When Franklin Roosevelt first took the oath of office on March 4, 1933, he implored his fellow Americans not to shrink from “honestly facing” the grim reality of the Great Depression. It was time, he said, to confront the truth, frankly and boldly — not with despair, but with hope. For FDR was confident, confident that this “great Nation will endure as it had endured, will revive and will prosper.” He then uttered one of the most quoted lines in American history when he asserted that in light of this confidence, “the only thing we have to fear is fear itself.”
It is a beautiful sentiment — but it is only the first half of what President Roosevelt had to say. The rest of the sentence goes on to more fully define the word ‘fear’ and the consequences that stem from a people lost in its grip. The full sentence reads:
So, first of all, let me assert my firm belief 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 is his assertion that fear “paralyzes needed efforts to convert retreat into advance” that deserves our attention as we try to work our way out of the Great Recession. In FDR’s day, it was economic insecurity that aroused the greatest anxiety among the American people; anxiety that led them — under FDR’s inspired leadership — to turn to what he called “the organized power of government.” Not a government mired in the evil tenets of fascism or communist totalitarianism, but one dedicated to preserving liberal capitalist democracy. What grew out of this faith in government was a collective effort to mitigate the worst excesses of capitalism; to manage it in such a way as to ensure that every American might be able to enjoy basic economic security and the benefits of capitalism at the same time. It was this fundamental goal that inspired the New Deal reforms that still shape much of the world we live in today; reforms that brought us Social Security, unemployment insurance, the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission and a host of other measures.
FDR also put the country back to work, not by cutting taxes and slashing government spending, but through direct government action. In the 1930s, this came in the form of such programs as the Works Progress Administration and the Civilian Conservation Corps, which built much of our nation’s economic infrastructure, and in the 1940s through the massive wartime mobilization. All of this, of course, cost a great deal of money, and as a consequence the Federal budget deficits grew from the modest 4-5 percent of GDP in the 1930s to levels approaching 30 percent of GDP during the war. Often overlooked, but directly tied to the level of government spending, was the unemployment rate, which fell from a high of 25 percent in 1933 to roughly one percent by 1945. Equally important — and in spite of the rise in public debt — the GDP also expanded significantly, especially during the war, when, thanks again to massive government spending, it increased by nearly 50 percent in four years.
Taken together, the social and economic reforms of the New Deal, coupled with the wartime expenditures that recapitalized American industry, transformed America. By 1945 they had made our nation the most productive and innovative manufacturer in the world and laid the foundation for the most significant and sustained period of economic expansion in American history. They also helped create the post-war middle class and left a legacy of economic security that, until its relatively recent dismantling, had served the American people well for decades. In short, the government programs and deficit spending of the Roosevelt era did not lead our nation into a permanent state of poverty; they turned the United States into a nuclear-armed global super-power.
The deficit hawks who today decry any talk of a second stimulus bill, scoff at the notion that government can and should engage in a direct effort to reduce unemployment, and must take stronger measures to regulate the banking and financial sectors, somehow prefer to ignore the lessons learned between 1933 and 1945. Worse, they also prefer to turn to fear rather than hope. The fear that deficit spending in the midst of an economic crisis will somehow permanently impoverish us. The fear that programs aimed at providing a greater measure of social and economic security for all Americans — such as health care reform — represent an infringement on their personal liberties. The fear that government regulation is tantamount to socialism. The fear that leads to a misguided belief that government itself is the problem.
The current administration and Congress deserve credit for the measures they have taken thus far to prevent the Great Recession from becoming a second Great Depression. But most economists agree that the government needs to do more, much more, to create the kind of economic growth that will vastly reduce the unemployment rate and get us back on the path to a full recovery. Unfortunately, it would appear that the fear sown by the anti-government forces of the right, helped along by the massive political influence of the banking and financial industries, have returned us to a pre-1933 world, a world where “unreasoning, unjustified terror…paralyzes needed efforts to convert retreat into advance.”
David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.