FDR – Sheila Kennedy

Testing Economic Theory

A couple of weeks ago, after speaking to a group at North United Methodist Church, I was approached by a couple who handed me a book and accompanying materials on Modern Monetary Theory. I explained that economics is definitely not one of my strong suits–far, far from it– but they insisted that the book, a New York Times bestseller titled The Deficit Myth, written by economist Stephanie Kelton–was clear and accessible.

So I took the book, and I read it. All the way through. And I found it very persuasive.

Modern Monetary Theory (MMT) begins with an undeniable fact: government budgets in countries with sovereign control over their currencies are very different from household budgets. Not all countries have “sovereign control”–in the EU, for example, countries that have adopted the Euro cannot issue currency. They are “users” not issuers, and thus are constrained in much the same way as our household budgets are.

The United States, however, is not. Our government is not revenue-constrained in the same way as our households or our businesses. That doesn’t mean there are no constraints; it just means the constraints are different. As the book persuasively argued, budget hawks and public officials wringing their hands over the size of the budget deficit are still operating under economic paradigms that were appropriate when we were on the gold standard (and/or Bretton Woods), but the country today operates within a very different fiscal reality, one that requires that we change our previous assumptions.

MMT doesn’t dispense with fiscal responsibility; it redefines what responsible behavior looks like.

MMT advocates argue that the government can use its currency-issuing power to guarantee full employment, as it can fund necessary public sector jobs during economic downturns without worrying about running out of money. Governments can use fiscal policy more effectively to stimulate demand and support economic growth. MMT emphasizes the importance of managing real resources (labor, materials, technology) rather than focusing on budgetary ones.

The real constraint on government spending, according to MMT, is inflation.

If government creates too much money, it can fuel a speculative bubble; if it creates too little, it promotes stagnation. Taxation thus becomes an important tool–both for controlling aggregate spending and for altering the distribution of wealth and income–i.e., addressing and reducing the gap between the rich and the rest. (As the author notes, it’s important to determine when taxes should be raised or lowered, and especially which ones and on whom.)

I obviously cannot reduce the book’s lengthy and lucid explanations to a blog post. I strongly encourage you to read the book, or other explanations of MMT. I will note, however, that there are a growing number of economists, many cited in the text, who have adopted MMT because it is based upon an accurate description of the way our current economy functions.

Something that wasn’t in the text, but occurred to me as I was reading, was that both FDR’s New Deal and Joe Biden’s “Bidenomics” appear to have adopted some of the major tenets of MMT, by using government spending to boost wages and employment. I know that many people attribute FDR’s economic successes to wartime anomalies, but the data on Biden’s flourishing economy cannot be so easily dismissed.

As Heather Cox Richardson recently reported:

Data from the Bureau of Economic Analysis released today showed inflation continuing to come down. In November the Personal Consumption Expenditures (PCE) price index was 2.6% over the previous November, down from 2.9% in October. The Federal Reserve aims for 2%. Falling gas prices meant that overall, prices actually dropped in November for the first time since April 2020.

In a statement, President Joe Biden reminded Americans that “[a] year ago, most forecasters predicted it would require a spike in joblessness and a slowdown to get inflation down. I never believed that. I never gave up on the hard work, grit, and resilience of millions of Americans.” In addition to the falling inflation rate, he noted that “the unemployment rate has stayed below 4 percent for 22 months in a row, and wages, wealth, and the share of working-age Americans with jobs are higher now than they were before the pandemic began.” …

The administration is highlighting economic numbers not just because they are good—and they are: real gross domestic product (GDP) grew by an astonishing annual rate of 4.9% in the third quarter of 2023; under Trump it was 2.5% before the pandemic knocked the bottom out of everything—but also because they illustrate the administration’s return to an economic theory under which the U.S. government operated from 1933 to 1981.

Unfortunately, we have too many lawmakers and pundits who cling to outmoded paradigms even more fiercely in the face of empirical evidence to the contrary.

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Joe Biden

Let me begin this post with an admission: I am older than Joe Biden, so I know a little something about the diminishing energy levels that accompany aging. I sometimes (okay, often) blank on words. On the other hand, I have a significant well of life experience to draw on, and so far, at least, I’m reasonably confident that the lessons of that lifetime have more than compensated for the relatively minor deficits of aging.

And I am over the constant media handwringing about Biden’s age.

Sure, given the challenges of aging, I wish Biden was younger–but after looking at what he has accomplished over the past three years by drawing on his lifetime of political and governmental experience, I realize that significant trade-offs would be involved. (Unlike Trump–who is only 4 years younger– Biden spent his time acquiring the knowledge and skills that have made him a very consequential President.)

In the last three years, America’s economy has added more than 13 million jobs—including nearly 800,000 manufacturing jobs. We’ve unleashed a manufacturing and clean energy boom. In 2021 and 2022, more than 10 million applications were filed for new small businesses—the strongest two years ever recorded. Since the pandemic, America has had the strongest growth of any leading economy in the world. Inflation has fallen for 11 straight months.

As my middle son observed, “Biden is the first President I’ve voted for who has exceeded my expectations.”

And as an article in the New Republic argues, there needs to be more recognition of the skills Biden brought to the job.

Nobody seems to have noticed this, but over the course of the spring, the country’s four leading freight rail carriers agreed to grant the vast majority of their workers paid sick days.

Everybody remembers what happened last December. The workers threatened to strike over such days, among other issues. President Biden, generally very friendly toward labor, made it illegal for the workers to strike. He was criticized by unions and workers and fellow Democrats and liberal media outlets, this one included….

When the workers prevailed, the International Brotherhood of Electrical Workers explicitly acknowledged that the Biden administration had

played the long game on sick days and stuck with us for months after Congress imposed our updated national agreement. Without making a big show of it, Joe Biden and members of his administration in the Transportation and Labor departments have been working continuously to get guaranteed paid sick days for all railroad workers.

As the article argued, the administration needs to start “making big show” of such accomplishments.

Biden has been a terrific president. The big legislation. The way he played Kevin McCarthy on the debt deal. The global leadership against Putin. The plain human decency restored to the White House after four years of self-obsessed thuggery. Oh—the 13 million jobs created since he took office, which is more jobs in 28 months than created under any other president, in all of our history, in a full four-year term.

As Jennifer Rubin recently wrote in the Washington Post, Biden has an economic record that has been working far better than most people anticipated but that the electorate doesn’t yet recognize.

The economy has created 13 million jobs, inflation has been more than cut in half, huge investments are being made in infrastructure and green energy, wage growth has begun to outpace inflation, the first drug price controls are going into effect and the biggest corporations will finally be forced to pay something in federal taxes. Yet polls show voters incorrectly think we are in a recession and remain negative about the economy.

As Robert Hubbell recently reminded us, “The constant hum of investigations into Trump’s many crimes is obscuring one of the great modern presidencies.”

Historians will look back in wonder at what Biden achieved in a presidency that began mid-pandemic before the smoke of a failed coup and insurrection had cleared. Despite those obstacles, his legislative record rivals or exceeds that of every president since FDR—a president who was mired in controversy throughout his tenure.

The Biden Administration has a three-part vision: targeting investment, empowering workers, and promoting competition. That vision includes enforcing antitrust rules and allowing Medicare to negotiate for lower drug prices. (Recent results: cheaper insulin and real wage growth.)

As the New Republic reminds us,

Liberals have a list of 50 things they want government to do, and they want those things done fast and to completion. Conservatives have a list of about two things they want government to do: Cut taxes, and punish people they disapprove of morally. For a presidential administration, satisfying that first group is a lot harder than satisfying the second

As someone has pointed out, It’s not how old you are. It’s how you are old.

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Fear Itself…

FDR famously declared that ” the only thing we have to fear is…fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” It was 1933, and the country was still reeling from the Great Depression.

Almost 100 years later, the U.S. is dealing with a pandemic, but otherwise most of us are in far better shape than people were in 1933. (For that matter, there’s an argument to be made that if it wasn’t for the people holding an “unreasoning, unjustified” fear of vaccines, the pandemic would be largely behind us.) Our sour national mood is almost entirely attributable to a political environment characterized by fear–a fear that has led to Congressional gridlock and refusal to deal with reality.

A friend recently sent me the results of a poll conducted by Axios–results that puzzled her. The poll showed heightened levels of fear across the political spectrum, but far higher among those identifying as Republicans. She had a reasonable reaction: yes, rational Americans have reason to be fearful of Republicans’ persistent attacks on democratic institutions–but what do the Republicans fear? And why is fear so much higher among them?

Whatever they told the pollsters, I’m pretty sure that what most of today’s Republicans really fear is demographic change and the loss of White Christian privilege. It’s that fear that is motivating their frenzied attacks on democracy and “one person, one vote.”

There’s an enormous amount of research corroborating that conclusion. Over the past decade, as popular culture and media outlets have paid more attention to their demographic decline, Americans who equate “real Americanism” with being White and Christian have seen headlines describing the waning of their share of the population; in 2017, numerous outlets headlined the fact that the country’s White Christian population had dipped below 50% for the first time.

Or, as one 2019 headline put it, “White Christian America ended in the 2010s.”

The author of the article, Robert P. Jones, heads up the Public Religion Research Institute. He wrote

Of all the changes to identity and belonging, the century’s second decade has been particularly marked by a religious sea change. After more than two centuries of white Anglo-Saxon Protestant dominance, the United States has moved from being a majority-white Christian nation to one with no single racial and religious majority.

When I first identified this shift mid-decade in my 2016 book “The End of White Christian America,” I noted that the percentage of white Christians in the general population had dropped from 53 percent to 47 percent between 2010 and 2014 alone. Now, at the end of the decade, only 42 percent of Americans identify as white and Christian, representing a drop of 11 percentage points.

Jones recited the statistics: since 2010, the number of White evangelical Protestants has dropped from 21 percent of the population to 15 percent. Today they are roughly the same size as their white mainline Protestant cousins (15 percent vs. 16 percent, respectively).

In 2017, the U.S. Census Bureau reported that, for the first time, there was an absolute decline in the country’s white, non-Hispanic population. In other words, whites not only lost ground as a proportion of the population, but in actual numbers; there were more deaths than births. The U.S. Census Bureau now predicts that the U.S. will no longer be majority-white by 2045, and among children at every age below 10, whites are already a minority.

Research tells us that White Christians have become deeply anxious about the future and unrealistically nostalgic for the past. That anxiety and nostalgia “has fueled support for Trump’s “Make America Great Again” agenda, and not just among white evangelicals.”

Solid majorities of each white Christian subgroup voted for Trump in 2016 and, in the Public Religion Research Institute’s most recent American Values Survey, nearly 9 in 10 (88 percent) white evangelicals and approximately two-thirds of both white mainline Protestants (68 percent) and white Catholics (65 percent) oppose impeaching and removing him from office.

White Christian America’s attraction to Trump has little to do with his personality or character — a slim majority (52 percent) of white evangelicals, for example, say they wish his speech and behavior were more like previous presidents — and everything to do with something more important: their belief that “making America great again” necessarily entails restoring white Christian demographic and political dominance.

These are the fears that motivate today’s GOP base–its opposition to immigration and hysteria over “Critical Race Theory,” among other things, and its determination to retain social dominance and privilege no matter how unconstitutional or unChristian the means and no matter how damaging to the nation.

Fear is a potent motivator but a very bad navigator.

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Blast From The Past Makes Me Happy!!

On family excursions into nature–admittedly, not my strong suit, but hey! grandkids–I became aware of the lasting contributions of FDR’s Civilian Conservation Corp. That program not only offered employment to some three million Americans who had found themselves out of work during the Depression—it also built lasting improvements to the nation’s parks, roads and forests.

Workers enrolled in the CCC planted more than three billion trees. They paved 125,000 miles of highways, and built 3,000 fire lookouts.. Trails and structures from the Grand Canyon and the Pacific Coast Trail to the Smokey Mountains remain in use today.

According to The Guardian, Joe Biden has taken a leaf from the CCC–one of FDR’s most popular and successful efforts.

As part his recent climate policy spree, Biden announced the establishment of a “Civilian Climate Corps Initiative” that could harness the energy of the very generation that must face – and solve – the climate crisis by putting them to work in well-paying conservation jobs.

After Biden’s omnibus executive order, the heads of the Department of the Interior, the Department of Agriculture and other departments have 90 days to present their plan to “mobilize the next generation of conservation and resilience workers”, a step toward fulfilling Biden’s promise to get the US on track to conserve 30% of lands and oceans by 2030.

This is exactly the sort of effort we need right now. Not only will this Civilian Climate Corp provide gainful and undeniably useful job opportunities at a time when the economy is reeling from COVID, not only will it provide training to young people who participate, not only will it be an important part of America’s response to climate change, but it will offer the demonstrable benefits that attend national public service programs.

This is far removed from “make work” programs. This CCC will work on projects that are clearly and substantively important. The article quotes Mary Ellen Sprenkel, head of the National Association of Service and Conservation Corps, for the range of issues such a Corp can address:

Far beyond just planting trees, a new conservation corps could pour money into tackling a bevy of other environmental problems, too. According to Biden’s website, projects will include working to mitigate wildfire risks, protect watershed health, and improve outdoor recreation access. Sprenkel thinks the effort could also include more activities at the community level, like urban agriculture projects and work retrofitting buildings to be more energy-efficient. And as Sprenkel pointed out, the federal government owns and manages thousands of buildings that need help to become more energy-efficient. The buildings “could even become sources of renewable energy generation with solar or wind power installations”, she added.

This reconstituted and reimagined CCC can and should provide apprenticeships and on-the-job education equipping participants for long-term employment. But even more important, at a time when Americans live in very different realities and occupy informational and residential “bubbles,” it will provide the democratic benefits offered by public service programs by bringing young people from widely different backgrounds together.

Back in 2014, I advocated for a new GI Bill that would require young people to enroll in a year of civil service between high school and college or trade school. Among the many benefits of such service would be an appreciation for the role of government; another benefit would be the experience of working with Americans from diverse backgrounds and communities. The original CCC was segregated by race and gender–realities that detracted from its otherwise positive influence. Biden’s CCC, to the contrary, would build non-corporeal bridges along with the physical ones–and it would do so at a time when the bonds of citizenship have become deeply frayed.

My youngest grandson is currently taking a year with Americorp, and as I watch his progress, I can attest to the maturation and flourishing–and cross-cultural understanding– that occurs in such programs.

I say three cheers for the three Cs!

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Wisdom from FDR: The Sunday Sermon

The other day, I came across a quotation from a State of the Union given by FDR, expressing a basic truth that is too often obscured in today’s highly moralistic political discourse.

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.

A very similar thesis was at the heart of Nobel prizewinner Amartya Sen’s important book, Development as Freedom. Development, for Sen,” is the process of expanding human freedom.” Sen argued that true freedom — ”substantive freedom” is his term — requires ”economic facilities,” ”social opportunities” and ”protective security,” thus government should not only provide social security, but should be prepared to be the employer of last resort.

Roosevelt’s point was practical: desperate people are ripe pickings for demagogues; they are the raw material of revolutions and social unrest. Sen’s argument was more basic; it was a consideration of the nature of freedom. His conclusion: a person whose every waking moment is spent ensuring simple survival is not free in any human sense of that word. She is certainly not free to develop her talents or pursue her dreams.

For both reasons then, prudential and humanitarian, it behooves a good society to provide its citizens with at least a minimal level of sustenance.

Aristotle defined a good society as one that promotes human flourishing, and no one can flourish if every waking moment is devoted to subsistence. The trick is finding the sweet spot between empowering people and creating dependency. In the U.S., we have historically frowned on assisting the poor, concerned that a too-generous social safety net would create a dependent underclass. (Our disinclination to help impoverished folks also reflects the Calvinist assumption that poverty is evidence of divine disapproval–that being poor somehow reflects moral deficiency.)

Ironically, despite America’s public celebration of self-sufficiency, capitalism and markets, our government blithely subsidizes all manner of private-sector business enterprises, privileging the well-connected and tilting the playing field with abandon–and creating considerable dependency in the process.

I’ve never understood why welfare for the rich is less morally suspect than welfare for the poor.

In that same State of the Union message, FDR outlined what he called a second Bill of Rights, one that would include the right to “a useful and remunerative job;” 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; and the right to a good education.

We’re no closer to realizing those goals than we were when FDR delivered his speech; if anything, we’re farther from them, thanks in no small measure to a small group of smug, self-righteous and highly subsidized “captains of industry” who have purchased our political system–and who can count on the millions of us who won’t vote on Tuesday.

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