With the current unemployment rate standing at 9.8 percent, and with some economists predicting that the rate may well top 10 percent by early 2010, talk of a second federal stimulus package has become more common in recent weeks. There are hints that the Obama administration is thinking along these lines, but so far the White House insists that although it is considering a number of ideas to bolster the US economy, a second stimulus plan is not one of them. This may be a mistake.
With unemployment climbing – not falling – now is the time to consider even bolder action. Perhaps what we really need is a jobs creation program that puts paychecks in people’s hands as quickly as possible.
In some respects the situation that President Obama finds himself in is not all that dissimilar to that experienced by Franklin Delano Roosevelt following his first two years in office. Like the current administration, FDR spent his initial months engaged in a major effort to stimulate growth, stabilize the banking and financial sector and provide emergency relief to those who needed it most. Not unlike today, these efforts met with some success. But much to FDR’s chagrin, unemployment—although down by more than five percent from its peak in March 1933—still remained stubbornly high, standing at just under 20 percent at the beginning of 1935.
In response FDR decided to launch the most ambitious jobs creation program of the New Deal – the Works Progress Administration (WPA). Headed by his trusted aide, Harry Hopkins, FDR insisted to Congress that the program should be guided by six principles: the projects should be useful; the bulk of the funds spent should “go into wages for labor;” the funds should be spent quickly; and areas of high unemployment should be especially targeted.
Aside from a small number of federal projects run by the WPA office in Washington, the vast majority of WPA projects were sponsored at the local level by public agencies with a measure of local public support. Approximately 90 percent of the workers employed by the WPA were classified as needy, and roughly 90 percent of each project’s budget went directly to wages, with the average worker remaining with the program for just over a year. Overall the WPA pumped more than $10 billion dollars into the Depression economy and employed approximately 8.5 million people. By the time it ended in 1943, it had also built much of the economic infrastructure of country, including over 650,000 miles of roads, 78,000 new bridges and viaducts, and 350 airports (including New York’s La Guardia), all of which greatly facilitated the movement of goods and people across the country. The WPA also built roughly 40,000 buildings, created 8,000 parks and vastly improved the nation’s supply of clean drinking water through an array of large and small water and sewage disposal projects.
Another plus: it helped reduce the unemployment rate, which fell to 14.3 percent in 1937, and according to most economists, would have continued to fall had the Roosevelt Administration not drastically cut back on WPA and other New Deal expenditures in the summer of that year—a move which led to a temporary reversal of the pre-war economic recovery and the recession of 1938. Stung by this set back, the Roosevelt Administration increased its support for the WPA in March 1938 and as a consequence the unemployment rate began to fall again, dropping to 14.6 percent in 1940, and less than 10 percent in 1941.
With unemployment rates still rising, some economists have begun to argue that the Obama administration should follow the example of FDR and invest in a federally funded jobs program. Such a move, they argue, could fill the employment gap while the economy recovers and help rebuild our nation’s long neglected infrastructure. It would also give those who despair of ever finding work the one commodity that is perhaps most precious of all—hope. Indeed, given the sad state of political discourse in Washington at present and the growing apathy among the nation’s electorate that has come as a consequence, perhaps our leaders should take heed of FDR’s maxim that “not only our future economic soundness but the very soundness of our democratic institutions depends on the determination of our government to give employment to idle men.”
David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.