F.D.R.’s Economic Foresight

by P.W.

2/16/2020

In 1936, President Franklin D. Roosevelt famously said to big bankers and other moneyed interests: “I Welcome Their Hatred!” As is widely-known, between 1933-1939, President Roosevelt enacted a series of policies, regulations, financial reforms, programs, and public work projects that were called “The New Deal.” FDR’s New Deal brought relief, reform, and recovery to American workers, and brought this country out of the Great Depression.

What is less well-known is that in 1944, President Franklin Delano Roosevelt proposed a Second Bill of Rights, stating that a decent job, education and healthcare for citizens would safeguard the American democracy from despotism. Roosevelt clearly recognized that economic inequality is an enabler of Fascism. Moreover, he conceived of progressive policies as a way to safeguard against Soviet-style Communism.

Emphasizing that unless there is economic security for workers here at home there cannot be lasting peace in the world, President Roosevelt outlined a Second Bill of Rights, designed to bring equality and economic justice to the US:

We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed. Among these are: The right to a useful and remunerative job in the industries or shops or farms or mines of the nation; The right to earn enough to provide adequate food and clothing and recreation; The right of every farmer to raise and sell his products at a return which will give him and his family a decent living; The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad; The right of every family to a decent home; The right to adequate medical care and the opportunity to achieve and enjoy good health; The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment; The right to a good education. All of these rights spell security.

Unfortunately, President Roosevelt’s bill was never implemented, in large part because Franklin Delano Roosevelt died 15 months after making this speech. 

However, FDR’s proposed economic and social rights were written into the Universal Declaration of Human Rights of 1948. In addition, his Second Bill of Rights had a profound influence on the constitution of Spain, on the constitution of Finland, and on numerous other constitutions worldwide, which now recognize the economic and social rights proposed by Roosevelt. But it remains one of the ironies of history that even today—seventy-six years later—nothing like President Roosevelt’s Second Bill of Rights has ever been implemented in the United States.

What about today? Consider the evidence. By taking advantage of loopholes, America’s corporations paid an average federal tax rate of only 11.3% on profits in 2018. But nothing has trickled down to ordinary workers. Corporations have used their tax savings to buy back their shares, giving the stock market an artificial high. Meanwhile, the average American household remains poorer today than it was before the financial crisis began in 2007.

Trump's tax cuts have shifted most of the tax burden away from corporations and the rich, and onto workers. Taxes on workers were 35% of federal tax revenue in 2018. But taxes on corporations were only 9%. And payroll taxes made up 7.8% of national income in 2018, while corporate taxes only made up 0.9%. This was the widest disparity in almost twenty years. These tax cuts have also dramatically increased the federal budget deficit. 

While corporate profits have reached all-time highs, corporate tax revenues have dropped by a third. This means that more federal dollars go to interest on the debt. Needless to say, this leaves next to nothing for the kinds of social services that American workers need for a minimum of financial security.

The Trump administration’s $45billion reduction in food stamp benefits affects 10,000 low-income working-class families. And Trump's reduction of Social Security benefits will harm hundreds of thousands of working-class families. 

Meanwhile, when adjusted for inflation, recent wage gains are smaller than the meager wage gains of 2015. And workers have lost so much bargaining power that not even the lowest unemployment rate in fifty years is doing anything to relieve the suffering of American workers. For one thing, employers continue to lay off workers in order to maximize profits. For example, AT&T executives promised three years ago that the corporate tax cut would enable them to create new jobs. But instead, these same AT&T executives laid off 23,000 workers. And today, 80 percent of American workers live paycheck to paycheck. But the costs of healthcare, childcare, education, and housing are ballooning. 

Meanwhile—unlike FDR’s administration—the Trump administration has done virtually nothing to assist US working families. Student loan debt is through the roof, and the Education Department—under Betsy DeVos—has rejected an astonishing 98 percent of applications for student loan debt forgiveness. Many young workers now live with their parents instead of marrying simply because the cost of housing exceeds their meager wages. Childcare is now almost unaffordable for workers. And in 2018, one out of four Americans did not go to the doctor because they could not afford it. Well over 30 million Americans now have no healthcare coverage. A recent Gallup poll revealed that in 2018, Americans borrowed $88 billion to pay for health care.

Now look back again to the days of President Franklin Delano Roosevelt. From 1933 until his death in 1945, FDR’s economic programs brought relief for the poor and the unemployed, recovery of the US economy back to pre-depression levels, and reform of the entire financial system in order to prevent another depression in the future. 

The New Deal restored confidence in the economy, and allowed Americans to return to work. It created a regulatory framework that—for over four decades—would protect the interests of all Americans. In fact, this regulatory framework successfully protected the US against a financial crisis until it was dismantled in the 1980s by the Reagan administration.

One result of Reagan’s policy of deregulation was the Savings and loan crisis of the 1980s and 1990s. Fully one third of all savings and loan associations in the United States failed in the years between 1986 to 1995. Unfortunately, this crisis did not result in the abandonment of a broad program of deregulation. Instead, both Republican and Democrat administrations doubled down on deregulation. It is now widely recognized that the deregulation of over-the-counter derivative transactions under the Clinton and George W. Bush administrations led directly to the global financial meltdown of 2008.

All of this indicates the significance of the economic reforms carried out by the administration of President Franklin Delano Roosevelt. We would do well to remember these words from President Roosevelt’s 1944 message to the Congress on the State of the Union:

“We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made.”