Steve Coll: Getting in touch with our inner FDR

In 1934, President Franklin Roosevelt asked Frances Perkins, his Secretary of Labor, to draft a plan that might help Americans escape poverty in old age. “Keep it simple,” he told her. “So simple that everybody will understand it.” On August 14, 1935, after bargaining in Congress, Roosevelt signed the Social Security Act at a White House ceremony. The law “represents a cornerstone in a structure which is being built but is by no means complete,” the President said. He continued:

It is a structure intended to lessen the force of possible future depressions. . . . It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.

Roosevelt hoped that the elderly would also receive health insurance; Congress balked. It took thirty years—until July 30, 1965, when Lyndon Johnson signed the Medicare bill—to protect older Americans from the ravages of sickness as well as poverty. These were Democratic initiatives, but they gradually became national compacts: Ronald Reagan defended Social Security, and George W. Bush expanded Medicare. They, too, came to recognize that a sound system of social insurance enabled by government makes capitalism and its splendid innovations (the iPhone, the Cartoon Network, the Ultimate Fishing Tool, etc.) more balanced and sustainable.

Last week, the Department of Commerce reported that the economy is shrinking. Almost certainly, the United States has entered its twelfth official recession since Roosevelt’s death. Most of the past eleven recessions have been short and mild, in part because of the “automatic stabilizers,” as economists call them, created by New Deal-inspired insurance and regulatory regimes. The current financial crisis, however, has already proved so severe and so volatile that it has smashed or bypassed a number of important shock absorbers. Some economists fear that this downturn may therefore be atypically long and painful.

The country is fortunate in one respect: the sudden buckling of financial safeguards has put just about everyone in touch with his inner New Dealer. Even Alan Greenspan recently confessed to Congress a crisis of faith in self-regulation. Meanwhile, former free-market true believers in the Bush Administration have tossed out money from the public vault like looters, and just as untidily; if they can sort out exactly what they have done, the Treasury’s mandarins must soon prepare PowerPoint presentations to document for their successors the most expansive nationalizations undertaken in the United States since the Second World War. The Administration seems giddy with a discovery familiar in the palaces of certain despots: yes, you can just print the bills on your own presses and hand them out to your friends.

Embedded in this festival of emergency measures, however, is an important and possibly durable ideological shift. Last week, in an op-ed in the Washington Post, Martin Feldstein, the chairman of the Council of Economic Advisers in the Reagan Administration, and, more recently, an adviser to John McCain, endorsed large-scale spending on public works as a way to stimulate economic recovery. This was a bit like Al Gore embracing coal.

The essay’s appearance indicated that a broad coalition is emerging, where none existed a year ago, in favor of New Deal-style expenditures on roads, bridges, broadband lines, alternative energy, and the like, to support economic recovery and future growth. Such investment could strengthen the economy for a generation, as Eisenhower’s Interstate Highway System did.