‘The Wealth of the Nation’ by Seymour Fogel
Let’s assume—and hope this isn’t too far-fetched—that come next January 20, the Democrats control the White House and both houses of Congress, and that a vaccine that confers immunity to COVID-19 has been produced and is being distributed. The primary challenge before the newly installed President Joe Biden, then, would be roughly the same as that which confronted Franklin Roosevelt and Barack Obama at the beginning of their presidencies: how to revive a terribly damaged economy. (Biden will also have to deal with a bitterly polarized nation—but reviving the economy can at least partially help to de-escalate those tensions, too.)
At first glance, both the Roosevelt and Obama precedents appear to offer the same lesson: Increased federal spending that creates jobs is the way to climb out of a catastrophic economic hole. At second glance, however, the two presidents’ policies differ significantly. Each initially sought to revive the economy by investing in long-overdue projects: Roosevelt in dams and other power-generating projects to create long-term improvements in the economies of the South and the West; Obama in clean energy and other new infrastructure investments that would downsize America’s immense carbon footprint.
Both these initiatives, however, took time to put in place; neither generated a large number of jobs very quickly. Six months into his presidency, Roosevelt realized this, and transferred some of his stimulus funding to basic construction and maintenance projects that generated nearly four million jobs in the subsequent four months (this in a nation of just 125 million people). The Obama administration, by contrast, never found a way to generate employment swiftly, save through providing funds to state and local governments to keep public employees on the job. This divergence in economic policy led to a divergence in political power. In the midterm election that followed FDR’s success in job creation, the Democrats actually increased their numbers in Congress—one of just two times the party of a newly elected president has won midterm gains. In the midterm election of 2010, however, the Democrats lost both houses of Congress (including a modern record loss of 63 seats in the House), and to this day have yet to regain both in the same session.
Like Roosevelt and Obama, Joe Biden has put forth ambitious, progressive plans to increase investment and employment in ways that would produce permanent changes in the nation’s economy. His plans for infrastructure investment, greening the economy, and boosting the caregiving sector for children and seniors are versions of ideas that had been incubating for years in liberal think tanks and activist groups. Each plan, if funded at the levels that Biden has called for, would boost aggregate employment over time. Whether they boost employment quickly enough to significantly reduce the nation’s massive level of unemployment, however, depends on Biden and the Democrats’ ability to proceed with Rooseveltian speed. That, in turn, will likely determine whether the Democrats’ hold on power and policymaking is a long-term endeavor or a two-year blip that paves the way for the next Trump.
THE ECONOMIC COLLAPSE of the past half-year has so devastated particular sectors of the economy that high levels of long-term unemployment are hardwired into our future—absent smart and massive federally financed job creation. In the September report from the Bureau of Labor Statistics, unemployment was at 8.4 percent of the workforce, and stood at 21 percent in the “leisure and hospitality” (chiefly, hotel and restaurant) sector. While many of the layoffs have been temporary, many have been permanent: By one estimate from economists Gabriel Chodorow-Reich of Harvard University and John Coglianese of the Federal Reserve Board, between six million and nine million of the jobs lost are not coming back. Perhaps more sobering still, a study from Oxford Information Technology estimates there will be four million business failures this year, and only 1.3 million business formations.
How successfully would Biden’s proposals for public investment stanch these wounds? University of Massachusetts economist Robert Pollin has produced a report for the Sierra Club that estimates the total number of jobs that would be created by Biden’s pledges to increase spending on infrastructure, clean energy, and caregiving, and arrives at the figure of 11.6 million jobs per year. (That figure includes the 1.4 million manufacturing jobs he estimates will be created yearly by the increased spending on those three initiatives.) Of those, 5.2 million would result from the boost to spending on infrastructure, 4.1 million from the boost to clean energy, and 2.3 million from the boost to the caregiving sector. Economist Josh Bivens of the Economic Policy Institute has estimated a comparable number of jobs to those that Pollin projects would be created in caregiving each year—from 1.8 million to 2.4 million.
Could a Biden administration create a 21st-century equivalent of the Civil Works Administration?
But can the jobs envisioned in Biden’s plan be created quickly? Many will require extensive training, others will require lengthy public approvals for projects to be constructed or renovated, and a lot will require both. For the kind of senior care and child care that Biden’s proposal calls for, new workers will need training, as will workers new to construction jobs. Just as time-consuming, if not more so, will be setting up the establishments required for universal child care and senior care, and making sure that new infrastructure and energy developments pass environmental and political muster. Projects requiring buy-in from state governments may well not get it if those governments are Republican-controlled. (Despite the Obama administration providing funding for new tunnels running under the Hudson River, Chris Christie—then the Republican governor of New Jersey—refused to go ahead with the project.)
THE FATE OF the $787 billion Obama stimulus illustrates what can go wrong with a Democratic president’s best-laid plans. One part of that plan—sending money to state governments whose revenues had collapsed in the Great Recession’s wake—worked as well as the funding would permit. States that had laid off many thousands of teachers, for instance, were able (if they were so inclined—see Chris Christie, above) to recall a number of them, though no state received enough money to come even close to avoiding layoffs altogether. States willing to accept more Medicaid funding from the federal government got it.
This year, the stimulus that the Democratic House passed in May (which the Republican Senate has subsequently ignored) included a trillion-dollar appropriation to the states to keep them from having to cut untold thousands of their employees from the rolls. Biden supported that bill, and would likely make such a bailout to the states an immediate priority once he takes office.
But the rest of the Obama stimulus took a good deal of time to trickle down to its intended recipients. For a set period of time, its Recovery Act reduced payroll taxes, but rather than do so in one lump sum that recipients could have recirculated, and would have noticed, it did so by adding small amounts to each payroll check, which may have reduced its economic impact and surely reduced its political effect.
The real hang-up, though, came in initiating the kind of projects that Americans expected a stimulus to jump-start: public works, whether related to infrastructure, green energy, or both. The problem wasn’t a lack of will: The Obama administration understood that 2009 was a time for big government to resurface after decades spent submerged under right-wing ideology. The problem was that progressive big government smacked head-on into progressive good government: a need for public sign-off and vetting that hadn’t been a comparable factor when Americans employed by the New Deal were building post offices and paving roads.
“I kept hearing that we had lots of projects that were shovel-ready,” one Obama administration official told me in 2010. “But they weren’t. We have think tanks that make a compelling case for Keynesian stimulus. What we need, it turns out, is a think tank that tells us how to actually do a stimulus—how we can get the dollars out there now.”
Of the $787 billion in the Recovery Act, $85 billion was targeted for America’s mega-state, California. Much of that went to Medicaid and school districts, but the public-works funding, which was administered through the Departments of Energy and Transportation, was very slow to appear. Of the $10.6 billion the state received in infrastructure funding, only $1.2 billion had been spent in the program’s first year. By 2009’s end, the stimulus had funded 50,138 jobs in education, but only 1,656 in transportation.
If Biden wins, his hold on power depends on his ability to proceed with Rooseveltian speed.
In 2010, Laura Chick, a former Los Angeles city controller (and a liberal Democrat) whom Gov. Arnold Schwarzenegger had appointed as the state’s inspector general of stimulus spending, explained the hang-ups to me. “To be shovel-ready is much more complicated now than it was in 1933,” she said. “Environmental-impact reviews, historic-preservation safeguards, unionization of government workers—these are good things, but they’ve changed the way government can operate.
“There are no exemptions from [federal] regulations that came with the stimulus funds,” she added. “They didn’t waive the requirement for competitive bidding; they stressed competitive bidding. You can’t just build a new bridge. You’ve got to do environmental-impact reports, you have to open up the decision to community input, you face potential lawsuits. I’m not saying concern for environmental impacts should go away, but it makes it harder to deal with an economic crisis.”
“We got $25 million of the $256 million in Department of Energy (DOE) grants to the state Energy Commission to make 250 state office buildings more energy-efficient,” Scott Harvey, the chief deputy director of California’s Department of General Services, told me in 2010. “We do competitive bidding for the jobs.” By year’s end, of the $25 million, only $5.4 million had gone out to contractors.
Yet the Roosevelt administration encountered similar constraints to getting its own stimulus up and running. In its fabled first hundred days, it had persuaded Congress to appropriate $4 billion—a huge sum of money for its time—for public works. Those funds had gone to the Department of the Interior, whose secretary, Harold Ickes, was a stickler not just for exhaustive competitive bidding but for crossing every I and dotting every T before a construction contract was let. His initiative—the Public Works Administration—was to do great work, building the Boulder and Bonneville Dams, the Triborough Bridge, and several of the aircraft carriers that were to smash the Japanese navy in the Battle of Midway. But with unemployment at nearly 25 percent, and with the enactment of unemployment insurance not yet accomplished, the PWA was taking too long to gear up.
That September, Roosevelt’s federal relief administrator, Harry Hopkins, came to him with a dire warning: Americans were likely to starve during the coming winter unless the government could generate jobs, and quick. Hopkins proposed establishing a labor-intensive employment program that could be geared up immediately, and Roosevelt agreed—funding it by taking $1 billion of the $4 billion allotted to the PWA and giving it to a program Hopkins would throw together, the Civil Works Administration.
Hopkins proved to be America’s master mobilizer. The CWA began operations on November 9 and, working with governors and mayors (and in 1933, not even Republican politicians turned down federally funded job projects), had put 4.3 million unemployed Americans to work by the following February on 180,000 small-scale projects. That 4.3 million amounted to 3.4 percent of the nation’s population of 125 million; an equivalent percentage of today’s population would come to 11.2 million. Most of the jobs created required only the use of shovels and pickaxes; the CWA’s workers paved airport runways and the roads connecting farms to market, built playgrounds, and constructed or made improvements to 40,000 schools.
The CWA was conceived as a one-winter-only emergency project, but in 1935, it was reconceived as the Works Progress Administration, which through the remainder of the decade employed millions more on kindred projects.
Carolyn Kaster/AP Photo
As vice president, Biden managed the stimulus package, which went well but suffered from a lack of shovel-ready infrastructure projects.
COULD A BIDEN administration create a 21st-century equivalent of the CWA? It would, of course, have to deal with the high levels of unemployment by enacting the $600 weekly federal supplement to unemployment insurance that the Trump administration and congressional Republicans have refused to renew. But it will be no less urgent—economically and politically—to lower the unemployment rate with federally funded jobs.
A number of Obama veterans have recognized the need to create jobs more quickly this time around. Writing in The Nation, Pollin, who worked with the Department of Transportation on the green investments in the Obama stimulus, noted that this time, “we need to identify the subgroup of green investment projects that can realistically roll into action at scale within a matter of months. One good example would be to undertake energy-efficient retrofits of all public and commercial buildings … The administrative issues around mounting such projects could begin today. The on-site work could then begin on the first day that it is safe to do so.”
In his study for the Sierra Club, Pollin estimates that the Biden plan’s suggested funding for retrofitting buildings would create 757,000 jobs per year—and of all the 11.6 million jobs that Pollin estimates the Biden plan could create, those retrofitting jobs are perhaps the first that an Obama administration could successfully create. That’s both a lot of jobs and nowhere near enough, given the staggering levels of joblessness a Democratic administration is sure to inherit.
The severity of that problem should require the administration to cut much of the red tape that would slow down its job creation. One way to do that would be to put some of those new jobs directly on the federal payroll, rather than send funds to the states to establish the very same job-creating projects, for which they’d have to constantly check with the feds to ensure that they were meeting the federal criteria. The CWA and WPA worked with state and local governments to identify needs and get sign-offs, but by reserving for themselves the role of direct employer, they sped the process along.
Another time-saver would be to shorten some of the good-government processes that delay projects’ implementation. There’d be no small irony, I acknowledge, in limiting the time prescribed for an environmental-impact report on a clean-energy project, but that may be what the administration needs to do to pull the economy back from the abyss—and to ensure that clean energy isn’t short-circuited by the right wing returning to power in two or four years.
What all this means is that the Biden campaign’s policy wing, and the liberal infrastructure that has helped inform it, needs to be working now not only on policies that will create a more thriving and egalitarian economy, but on those which can be made to thrive in the shortest amount of time. That’s no easy task, but one that both the economy and the nation’s political future demand.
