Over the past several weeks, President Barack Obama has repeatedly stated that our current economic situation is the worst since the Great Depression. But as Amity Shlaes, author of The Forgotten Man: A New History of the Great Depression points out, some aspects of the economy were worse then than now.
“During the Great Depression, one in four people were unemployed,” said Ms. Shlaes during a recent interview. “There weren’t many two-income families. If the breadwinner was unemployed your family was unemployed whereas now if you’re married it’s terrible that you need both incomes but at least one partner may remain employed.”
Still, there are some parallels between our current economic conditions and those of the 1930s. Some of the solutions being proposed now also can trace their roots back to the days of Roosevelt. The idea that government can provide the fix to an economic crisis was first born out of Depression-era policies.
“It was [President Herbert] Hoover who created the Reconstruction Finance Corp. upon which some iterations of the TARP are modeled,” said Ms. Shlaes. “The idea of pumping liquidity through various banking tools comes out of our experience with the New Deal. The concept that you can throw in a lot of social reform when you have a credit crisis is New Deal. When [White House Chief of Staff] Rahm Emmanuel says something to the effect that “a crisis is a terrible thing to waste” that tracks right along with the New Deal.”
Even before President Obama was sworn in there were comparisons to Roosevelt including a Time magazine cover made to show Obama as FDR with the headline “The New New Deal.” Comparisons to FDR have been almost inevitable for every president since 1945 according to Ms. Shlaes because of the transforming effect he had on presidential politics.
“FDR set the format for the modern government and for the modern Democratic party which said we will identify certain constituent groups and we will serve them loyally with gifts such as entitlements,” said Ms. Shlaes. “That pattern is not good for the budget but it also is not good for the people because it is divisive - it says you’re favored and you’re not. My book is called The Forgotten Man and it says there is always someone who doesn’t happen to fall into that group who is not rich but doesn’t get a mortgage break or financial aid either. Many Americans would like to see the country be econ-blind, color-blind, and in every way treat every man and woman the same. That’s classical liberalism and that’s what we gave up with FDR. The Forgotten Man traces how specifically FDR did this defining [of special interests] in the 1936 election. All presidents have had to struggle with that.”
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