To balance our budget in 1933 or 1934 or 1935 would have been a crime against the American people. To do so we should either have had to make a capital levy that would have been confiscatory, or we should have had to set our face against human suffering with callous indifference. When Americans suffered, we refused to pass by on the other side. Humanity came first.
... This debt is not going to be paid by oppressive taxation on future generations. It is not going to be paid by taking away the hard-won savings of the present generation. It is going to be paid out of an increased national income and increased individual incomes produced by increasing national prosperity. -- Franklin Roosevelt, 1936
The recent news that the U.K. and other major European economies have officially entered a double dip recession has led many observers to argue, as the New York Times did last week, that the economic policies followed by the Obama administration have been better than the austerity measures pursued by his European counterparts. Indeed, most mainstream economists now agree with the voters in France, who, in electing François Hollande as their next president, have endorsed the idea that "austerity need not be Europe's fate."
There is a growing recognition on both sides of the Atlantic that President Obama's approach, which has combined stimulus spending, capital injections, and quantitative easing, is largely responsible for the fragile yet steady recovery the United States has been experiencing since 2010. Granted, the U.S. economy remains weak, and as such there is real concern that the downturn in Europe might drag the U.S. back into recession. But there is another, perhaps greater risk to the U.S. recovery that emanates from our own shores: the incessant demand for European-style federal budget cuts from American austerity hawks.
As evidenced by last summer's debt ceiling debacle or the draconian budget proposed this spring by Rep. Paul Ryan, the right wing of the Republican party will seemingly stop at nothing to achieve its goal of cutting the size of government. Moreover, its unremitting sky-is-falling rhetoric -- which is based largely on fear -- has become so pervasive in our political discourse that the question of cutting the federal deficit receives nearly equal footing with the issue of job creation in the media and on the campaign trail. We are told again and again that the way to create jobs is to reduce spending and cut the size of government. Never mind that these policies have failed in Europe over the past two years, while President Obama's rejection of austerity has resulted in sustained economic growth over exactly the same period.
Roughly three-quarters of a century ago, a similar argument raged between Franklin Roosevelt, who firmly believed that it was right and proper for the government to intervene in the economy during a time of crisis, and those on the extreme right who insisted the way to end the Great Depression was to reduce the federal deficit and balance the budget, no matter what the short-term costs.
FDR had little time for such arguments, which he viewed as not only selfish, but un-American. In his view, most Americans, "if they know both sides of a question and are asked to support the public good, will step forward and lay aside selfishness." But, he went on:
... we must admit that there are some people who honestly believe in a wholly different theory of government than the one our Constitution provides.
You know their reasoning. They say that in the competition of life for the good things of life "some people are successful because they have better brains or are more efficient; the wise, the swift and the strong are able to outstrip their fellowmen." And they say that that is nature itself and you cannot do anything about it and it is just too bad if some, the minority of people, get left behind.
For Roosevelt, however -- and the vast majority of Americans who voted for him over the course of four terms in office -- such an attitude was unacceptable. They understood that there were times in the life of a nation when government had a duty to intervene in the economy, even if it meant going into debt. Thanks to their efforts, and to their faith in government, we continue to enjoy Social Security, unemployment insurance, Federal Deposit Insurance, and a host of other beneficial programs that came from the New Deal.
Conservative commentators today are fond of arguing that the New Deal did not work, that it was the war, rather than New Deal spending, which finally got the United States out of the Great Depression. What they fail to mention, of course, is that New Deal spending did work, just not enough to pull us out of the deep trough we were in. For that we needed much more spending, the kind of spending -- and borrowing -- that occurred in World War II. According to the logic of today's budget hawks, such a massive level of deficit and debt should have brought the U.S. economy to a screeching halt once the war was over. But that did not happen. On the contrary, the period of economic growth that occurred in the United States after the war was the largest and longest the world had ever seen.
Much like the 1930s, our slow climb out of the Great Recession has been made all the more difficult and painful thanks in large part to the unwillingness of austerity hawks in Congress to pass the president's ill-fated jobs bill and other pieces of stimulus legislation. Sadly, they seem far more interested in promoting the myth of austerity and the evils of short-term deficit spending than they do in confronting the overwhelming evidence from Europe and our own history that now is the time not to cut the federal budget, but to expand it.
Cross-posted from Next New Deal.