Ghost of the New Deal Haunts Democrats’ Agenda, but It’s Time to Summon FDR

Obama and most Democrats are so dependent on contributions and support from business and the rich that they dare not discuss, let alone implement, the kinds of policies Roosevelt employed the last time US capitalism crashed.

While Bush’s absence was obvious at the 2012 Republican convention, so was another president’s absence at the Democratic convention. Romney banished Bush because his last year, 2008, linked Republicans in office with economic crisis and big bank bailouts: not a vote-getting association. The Democrats banished President Franklin Delano Roosevelt, but for a different reason, and in a different way. They feared reminding people of what FDR did the last time US capitalism crashed. Obama and most Democrats are so dependent on contributions and support from business and the rich that they dare not discuss, let alone implement, Roosevelt-type policies. Obama’s convention speech passingly referred to FDR’s “bold, persistent experimentation.” Obama said nothing about what FDR actually did in the last great collapse of capitalism, nothing about his policies’ achievements or their shortcomings.

What FDR accomplished needs rescue from banishment by Obama and Democratic leaders. In the deep 1930s Depression, FDR massively assisted average Americans. He created the Social Security and unemployment compensation systems that directly helped tens of millions. His federal jobs programs provided jobs and incomes for additional tens of millions from 1934 to 1941. These “stimulus plans” helped average citizens with financial supports, jobs and paychecks. Those citizens then spent on goods and services that realized profits trickling up for businesses. FDR’s trickle-up economics worked: far from perfectly, but better for most Americans than Bush’s or Obama’s policies.

Leading Democrats today lack the courage even to propose what FDR did. Obama keeps offering incentives for the private sector to hire more, but that policy failed over the last five years to return employment to pre-crisis levels. Obama refuses to expand Social Security as an anti-crisis policy. Instead, Obama and the Democrats pursue chiefly trickle-down policies: bail out banks and select mega-corporations, boost credit and stock markets with infusions of cheap money, and hope something trickles down to lift average peoples’ incomes. Despite five years of failed trickle-down economics, Democrats today still fear to consider FDR’s alternatives, acting as if they never happened.

Powerfully organized worker demands caused FDR’s conversion to trickle-up economics. Stunningly successful Congress of Industrial Organizations (CIO) unionization campaigns in the 1930s coordinated with rising memberships, activities, and influences of socialist and communist parties. These forces demanded and obtained direct help for the mass of people, while some among them also advocated basic social change as the best crisis solution. Today, Obama and most Democrats try to repress emerging parallel forces such as Occupy Wall Street. They simultaneously excuse their weak, so-called “moderate” policies by blaming the supposed lack of public support for more progressive policies.

FDR leveraged and channeled organized worker pressures into a grand social compromise, his New Deal. It pleased majorities of the American public and of capitalists and the richest 5 percent. That won him repeated re-election. The New Deal got corporations and the wealthy to finance Washington’s provision of help to average Americans in exchange for the CIO, socialists and communists muting demands within their ranks for system change. By warning capitalists and the rich that his New Deal was their only alternative to revolution along Soviet lines, FDR split their ranks and won support from many. He likewise got most in the CIO, socialist and communist parties to marginalize their anti-capitalism in return for a real social safety net. FDR never persuaded all capitalists and all the rich; serious, determined opposition arose. Likewise, dissenting socialists and communists persisted in fighting for basic economic and political changes. However, FDR’s New Deal social compromise prevailed.

Corporations and the rich thus paid high taxes and made large loans to finance Social Security, unemployment compensation and federal jobs programs. From the 1940s to the 1960s, corporate income tax rates and tax rates on high-income individuals were much higher than today. FDR took the money his policies needed from corporations and the rich. That’s where the money was then, and that’s where it is now. But unlike FDR, today’s Democrats have no plan or program to get it. So, discussing what FDR actually did got banished from their convention.

Choosing trickle-up economics to cope with capitalism’s crash was key to FDR being re-elected four consecutive times. No other president in US history had such success. After FDR’s death, Republicans moved to limit presidents to a maximum of two consecutive terms. Like FDR, Obama rode a capitalist crash into power, but Obama risks being ridden out because of failed economic policies. Yet Democrats dare not offend their financial backers to follow FDR’s way or even acknowledge its relevance.

The New Deal also had flaws that enabled it to be destroyed. Those capitalists and rich individuals who never welcomed the New Deal were determined to undo it once the war ended in 1945. Because FDR’s compromise had preserved the capitalist system, shareholders and the boards of directors they selected kept their positions inside the structure of corporations. There, they retained the incentives and accumulated the power and resources to undermine the New Deal and its major supports. Sometimes these enemies of the New Deal shaped government policies: for example, to eradicate communist and socialist parties (McCarthyism, etcetera) or to weaken unions (Taft-Hartley, etcetera). Sometimes, corporate owners and leaders directly funded foundations, think tanks and organizations molding public opinion. As dissenting socialists and communists had warned about FDR’s grand compromise: by leaving enterprises in the hands of major shareholders and their boards of directors, the New Deal had signed its own death warrant.

By the 1980s, corporations and the rich had sufficiently weakened labor and the left to more openly dismantle what remained of the New Deal. Market deregulation, tax cuts, neoliberalism, neo-conservatism and privatization were the new era’s processes and watchwords – with Reagan as mascot. Because they developed no effective counterstrategy to affirmatively defend what the business community and the rich assaulted, Democrats lost parts of their electoral base and, thus, strengthened the Republicans. Keeping FDR’s achievements away from their 2012 convention marked another step in the Democrats’ decline.