Obama's Job Plan: What We Can learn from the New Deal

For the first time in many years, federal officials may soon directly create several million jobs. Such an effort can be difficult; some think it is counterproductive. The history of the 1930s, when job programs were common, can help us think about how to do things right.

The first thing we need is a balanced view of Roosevelt’s New Deal. Right wingers Tyler Cowan and Amity Shlaes claim that the New Deal did not bring recovery. True enough as far as it goes: despite eight years of federal programs, employment and output had not fully recovered by 1941. But clinging to that stale bit of news, critics ignore the fact that the New Deal was a vast improvement over Hoover’s quasi-laissez-faire. Over 1929-1933 (Hoover), output and employment fell by 30%. Beginning in 1933 (FDR), investment began to recover and millions of jobs were created. In 1937 real output was 44% over the 1933 level and back to its 1929 level. That was not full recovery and unemployment was still very high; but the record is not one of utter failure. We can say that the New Deal promoted recovery, but that the limits of its ideology and fierce conservative opposition restricted spending adequate to the crisis.

The Bush administration spent eight years proving that the federal government cannot work efficiently and humanely. It does not have to be that way. The Hoovers and Mellons opposed direct federal aid to the unemployed, even as unemployment soared above 50% in some cities. Then New Deal programs began offering cash and jobs to the jobless. Over the winter of 1933-1934, the Civil Works Administration (CWA) employed four million people on public projects. The CWA’s director, Harry Hopkins, and many of the officials who worked for him were compassionate, anti-bureaucratic, and energetic. Roosevelt created the CWA on November 9 and a million workers received paychecks on November 23. The CWA was phased out in the spring of 1934, but in four months its employees built or improved 500,000 miles of roads, 40,000 schools, and 3500 playgrounds. They restored every park in New York City, they compiled accurate lists of historic American buildings, and they accomplished a hundred other useful tasks.

In 1935, Roosevelt began the Works Progress Administration. The WPA typically employed 2 million Americans, most in construction, but many also in the arts and services. WPA employees built bridges; thousands more worked as teachers; librarians delivered books to the backwoods by car, boat and horse. Some 200,000 WPA workers were mobilized to help victims of a massive flood in the Ohio Valley. Artists produced murals for public buildings and others gave free concerts.

Despite the need to spend quickly, Hopkins generally ran the WPA efficiently. He sometimes favored local Democrats, sometimes Republicans. Occasionally he turned a blind eye to corruption at the local level, but dozens of people who misused WPA funds were caught by WPA investigators. Some were brought to trial. On balance both the CWA and the WPA were relatively free of corruption.

Some credit for New Deal job programs goes to Roosevelt who, despite a preference for balanced budgets, was willing to borrow to keep people from starving. But much credit goes to Hopkins, one-time social worker, and a staff drawn from business, social work, and engineering. These people, some of them Republicans, showed remarkable ability to get the job done. Roosevelt could have said to Hopkins, "Heck of a job, Harry," and he would have been right about the whole WPA staff.

But if the New Deal had success, it was a qualified success. While we are inspired by it, we must also learn what not to do. First, we should push for real federal jobs (RFJs). We need millions of permanent, decently paid positions in the public sector. The CWA was radically temporary. The WPA as an institution endured for eight years, but WPA jobs were short ter. Employees had to accept comparable jobs in the private sector; and in 1939, the tenure of a WPA position was arbitrarily limited to 18 months. Also, in deference to budget realities and the hope that workers would be attracted by higher-paying private sector jobs, the WPA and the CWA paid wages that averaged about half of the 1930s poverty line. Other things undercut the morale-boosting effect of a government job, but the fact that the job was temporary and poorly paid was the most important. Obama jobs should be permanent jobs. Job holders ought to have a chance for training and career advancement and they should get benefits. They should have the right to unionize and, in contrast to Roosevelt’s declaration for the WPA, the right to strike. And they should be paid adequately, twice the poverty line for a family of four ($21,000 x 2 =$42,000 a year) after a probationary period. Such wage levels will promote a healthy economic recovery–one that does not depend overmuch on bubbles.

Second, smaller parts of the New Deal like the Civilian Conservation Corps included something like "green" jobs but we face a potential global catastrophe. Solutions to global warming may require a permanent corps of environmental workers, to insulate buildings, to test and develop solar, wind, and other clean fuels, and so on. Obama understands global warming but he is probably not planning a big enough strike force to do jobs that cannot be done by tax breaks and regulation.

Third, to promote equality and prosperity, the jobs program must be especially inviting to women, minorities, and low-income Americans. In thirty-five years we have not been able to push the poverty rate below 11%; one way to do it is to raise wages for low-income workers. But we should also avoid limiting the RFJ program to the poorest, those who were labeled in the 60s as the hardcore unemployed. Nothing would be more temporary than a program that conservatives can attack as a form of welfare. The WPA was assailed by conservatives but it had a broad and varied constituency that helped sustain it.

Fourth, the jobs program needs to reach beyond infrastructure projects if it is to help enough people and if it is to do so without discrimination. Not everyone can succeed in the construction field. In any case, we are short of many needed services, such as child car; we should lift the care industry with higher pay, more workers, and better conditions. Whether through direct employment or increased subsidies, the feds can improve jobs in the care business, jobs that are bound to continue growing.

Fifth, an RFJ program must be part of a long-term strategy to cure the long-term unemployment that our public statistics and our national policy ignore. For years we have created too few good jobs for those who want to work. One result has been thirty years of poor income growth. If more people had earned better incomes, fewer would have needed sub-prime mortgages. Bush wanted the ownership society without giving people the income to own.

Even if the current depression is reversed, high levels of unemployment and underemployment will remain. Many who want to work are uncounted or ignored. The National Jobs for All Coalition estimates that there are twice as many people unemployed as the highly publicized monthly numbers show. While the Bureau of Labor Statistics claims that unemployment in November was 6.7%--10.3 million people looking for work and unable to find it–the coalition includes part-time workers who want full-time work and those who want a job but are not looking for various good reasons. The result is an unemployment rate of 14.4% (23 million people). This expanded rate is lower than unemployment in the 1930s, but it is huge. The WPA typically employed too few, only 2 million; that was a fifth to a fourth of the unemployed. Over two years, Obama plans to create or save relatively fewer jobs: 2 to 3 million, a tenth of the jobless.

It is true that Obama plans other stimuli, from relatively ineffective tax cuts, to things that will usefully enter the spending stream almost immediately (expanded food stamps and unemployment insurance and grants to the states). But more direct job creation is essential to counter both the recession and the long-term shortage of good jobs.

Overall, we face four job problems: first, population growth, which increases the potential labor force; second, unemployment from this recession, which may reach 10%; third, one of the worst job recoveries ever from a recession (2001-2007); and fourth, the hidden unemployed who are not counted in the official monthly unemployment number. Against these job shortages, Obama’s 2 or 3 million new and saved jobs don’t go very far. Even that may be more than Republicans want, but the Hoover-Mellon philosophy of government was repudiated in November of 1932 and again in 2008. It is up to people who want a better economy to pressure the Democrats to do the right thing. If we want to deal with the four causes of unemployment and end the stagnation of average incomes we ought to be creating 3 million new jobs–many of them government jobs--every year of Obama’s eight-year presidency. Otherwise, we may have to rely again for recovery on a Wall-Street bubble, just what got us into our present mess.