wilkie campaigned unsuccessfully for the presidency. However, Dwight D. Eisenhower was successful in his campaign and was able to hold onto the best elements of the New Deal while reforming it, making it more efficient, and placing more investment in crucial sectors such as infrastructure and technological research.

Unfortunately, as we shall see in the next article, this resurgence of moderate Republicanism — Hamiltonianism for the 20th Century — was short-lived. Eisenhower’s inability to institutionalize moderate Republicanism as a major political force was arguably his greatest failure. He was not able to do what insurgent conservatives were doing in his party, or what Franklin Roosevelt’s New Deal Democrats had already done in American politics.

By the 1950s and early 1960s, New Deal short-term thinking and Wilsonian idealism dominated the ideas of the establishment Democrats. The furthest reaches of Progressivism, however, were yet to come — this time in the policies of Lyndon B. Johnson.

Editor’s note: This is part three of an ongoing series, titled “Expanding the Role of Uncle Sam.” You can read part 1 here and part 2 here

Photo Credit: Vladimir Wrangel / shutterstock.com