Friday, August 06, 2010

The Unloved New Deal

-- Posted by Neil H. Buchanan

My post earlier this week, discussing the extremism so evident in today's Republican party, included a short discussion of current opposition among conservatives to the New Deal. Responding to a colleague's comment on an earlier Dorf on Law post -- a comment suggesting that liberals are wrong to assert that "conservatives are trying to undo the New Deal" -- I noted that there is at least one group of conservatives who believe that the entire notion of government regulation of business is a violation of the contracts clause of the Constitution. I further noted that the most recent conservative president, and his entire party, were willing to put a proponent of that viewpoint (Judge Janice Rogers Brown) on the D.C. Circuit, even over strong Democratic objections that this viewpoint is far outside the mainstream. At the very least, therefore, some conservatives want to undo the New Deal, and most or nearly all national Republicans were anxious to put a person with that view on a very powerful court -- a court that, moreover, is the most active in dealing with the modern regulatory state.

This discussion led me to think further about what we are really talking about when we discuss the New Deal in 2010, and what it would mean to want to undo that sea change in the philosophy of governance in the United States. One way to think about this is in the neo-Lochnerian mode noted above: The New Deal is the entirety of modern government and its activities, in which the federal government is regularly involved in setting the rules by which society (and especially business) work.

By that definition, I suspect that it is fair to say that not many conservatives really would completely undo the New Deal, even if they had the chance. There are just too many things that people take for granted, such as food and drug regulation, that are carried out by the federal government. Notwithstanding almost all current political rhetoric, it is difficult to imagine even a strongly conservative Congress going very far in cutting back the modern state. Indeed, the years when President George W. Bush could have worked with Republican majorities in both houses of Congress to cut back on New Deal-inspired government activities saw little action in that regard. (There were, of course, plenty of behind-the-scenes efforts to emasculate agencies, such as the Minerals Management Service. Even so, these efforts were relatively small in the scheme of the things.)

Beyond the broad concept of government-as-rulemaker, with the federal government intervening in the life of the nation as a matter of course, what else could be said to characterize the New Deal? After some thought, I have concluded that the key programmatic elements of the New Deal are on the hit list of not only every Republican, but of the leadership of the modern Democratic Party as well. This is a strong claim, to be sure. Please allow me to explain.

Some aspects of the New Deal are simply artifacts of history. The Civilian Conservation Corps, the National Reconstruction Adminstration, and so on served their purpose -- although they were too small, and their reduction in 1937 in the name of budget balancing caused a very deep second dip of the Depression. Those programs are gone. Even so, they represent the first key element of what I think is a meaningful definition of the New Deal: direct government involvement in the economy to fight economic downturns. This was new in the thirties, with John Maynard Keynes providing the intellectual basis for an active government role in fighting the Depression.

The other key aspects of the New Deal that are still in play are, as far as I can discern, the following: securities regulation, labor laws, and Social Security. On each of these, "centrist" Democrats now join with conservatives and Republicans in opposing the essence of Roosevelt's legacy.

(1) Counter-cyclical policies: The Democrats passed a weak stimulus package in 2009. The Republicans opposed it. A President McCain, however, almost certainly would have done something similar. Even so, Democrats are showing no stomach for a big showdown over further stimulus, no matter how obviously it is needed. Even the Senate's vote this week in favor of aid to states was "paid for," which means that it was not as stimulative as it could have been. (Caveat: A big part of the offset was in closing a corporate tax loophole, which is a good idea even during a deep recession.)

More broadly, a very large number of Democrats now espouse balanced budgets, even during the toughest economic times in over seventy years. Being an anti-deficit hawk is now a matter of holier-than-thou posturing, with people like Senator Evan Bayh decrying his colleagues' supposed lack of seriousness about cutting budget deficits, and citing his disgust with their fiscally impure thoughts as one of his principle reasons for leaving the Senate. If the New Deal's commitment to fighting downturns has not been undone, it is a close call. Moreover, there is not even the slightest hint of sentiment to have the federal government directly create temporary jobs (as opposed to encouraging private-sector job creation) on a large scale, suggesting that the most visible manifestation of the New Deal is truly dead. Nearly all Republicans, and nearly all Democrats (including the "socialist" president), apparently see nothing wrong with that.

(2) Securities Regulation: With the big, new financial regulatory bill (Dodd-Frank) freshly signed by President Obama, it seems obvious that Democrats are still committed to the idea that the government should aggressively intervene to make sure that financial capitalists play by extensive (and unwelcome) rules. We need to remember, however, that it was the Clinton economic team, led by Obama's top economic advisor Summers, that dismantled the Glass-Steagall Act, the key bulwark of the New Deal's response to financial chaos.

Dodd-Frank is no Glass-Steagall. Indeed, as many have noted, most of the new law's bite will come in yet-to-be-written (after extensive lobbying) regulations. The bill explicitly rejected structural remedies to systemic financial problems, especially "too big to fail" limits and the segregation of banking activities from other financial activities. Again, there is very little evidence that the mainstream of the Democratic party has any interest in putting the most important aspects of the New Deal back in place, when it comes to financial rules. Although there is no move toward outright deregulation, there has clearly been a move toward much less effective regulation. And neither party seems bothered by this basic change in approach.

(3) Labor Laws: The National Labor Relations Act has not been repealed. That, however, is about the only positive thing one can say about labor protections in recent decades. The Democratic Leadership Council, which created people like Bill Clinton and Rahm Emanuel, was open in its hostility to organized labor. Democrats in 2009 could not even get themselves worked up about something as basic as reforming the rules to organize unions. Yes, the Democrats solicit and receive political support from unions, but there is very little reason to believe that Democrats are pro-labor in any real sense of that term. For Republicans, it is even more obvious. They attacked this week's bill providing aid to state governments (noted above) as a sop to teachers' unions, because the bill forestalled the firing of 140,000 teachers.

(4) Social Security: No law more centrally reflects the spirit of the New Deal than Social Security. It is one of FDR's proudest achievements, and it has been a spectacularly successful program. It can continue to be so, but only if it is not destroyed through political action. Even so, Obama's deficit commission is expected to recommend major cuts in the program, with budget hawks almost visibly salivating over the idea that some Democrats are now talking about cutting into their most important program. Republicans, meanwhile, seem to hate the program on a cellular level. One of their so-called idea men, Rep. Ryan, has proposed what amounts to a full privatization plan. Few expect Social Security to be repealed outright, but there are ominous movements afoot to start its long-term destruction in earnest. All in a bipartisan manner, of course.

In sum, I do not believe that most conservatives would take the opportunity to return to pre-1933 laws in all of the areas discussed above. In that sense, there is no widespread movement to undo the New Deal. However, it seems entirely clear that Republicans and Democrats alike do not support the concepts that were at the heart of the New Deal. The two parties differ greatly in the degree to which they would undo specific parts of FDR's still-vibrant legacy, but both parties show little support for its key elements. I believe that this is bad for America, but even those who applaud the rollback of the New Deal must see that both parties have been hacking away at it for decades.