Obamanomics in the Great Recession

Building a Dam -- Picture courtesy of Wikipedia

by blogSpotter
Pundits have made many comparisons between the Great Recession of 2008-2010 and the Great Depression of the 1930’s. While recent events have been scary and unsettling, 2010 doesn’t even approach the gravity of 1932. From 1929 to 1932, industrial production fell 45%. 5,000 banks folded and 25% of all workers (37% of all nonfarm workers) were unemployed. 2010 is a walk in the park compared to that.

There are similarities – in 2008, the machinery of capitalism did slip into near-neutral. Several major investment banks failed; GM and Chrysler had to be bailed out by Uncle Sam and unemployment flirted with the 10% mark. The Obama administration took a page from Franklin Roosevelt and attempted to right the situation with Keynesian pump-priming – a nearly $1 trillion stimulus package. The results seem middling to poor on recent review; it might be good to take a look back at FDR’s New Deal, particularly its largest agency, the Works Progress Administration (WPA) to see how that model worked out.

The WPA was created in 1935 as part of the Emergency Relief Appropriation – enacted overwhelmingly by a House vote of 329 to 78. Across 8 years (1935-1943) WPA provided jobs to 8 million Americans and at one point was the largest employer in America. WPA created bridges, school buildings, utility infrastructure, lodges, libraries, theaters and many other public works throughout the nation. Nearly every town and hamlet in America enjoys the WPA legacy. Some national landmarks (LA’s Griffith Observatory and Oregon’s famous Timberline Lodge) owe their existence to WPA. The University of Texas at Austin has many beautiful Spanish-Mediterranean classroom buildings built by WPA. White Rock Lake here in Dallas has distinctive docks, bridges, gazebos, expanded Lawther Drive and a Bath House all created by either WPA or its companion program, Civiilian Conservation Corps (for teens and young adults).

WPA had limitations built into it. Employees could not work more than 30 hours/week, and only one member of a household could be an employee. Average annual wage was $1,200 (decent money for an otherwise unemployed, depression-era family). Despite these impositions, WPA lifted many people out of poverty and despair. 17% of the national black population was employed by WPA; in Mississippi, 60% of the WPA female employees had no husbands (they were divorced, separated, widowed or deserted); they were helped enormously by WPA.

By 1937, John Keynes’ economic theory had worked much of its magic – production, profit and wages were restored to 1929 levels. The government’s largesse gave dispossessed people spending money and indirectly created demand in the private economy. This pleasant state was oddly short-lived -- there was a Great Recession in 1937 which would compare to our 2010 debacle. Republicans in 1937 were hoping to wield the downturn as a weapon against FDR in the 1940 Presidential Election. Economists felt at the time (and more so since) that Congress was too quick in declaring success – a series of program cuts and tax increases had been implemented @ 1936 to curtail the growing deficit. A recovery was brought about in mid-1938 with farm subsidies and newly funded WPA projects. Full recovery to employment wasn’t achieved until war-time spending of 1941, but that’s not an indictment against FDR or the New Deal. Most of FDR’s programs struggled for Congressional passage and funding following 1936, despite his personal popularity.

WPA was savaged in the 1930’s much as Obama’s Stimulus package is today. WPA was accused of being the ultimate socialistic Pork Barrel spending, a bodacious, out-of-control buying of votes. In the 1930’s it was also seen as entrenching the power of labor unions. The exact same critiques are leveled today, and frequently met with the same Keynesian reply of yesteryear – there’s actually not enough priming of the pump. Noted economist Paul Krugman maintains that the trillion dollar stimulus of 2008-2009 was a decent first volley, but not nearly enough to fix things. A spending retrenchment at this point might send us in precisely the wrong direction.

What to make of the WPA, historically? In general, it did much to restore personal pride and economic balance to our nation. 1920’s Capitalism had failed us utterly, and the only pre-FDR remedies were bread lines and charitable giving. WPA gave a constructive way out of a destructive situation. What’s more, WPA made something very clear – that people are more important than money, things or even hallowed institutions when said institutions are unfathomable failures. Let’s hope that the lucidity of that message stays with us in the 2010 mid-terms. We don’t want to relive the 1930’s.

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