Learning from the New Deal

Abstract

This paper argues that the direct job-creation strategy adopted by the New Deal administration of Franklin D. Roosevelt in programs like the WPA (the “New Deal strategy”) is best understood as an effort to secure what the New Dealers came to regard as a human rights entitlement—the right to work—rather than as an economic policy designed to promote the economy’s recovery from the Great Depression. The paper goes on to argue, though, that in fashioning a policy to secure the right to work, the New Dealers unknowingly developed a strategy for delivering a Keynesian fiscal stimulus that is markedly superior to other anti-recession strategies. Unfortunately, neither the New Dealers themselves nor the generation of progressive policy makers that followed them understood the multiple strengths of the New Deal strategy. Consequently, the strategy was permitted to languish, and its potential contribution to public policy in the post World War II era was lost. In an effort to rekindle interest in the New Deal strategy, the paper concludes by pointing out how much more effective the New Deal strategy would have been in combating the so-called Great Recession than the more conventional spending and tax-cut policies the Federal Government actually has deployed. For a fraction of the sum the Federal Government has allocated to stimulate the American economy since the fall of 2008, the New Deal strategy could have immediately reduced the nation’s unemployment rate to pre-recession levels while simultaneously promoting a more rapid recovery in private-sector hiring.