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Obama and Jobs--He Should Look to FDR

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Judging by his record of job creation, which has been rather benign during the worst employment drought since the Great Depression, it should be clear by now that Barack Obama is no Franklin Roosevelt. Although he admires the Roosevelt legacy, he seems to have learned too little from history. But it doesn't have to be this way, if he followed up on what he's accomplished so far.

To his credit, Obama began his presidency by keeping a promise he made the month before he took office when he proposed the elements of his economic recovery program, which included public works. As he said, "We need action-and action now." He said he would invest record amounts of money, about $700 billion, in a vast infrastructure program, including work on schools, sewer systems, mass transit, dams and public utilities.

Toward those ends, Obama shoved through the Congress, with no help from Republicans, the $784 billion American Recovery and Reinvestment Act., along with $170 billion for an economic stimulus (less than what he wanted), $3 billion for the popular "cash for clunkers," $100 billion to refinance defaulting mortgages. and $90 billion in emergency unemployment insurance. The outgoing Bush administration contributed $600 billion for the Troubled Assets Relief Program (TARP), under which the government bought shaky assets from banks.

In addition, the Federal Reserve and the U.S. Treasury invested or loaned billions (much of which has been paid back with interest) to bail out giant banks and two of the big three auto manufacturers. In spite of almost unanimous Republican opposition, the states lined up to get their share of stimulus money, after several vowed that they would take nothing from the federal government. The latest flip-flopper is Gov. Mark Sanford of South Carolina, who was moved to change his position in the face of a ten percent unemployment rate in his state.

Despite criticism of TARP and the assorted bailouts, two eminent economists, Mark Zandi, chief economist with Moody's Economy, and a former adviser to Sen. John McCain, and Princeton's Alan Blinder, former vice-president of the Federal Reserve Board, pronounced the Obama programs successful in averting "what could have been called Great Depression 2.0,"

In their 23-page paper entitled, "How The Great Recession Was Brought To An End," they note that "the government's response (which began in the last days of the Bush administration)to the financial crisis and ensuing Great Recession included some of the most aggressive fiscal and monetary policies in history...Yet almost every one of these policies remain controversial...with critics calling them misguided, ineffective or both."

But, they added, "we estimate that without the government's response the GDP (Gross Domestic Product) in 2010 would be about 11.5 percent lower, payroll employment would be less than 8 ½ million jobs and the nation would now be experiencing deflation." Despite the persistently high unemployment rate, they claim the fiscal stimulus alone raised this year's GDP to 3.4 percent and 2.7 million jobs were saved or added. But the latest economic news, including a lower GDP and deeper unemployment, accompanied by spreading poverty among working and middle class families, has blemished their optimism.

Part of the problem: Of the $784 billion in the recovery act, more than $266 billion has not yet been spent and the deaf and dumb Republicans want that amount suspended and used to reduce the deficit. The administration says 80 percent of the projects are under contract and another $50 billion are in the process of being awarded. Nevertheless, cities are turning out street lights and replacing paved roads with gravel to save money. The fact is that the recovery act and the inadequate stimulus have yet to put much of a dent in the unemployment rate, which is far above the official rate of 9.5 percent.

As Bob Herbert reported in the New York Times, the reason the rate is not higher is because 181,000 workers left the labor force this summer. One economist, Charles McMillion, who analyzes employment trends. told him that "over the past three months 1,155,000 unemployed people dropped out of the active labor force and were not counted as unemployed. Even ignoring population growth, if these unemployed had not dropped out of the labor force...the official unemployment rate would have risen from 9.9 percent in April to 10.2 percent in July. When you combine the long term unemployed with those who are dropping out and those who are working part time because they can't find anything else. It is just far beyond anything we've seen..since the 1930s."

Yet, said Herbert, Washington, including the president, who says, "I feel your pain,"is not doing much about the crisis. "With 14.6 million officially jobless, and 5.9 million who have stopped looking but say they want a job. And 8.5 million who are working part time...you end up with 30 million Americans who cannot find the work they want and desperately need...There are now 3.4 million fewer private sector jobs than there were a decade ago. In the last ten years. We've seen the worst job creation record since 1928-1938."

What can be done? How about following the advice of a couple of Nobel Prize winning economists, Joseph Stiglitz and New York Times columnist Paul Krugman? Stiglitz, former chief economist for the World Bank told Bloomberg TV that the administration's stimulus and public works effort were "a big gamble and it doesn't look like it's paying off. The recovery is so weak that it's not strong enough to generate new jobs for the new entrants in the labor force, let alone to find jobs for the 15 million who would like to get a job, but can't find one."

One reason the recovery act has been slow in creating jobs is that many of the projects and contracts must go through the slow process of being approved by state and local jurisdictions and competing labor unions. That's why Stiglitz, Krugman, former Labor Secretary Robert Reich and Blinder have called for the resurrection of New Deal-style job creation programs like the Works Progress Administration (WPA) and, for younger men and women trying to enter the labor force who need to do useful work, the once popular Civilian Conservation Corps.

Reich noted that the U.S. already has a "giant jobs program," the thousands of men and women in the military, sapping valuable taxpayer funds that are justified as necessary for national security, when a nation with so many jobless is economically insecure. Noting the U.S. had a National Defense Education Act, during the Eisenhower presidency, Reich said "maybe this is the way to convince Republicans to spend more federal dollars putting Americans back and working on things we genuinely need: call it the National Defense Full Employment Act."

When the Washington Post's Ezra Klein asked Blinder what needs to be done to give a blood transfusion to the anemic recovery, Blinder said, "I would do two things, both aimed at jobs. I would do the so-called new jobs tax credit on a much bigger and better scale than the HIRE Act, which was a baby step. The second thing I would do is a WPA-like program of direct, public hiring. People could work in parks in maintenance, the many paper-shuffling jobs in government." Actually, the WPA and CCC did a lot more than that. Here's what I wrote months ago when Obama offered what became too little:

"The WPA, born in 1935 at an initial cost of $4.8 billion, was at the time, the largest "relief" program in American history (now it's called "stimulus"). By 1941, when spending on the coming war pulled America out of the lingering slump, WPA had cost $11.4 billion and put eight million men and women to work building 1,634 public schools, 105 airports, 3,000 tennis courts, 5,800 libraries, 3,300 storage dams, hundreds of miles of roads, sewer lines. At the same time the CCC built roads through national and state parks, fire towers, and scores of campgrounds, many of which are in use today.

"I doubt if George Bush even suspected that his weekend retreat, Camp David, which Franklin Roosevelt called Shangri-la, was built by the WPA and CCC as a recreation area in the Catoctin Mountains of Maryland. Do baseball fans know that WPA workers built Doubleday Field, in Cooperstown, NY., in 1939 to mark the 100th anniversary of the birth of America's pastime on that hallowed ground?

"The architecturally unique bridges of the Merritt Parkway in Connecticut were built by the WPA. Not until 1937 did New York City get an airport, La Guardia Field (named after the city's New Deal era mayor), with its beautiful art-deco main terminal, all built by WPA labor.

"The WPA, I should add, hired women, although the agency's boss, Harry Hopkins, frowned on giving work to both and a wife and leaving children unattended. About 15 percent of the workers were in the Women's Division and they received equal pay, which was the local prevailing wage, from $19 to $94 a month for a maximum of 30 hours of work each week. The WPA also provided jobs for 350,000 blacks, and helped dent some color barriers. And the WPA's Education Division, gave work to teachers who taught reading to thousands of illiterate blacks and whites."

But the WPA, which was ridiculed by Republicans (naturally) as a make-work program (and nothing is wrong with make-work when there are no other jobs), was paired with the CCC in putting Americans in useful jobs. The genius of the CCC is that it concentrated on young men 18 to 24 (later 18-28), many of whom were roaming the country like hoboes to give them work that needed doing, providing them the discipline of a military-like structure and seeing to it that they sent part of their wages to their struggling families at home.

As New York State's governor, Roosevelt, an ardent conservationist, had run a similar program. But barely three weeks into his presidency, on March 21, 1933, he told the Congress. "I propose to create a civilian conservation corps to be used in simple work, not interfering with normal employment, and confining itself to forestry, the prevention of soil erosion, flood control and similar projects. I call your attention to the fact that this type of work is of definite, practical value, not only through the prevention of great financial loss, but also as a means of creating future national wealth."

Today, I suppose the Republican right (e.g., Rep Michele Bachmann of Minnesota) would accuse Obama of trying to put America's youth into concentration camps. But the law that created the CCC, for Emergency Conservation Work, was passed ten days after Roosevelt proposed it. And he promised it "would give 250,000 young men meals, housing, uniforms and small wages for working on national forests and other government properties." Those numbers grew as the depression deepened.

If you travel to a national forest, you'll notice that many of the fire watch towers were built by the CCC. My late brother-in-law and a close friend left their depression-weary urban homes for service in the CCC. But among the more prominent alumni were Hyman Rickover, who became a four-star admiral and the father of the nuclear submarine fleet; actors Raymond Burr, Robert Mitchum and Walter Matthau; baseball greats Stan Musial and Red Schoendienst and test pilot Chuck Yeager. Volunteers came from every state, including the then territories of Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands.

According to Wikipedia, the CCC became the most popular New Deal program among the public, eventually providing jobs for 3 million men, most of them from families on relief. Then Interior Secretary Harold Ickes, insisted that black youth were included and 200,000 signed up, although they were segregated. During its life, from 1933 to 1942, CCC volunteers planted nearly 3 billion trees to help reforest America, constructed more than 800 parks nationwide, most of which became state parks, and a network of thousands of miles of roads in forests and rural lands.

The Indian Division of the CCC built schools and operated extensive road building projects on Indian lands. Crews built dams, sowed grass to stop erosion. In addition, it trained men to be carpenters, truck rivers, radio operators, mechanics and stock raisers. About 24,000 of the 85,000 Indian enrollees later served in the military and 40,000 left the reservations for war jobs in the cities.

What was it about the Roosevelt presidency that enabled the passage and creation of the WPA, the PWA, the CCC, not to mention regulatory agencies (the Federal Deposit Insurance Corp, FDIC, the Securities Exchange Commission, SEC, the Federal Trade Commission, FTC) and laws, The Glass-Stegall Banking Act? The Obama presidency, which promise a revival of Rooseveltian hope, has steadily weakened with compromise virtually every New Deal era effort to deal with funny money Wall Street and financial shenanigans. It's true that Obama has confronted highly partisan and an ideologically extremist Republican Party, but has he fought them? Roosevelt, who ran in 1932 on a promise to balance the budget, abandoned that vow when faced with the misery and crises of the Great Depression. Obama has endorsed a right-wing budget-cutting deficit commission, which wants to cut Social Security benefits, among other federal programs.

Roosevelt said he welcomed the opposition from what he called the "economic royalists," whose business-loving Republican Party had run the country for more than a dozen years, with Harding, Coolidge and Hoover. Roosevelt, with the courage of his convictions and prodding from Eleanor, did not seek bipartisanship but fought the Republicans and their banker allies. In the vernacular, Roosevelt stayed with the voters who brung him to the presidency. In 1934, the people supported him, winning nine seats each for Democrats in the House and Senate, which happens rarely for the party in power. But even as the depression got worse, the voters responded to FDR's partisanship and set the stage for the best of the New Deal that was to come.

Surely there's a lesson in this for today. Here is part of another Bob Herbert column: " The problem with the U.S. economy today, as it was during the Great Depression, is the absence of sufficient demand for goods and services. Consumers, struggling with sky-high unemployment and staggering debt loads, are tapped out. The economy cannot be made healthy again, and there is no chance of doing anything substantial about budget deficits, as long as so many millions of people are left with essentially no purchasing power. Jobs are the only real answer.

"President Obama missed his opportunity early last year to rally the public behind a call for shared sacrifice and a great national mission to rebuild the United States in a way that would create employment for millions and establish a gleaming new industrial platform for the great advances of the 21st century.

"It would have taken fire and imagination, but the public was poised to respond to bold leadership. If the Republicans had balked, and they would have, the president had the option of taking his case to the people, as Truman did in his great underdog campaign of 1948.

"During the Depression, Franklin Roosevelt explained to the public the difference between wasteful spending and sound government investments. "You cannot borrow your way out of debt," he said, "but you can invest your way into a sounder future."

write saulfriedman@comcast.net Friedman also writes for www.timegoesby.net


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