Amity Shlaes
is a syndicated columnist for Bloomberg and a senior fellow in economic history at the
Council on Foreign Relations. She is a graduate of Yale University and pursued
postgraduate studies at the Free University in Berlin. In the 1990s, she served as a
member of the editorial board of the Wall Street Journal. In 2007, she won New York’s
Deadline Club Prize for Commentary. In 2003, she was J.P. Morgan Fellow in Finance and
Economics at the American Academy in Berlin. In 2002, she was co-winner of the Frederic
Bastiat Prize, an international award for free-market journalism. She is the author of two
national bestsellers, The Greedy Hand, a profile of the tax code, and the
currently bestselling history of the Great Depression, The Forgotten Man.
The following is adapted from a lecture delivered on the
Hillsdale College campus on July 24, 2007, during a Hillsdale Hostel on the American
Constitution.
The
Legacy of the 1936 Election
WHAT MAKES the current field of candidates so timid?
It is clear listening to figures from both parties this year that they still believe
Social Security is untouchable. This despite the fact that bringing Social Security into
solvency is a relatively easy task. When it comes to the more serious fiscal burdens upon
our grandchildren, the candidates are likewise timid. This despite the fact that those
burdens only become heavier as we delay. We speak of 2008 as an election year, but it is
also the year when the tide of Social Security cash begins to recede with the retirement
of Baby Boomers.
But where is the origin of the problem? Traditionally
historians have focused on the slow rise of American progressivism over the past century
and a half. I’m going to do something different, and undertake an almost artificial
exercise. Here I will compress history and argue that this destructive hesitation comes
out of a single political campaign, the presidential campaign of 1936. This campaign
marked the virtual end of old-fashioned American federalism and the rise of a new kind of
politics. It was 1936 more than any other campaign that created modern interest groups and
taught us that Washington should subsidize them.
Pinning blame on a single campaign (and its run up) may seem
facile. Still, the story is well worth telling.
The Run Up
In 1932, total federal spending was still only five percent
of gross domestic product. Spending by states and local governments represented by
contrast ten percent of GDP. Even well into the Depression, it was to state and local
governments that many looked for a means to recovery. There was no big tax redistribution.
The word “liberalism” still signified a belief in individual liberty rather than
paternalistic government. Nor did American workers view themselves so much as a class in
those years. They viewed themselves as moving up and down the economic ladder. Even our
greatest union, the American Federation of Labor, was more of a craft and trade union than
a class union. But all this was soon to change.
In his 1932 campaign, Franklin D. Roosevelt had talked about
helping someone he called “the forgotten man.” He was thinking of the poorest
man, or as he put it—invoking the time of the pharaohs—“the man at the
bottom of the economic pyramid.” His speechwriter, Ray Moley, had inserted the phrase
into an address on The Lucky Strike Hour. Moley wrote to his sister Nell that he
didn’t know where the phrase came from. But in fact it did have a provenance. It came
from an essay (and later a book) written decades before, called The Forgotten Man. Written
by a famous Yale professor named William Graham Sumner, this essay defined “the
forgotten man” differently.
Sumner employed an algebra to explain what he meant: A and B
want to help X, he wrote. This is the charitable impulse. The problem arises when A and B
band together and pass a law that coerces C into co-funding their project for X. Sumner
identified C as the forgotten man. He is the man who works, the man who prays, the man who
pays his own bills, the man who is “never thought of.”
But this did not matter to Roosevelt, who of course won
handily in 1932 without thinking much about the phrase again. He spent the next few years
trying to help the poor through the now famous New Deal measures. But three years into his
presidency, his efforts were still failing. The New Deal was having mixed results.
Unemployment in May 1935 stood at what we today would compute to 20.1 percent—a large
share of Americans were still forgotten men. The Brookings Institution wrote a nearly
1,000-page report on the New Deal’s centerpiece, the National Recovery
Administration, concluding that it “on the whole retarded recovery.” The Dow was
stuck in the low hundreds, nowhere near even the 250 it had been in 1930 under Hoover,
well into the downturn. As a result, in July 1935— the year before the 1936
election—Roosevelt made a decision to give up on trying to help the general economy.
Instead, he decided to refine his definition of “the forgotten man.” No longer
would this man be simply the poor person at the bottom of the economic pyramid. The
forgotten man would now be the member of certain defined constituency groups—groups
like senior citizens, farmers, writers and artists, and union members.
Federal Largesse
Critical to FDR’s plan was to invent ways to alter the
bonds of towns and individuals with their states and establish bonds with Washington, D.C.
One of the first important institutions through which this was accomplished was an old
office that we rarely talk about anymore, the Public Works Administration or PWA. The PWA
was placed under the control of Secretary of the Interior Harold L. Ickes—father of
Harold M. Ickes, the prominent Democratic strategist who has worked with Bill and Hillary
Clinton. The PWA’s role was to fund buildings, bridges, and other structures in towns
and villages all over America.
The PWA went to counties and towns to offer them a
combination of grants and loans to build schools or dams or power plants, or any kind of
public buildings. PWA regional offices sent all bids for structures back to the national
office, where Ickes reviewed them. Then, every week, with a manila envelope, he went to
the White House and Roosevelt looked them over personally, just as he looked, say, over
his stamp collection in the evenings.
On the local end, the experience was a pleasant one for
mayors or officers of the county. They were able to allocate the cash, to pick the
architect and even the contractors. The money made them feel empowered.
The scale of the spending of the PWA was unprecedented. Its
budget was $3 billion in its first few years, or half the size of the federal budget in
any given year. Ickes himself was stunned by the magnitude: “It helped me to estimate
its size,” he wrote, “by figuring that if we had it all in currency and should
load it into trucks, we could set out with it from Washington, D.C., for the Pacific
Coast, shovel off one million dollars at every milepost,” and at the end “still
have enough left to build a fleet of battle ships.” It is hard now, when we have
become accustomed to imperious Washington bureaucrats, to imagine the high of the brand
new experience Ickes was enjoying. Riding up and down the East Coast and across the
country on a train with the President—in special cars with a new luxury that Ickes in
his diary calls “cooled air”—he felt that his job gave him the ability to
reshape the country. And indeed, the pyramid image appeared again: people called Ickes a
pharaoh. And in fact, the PWA enabled him to be like a pharaoh—simultaneously
grandiose and petty. On each PWA structure were placed the words: “Harold L. Ickes,
Secretary of the Interior.”
There were more than 3,000 counties in the United States,
and all but 33 of them received a PWA project. Many received several. At Michigan State
University alone—just up the road from Hillsdale—nine PWA buildings went up.
What did the country think of it all? The critic Frederick
A. Gutheim wrote an article at the end of the 1930s complaining that the entire PWA
produced “not one architectural masterpiece.” But that in a way was the point.
Roosevelt knew that masterpieces were not what was needed for his purpose. On the
contrary, a masterpiece from Washington might stand out too much in small town America.
This was a task of ingratiation.
The goal was to make the towns feel that the buildings were
theirs, to get people used to Washington’s hand being involved in projects that
formerly were entirely local. Relatedly, Ickes was attacked
on all sides for the pickiness with which he reviewed PWA projects. But Roosevelt told
Ickes that he did not mind. “This slowness did not displease him,” Ickes wrote.
“On the contrary, he said to me, ‘I do not want you to move any
faster.’” The extra months that the process took were extra months of activity
that held the eye, evidence that Roosevelt the candidate was doing something.
With this advertisement campaign in place, Roosevelt went on
to connect with all his targeted groups. The Wagner Act, the Public Utilities Law, the
Social Security Law, and the Works Progress Administration—WPA, not to be confused
with PWA—were all passed in great haste, beginning in the summer of 1935. Senator
Arthur Vandenberg of Michigan was so aghast at the scale of WPA spending that he decried
the “four or five billion worth of lost liberty.”
The WPA served much the same purpose as the PWA. Many here
will recall those humble, high quality WPA guidebooks to cities, states and regions. They
were another way of making the new federal role seem less threatening. Just like the
building projects of the PWA, they symbolized a new relationship between the federal
government and the counties and localities, from which states are cut out.
The WPA also developed a direct form of propaganda: writings
and theater that supported the New Deal. In October 1935, the Agency announced that it was
producing a play in New York about agriculture called Triple A Plowed Under (Triple A was
a New Deal agency). The WPA also produced Power, a Marxist play that caricatured
private-sector utilities executives as old men who exploit American households. The New
Deal produced some real art—we all remember the compelling photo of the migrant
mother by Dorothea Lange. But it also produced pure propaganda.
It is hard for us now to overestimate how welcome it was for
so many journalists, photographers, artists, sculptors, and actors, to be on the
Washington payroll. There was no Hatch Act in those days, no federal law precluding
political activity by government officials. The WPA was the equivalent of Congress or the
White House today moving, after a market crash, to put the staffers of Slate and Google on
its payroll as bloggers.
Even by the end of 1935, what the federal government was
doing was so changed that it would have been scarcely recognizable to someone from the
minimalist 1920s. Washington spent $5.6 billion for the year, double the level of
1930—and this was before the first Social Security check was cut.
Interest Group Politics
It is worthwhile to pause and consider what all these New
Deal programs were doing. They were not bringing the economy back to health. Indeed, they
frightened participants in the economy. Utilities, for example, were seeing increased use
of electricity, even in the Depression. But utility stocks were not booming because
Roosevelt was attacking utility companies as enemies of “the forgotten man.” In
fact, Ickes was giving towns power plants in exchange for their commitment to use
government power instead of private power. The Dow, as mentioned before, was still in the
100s. Unemployment was still through the roof —19 percent in March 1936. Nonetheless,
Roosevelt saw what his work at identifying groups to receive federal largesse would do: it
would get votes. He continued to reach out to the mythical figure of “the forgotten
man” through the spring, summer, and fall of 1936. Interestingly, people especially
preferred the projects that were not for the poorest—the ones that instead helped the
middle class along, not with relief, but with work and entitlements. This foreshadowed our
own attitudes today.
Toward the end of the 1936 campaign, near the elections,
Roosevelt moved into a frenzy, reaching out even to those groups he might have neglected
before. He announced a $2 million expansion at Virginia State College, a black
institution. In late October of 1936, days before the vote, he told an audience at Howard
University that there are “no forgotten men and no forgotten races.” By the last
days of the election Roosevelt therefore had cemented his party’s position vis-āvis
his revised “forgotten man”—now a member of a group, not an individual. The
job of everyone in the “unforgotten” groups henceforward would be to pay for the
larger Washington that in turn would pay for the “forgotten” ones.
In 1936, federal spending moved to nine percent of GDP, up
from two-and-a-half percent in 1929. If the gift to the 1932 electorate had been
liquor—with the promise of Prohibition’s repeal—federal spending was the
gift in this election cycle. Historian Jim Couch of the
University of North Alabama has shown the precision of the targeting of this money as a
way of buying votes. He documents that Roosevelt poured money into battleground states and
gave short shrift to safe states, including those of the poor South. Richard Vedder of the University of Ohio has data that suggests that the
creation of jobs was also targeted politically. Reckoning unemployment rates
month-by-month for 1930 to 1939, he found that though the average for 1935 or 1936 is
between 15 and 20 percent, there is one month where unemployment dropped to 13.9 percent:
November 1936, the month of the election. It went below that, and then rose again.
In other words, it is true that FDR was at his most popular
in 1936, taking 46 of 48 states; but that fact cannot be credited entirely to his radio
voice. Nor to the heroic popularity of an ailing president leading a nation through World
War II—as we now, anachronistically, remember the 1930s elections. That would come
later. In 1936, Roosevelt’s was also the popularity of a
leader who had invented a new way to reward the constituencies that he needed to win.
* * *
The overall lesson of this is that we can continue to
respect many aspects of Roosevelt’s presidency today. But we shouldn’t have
false nostalgia about it. After all, it was Roosevelt’s political machinations in the
1936 campaign—symbolized by the PWA—that gave us the “earmarks” that
bedevil Congress today, on both sides of the political aisle. Action is more important
today because of our fiscal challenge—the new forgotten men are the grandchildren who
will pay if we do not give up some of that costly nostalgia. John Marini was right when he
said, right here at Hillsdale and earlier this year, that the country must choose now
between Reagan and Roosevelt. That Reagan himself did not have to choose was because of
demography. Unfortunately, now we must.
When I was writing my book on the Great Depression, I kept
thinking back to William Graham Sumner, who originated the idea of “the forgotten
man.” Sumner was a Victorian who died in 1910. But I continued to hear him in the
background as I studied Roosevelt and Ickes, and what Sumner said continued to
apply—both to the 1930s and to our current political life. He spoke prophetically
about the voter who was not included in preferred interest groups—the man or woman
who everyone fails to think about. He spoke of the forgotten
voter for whom there is “no provision in the great scramble” for federal
largesse. Our elections are not good elections until they welcome back that voter, too.
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