US: High Time for a New New Deal
How to save the U.S. economy from a looming depression.
- If Trump allows the 245-year-old US Postal Service go fail, he will not only jeopardize 600,000 jobs but sever a key link holding the nation together.
- With the COVID 19 pandemic, the US unemployment rate is starting to resemble the darkest days of the 1930s. You would think it’s time for a new New Deal.
- FDR’s New Deal unified a country. Without it, it is doubtful that the US could have fought a protracted foreign war.
- Many New Deal achievements have been dismantled over the past four decades. The US of the 21st century bears an uncanny resemblance to the US 90 years ago.
- Trump ought to learn from FDR what needs to be done to stop the economy from a depression and the US government from bankruptcy.
President Donald Trump has threatened to let the U.S. Postal Service fail. If he allows the 245-year-old institution to go under, he will not only jeopardize 600,000 jobs but sever a key link holding his continent-sized nation together.
A building initiative to counter the depression
The U.S. Postal Service links Trump to Franklin Delano Roosevelt, another U.S. president who faced a big economic calamity. One of FDR’s major public works projects during the Great Depression was constructing or refurbishing post offices around the United States.
An astounding number of small towns still have a Roosevelt-era post office — one of 125,000 buildings erected during the 1930s.
Between 1933 and 1941, 650,000 miles of new roads, 78,000 bridges and several hundred airports were built in the United States, which at the time had only about one-third of its current population size.
Unionization and blue-collar wealth
Roosevelt not only put millions of Americans back to work but pulled the country out of poverty. His New Deal also made sure that workers got a share of profits they created through higher wages.
The Wagner Act of 1935 protected the right of workers to organize and encouraged the government to defend labor from union-busting employers. Unionization levels went from under 10% of the labor force in the early 1930s to nearly 30% in the early 1950s.
Collective bargaining raised workers’ wages and benefits and provided unemployment insurance — which even now is the saving grace for 26 million newly jobless Americans.
Meanwhile, older Americans have been saved from poverty by Social Security. Without it, the poverty rate in the 65-plus group would have gone from 9.7% to 37.8%.
A vision lost
FDR’s New Deal unified a country that had been torn apart politically as well as economically. Without it, it is doubtful that Mr. Roosevelt could have taken the United States through a protracted foreign war. The fate of freedom around the world would have been very different.
The New Deal was helpful to U.S. businesses as well. Workers and retirees had money to buy goods and services produced by U.S. industry. In turn, public works projects created an infrastructure which underpinned the post-World War II economic prosperity.
The consequences of dismantling the New Deal
Many New Deal achievements have been dismantled over the past four decades. Perhaps not coincidentally, the United States of the 21st century bears an uncanny resemblance to the United States 90 years ago.
Today’s income differentials are back at the extreme pre-New Deal levels. Unionization in the private sector is at 6.2% of the labor force.
No surprise either, that highways and bridges built up by FDR and Dwight Eisenhower are crumbling and in need of repair — which was estimated by the American Society of Civil Engineers in 2013 to cost $3.6 trillion.
And now with the COVID 19 pandemic, the unemployment rate too starts to resemble the darkest days of the 1930s. You would think it’s time for a new New Deal.
Why isn’t it happening?
Blame the unfettered free market ideology that dominates U.S. politics and which will likely plunge the U.S. economy into the re-run of the Great Depression.
Under the pernicious influence of Nobel Prize-winning economist Milton Friedman, the New Deal has been severely criticized.
Why? Because it removed millions of workers from the “free market” economy and made them engage in “useless” activities — such as building post offices, dams and roads – that weren’t strictly serving the purposes (read: bank accounts) of private-sector capitalists.
Forget Main Street: It’s about servitude to Wall Street
Extremist as it is in its world view and view of human beings, this free-market ideology has had a long life. It even colored the recovery from the Great Recession that followed the collapse of Lehman Brothers in September 2008.
The U.S. Federal Reserve infused hundreds of billions into the financial system, saving it from collapse. The Troubled Asset Relief Program (TARP) helped banks mend their balance sheets at the cost of around $500 billion — and not much else.
Now, the Trump Administration is planning to rescue the economy using the same toolkit. It focuses on bailing out corporations and financial institutions, while distributing some cash to consumers — and therefore changes nothing.
More than $2.5 trillion in “stimulus” funds — as well as additional money that will certainly be appropriated — is an attempt to freeze the world in February 2020 and hope that once the country “re-opens” the good times will roll once more.
Pushing on a string
As a result, the Federal government, which thanks to the 2017 tax cut was running trillion-dollar deficits at the peak of the economic cycle, will now have a budget gap of some $4 trillion, according to fairly optimistic projections.
Trillions more may be needed to save small businesses, support state and local governments, keep tens of millions of unemployed from starving, etc.
This is why the Trump Administration must not only abandon the misconceived plan to let the Postal Service go bankrupt. Its real task is much bigger than that.
It ought to learn from FDR what needs to be done to stop the economy from a depression and the U.S. government from bankruptcy.