Congress’ Bailout Plan: Will It Be Enough to Bridge Political, Cultural Divides?

When I was a kid (I’m 55 now), I looked forward to holiday dinners because that was when my parents and my grandparents held their traditional “Was FDR a scoundrel or a savior?” debate. My grandparents, who worked for public utilities and, thus, survived the Great Depression with conservative opinions intact, argued for FDR the scoundrel. My father, who worked for a public utility company on the blue collar side and was a union steward, argued for FDR the savior.

The FDR argument was a traditional debate in our household even though the issue itself was a historical one, and though I already knew what every single participant was going to say, I looked forward to it because it was so exciting to see people I loved all vehemently disagreeing without really hurting each other. That’s the democracy I saw as a kid and the one that I miss today; a democracy that encouraged informed debate and tolerated strongly divergent views.

Watching the wrangling in Washington over the current banking crisis reminded me of that debate. The holidays are approaching, lots of Americans are scraping for turkey money, and, in an effort to maintain calm, the press is trying hard to replace the “D” word (Depression! Run for your lives!) with the more awkward but also more calming phrase “possible severe recession.” Once again we are witnessing an autumnal debate about the role of government in business and financial markets. Once again we are witnessing the spectacle of a televised tag team match between Emergency Socialism and Unfettered Capitalism.

Was FDR a scoundrel or a hero?

I don’t know. I do know that our current economic situation is similar in some ways to the one our grandparents (or in many cases, great-grandparents) survived. The stock market collapse that kicked off the Great Depression in 1929 came at the end of a bubble that included high-rolling, unfettered speculation and wildly indulgent personal lifestyles. The Dust Bowl disaster of the 1930s is parallel in some ways to our current climate change and energy crisis, with the displacement and disenfranchisement of huge numbers of people due to Katrina and now Hurricane Ike, and the promise that these kinds of monster storms will most likely become the norm, not the exception.

Like working Americans during the Great Depression, working Americans today are witnessing a rapid increase in costs concurrent with wage stagnation. Unemployment, while nowhere near Depression era levels of 25%, is rising rapidly and will rise even more rapidly should the current credit crunch continue. Just as in the aftermath of the stock market crash of 1929, we have a Hoover-like presidential candidate and an FDR-like candidate, acting out their respective roles in the holiday FDR debate on the national stage.

But there are real differences between our current situation and the one FDR seized by the horns in the ’30s.

The first difference is that American industry was still strong in the 1930s, and gearing this industrial base up for WWII arguably helped FDR turn the country around. Now, not only is U.S. infrastructure shot, our industrial base is gone, too, shipped overseas by multinational corporations in the wake of NAFTA for better profit margins.

A second difference is a loss of skills in the general populace. While my grandmother loved to regale me with stories about how she walked six miles for a 20 pound sack of government-issued potatoes once a week and fed her family of six on that and not much else, today’s consumer would be hard pressed to know what to do with a potato if there wasn’t a Wendy’s nearby. While we can relearn these skills (and many are doing just that: agricultural markets are “ripe for picking,” so to speak, and purchase of vegetable seed skyrocketed this year), in the short term, we have lost a lot of self-reliance and capability as individuals.

But maybe the most striking difference between that time and this one is the lack of a unifying political vision. My parents and grandparents argued about FDR at the Thanksgiving dinner table in part because FDR, scoundrel or hero, was able to bring everyone together for the common good, at least for awhile. Today, we have political machines that are still feeding the culture war in America, drawing a line between red and blue and even underhandedly pitching to white – something we all hoped we were past but clearly are not.

Who has the 21st century New Deal for America?

Hank Paulson doesn’t. But between the stock market’s meltdown after the House rejected Paulson’s bailout plan on Monday and tonight’s Senate vote on their version of a financial rescue package, we are finally hurting bad enough to come together to fix the mess wrought by 25 years of free market capitalism. Even then, freeing up U.S. credit markets will not in and of itself stop the free-fall in home values and home sales. It will do nothing to bring back the tax bases of our major cities. It will not encourage energy independence or investment in U.S. industry and infrastructure, and it will not address the problem of declining wages and rising costs.

Finally, helping Wall Street get its credit markets back on track will not bring together a populace split down the middle over issues of religion and personal lifestyle. It will not stop the feckless political pandering that has brought us to this sorry state.

I think we do need a New Deal, a vision of where America wants to go and who America wants to be on the world stage. Until that emerges, we will be seen only in terms of what we once were, and our suffering will continue. Debt cannot be a nation’s only commodity if that nation intends to prosper.

The parallels to our time and the time of the Great Depression are there alright.

But we haven’t seen anything, yet.

4 comments to Congress’ Bailout Plan: Will It Be Enough to Bridge Political, Cultural Divides?

  • Raymond

    There is one difference I could point out. In 1929 Secretary of the Treasury Mellon, though he was a proponent of the boom that culminated in the stock market crash , saw the importance of
    allowing the market to liquidate the bad investments.
    He noted the successful application of a laissez-faire policy in previous crises.

    On the other side——

    Hoover the president with then head of the NY Fed Harrison intervened with public works, credit expansion and attempted to raise wages. In fact he thought that low prices were causing the depression instead of the opposite. He subsidized industries to curtail production in an attempt to lift prices. He was cutting production (and employment) at a time when the exact opposite was needed. This marked the beginning of govt intervention
    in the economy that we now all take for granted. The dirty secret is the economy does not need to be managed.
    Just look at the mess we are in yet they prescribe a new and improved “management” concept.

    This time the Fed, the Treasury, congress and the President are all in agreement. Now that is groupthink of the highest order.
    Zip your wallets :)

  • Evelyn Black

    Thank you for your insights into this comparison, Raymond. I fear that we are indeed in for the worst. A three page bill that initially looked like an all-time bad idea to lots of people now is over 400 pages long and loaded with pork. It looks to me like the choice at this point is between the Devil and the deep blue sea, and tomorrow Congress will choose again. Why do I get the feeling people like me will lose either way? It certainly won’t be boring–I just hope my 401K doesn’t disappear entirely by the time the dust settles. Thanks again for your comments!

  • J.D. Seagraves

    He was most definitely a scoundrel! :)

  • Evelyn Black

    Thank you J.D.!

    So far:

    Scoundrel: 2
    Savior: 1

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