Analysis: Obama plans eclipsing New Deal spendingWASHINGTON (AP) — In sheer size, the economic measures announced by President Barack Obama to address “a crisis unlike we’ve ever known” are remarkable, rivaling and in many cases dwarfing the New Deal programs that Franklin D. Roosevelt famously created to battle the Great Depression.
WASHINGTON (AP) — In sheer size, the economic measures announced by President Barack Obama to address “a crisis unlike we’ve ever known” are remarkable, rivaling and in many cases dwarfing the New Deal programs that Franklin D. Roosevelt famously created to battle the Great Depression.
Winning approval was a political tour-de-force for the new administration.
Yet gloom and uncertainty persist about the plan’s ability to deliver a cure for the economy’s severe ailments.
Stocks plunged to six-year lows after the burst of bill signings, bailout announcements and presidential pledges.
And polls show Americans are increasingly worried about losing jobs and not having enough money to pay their bills.
Why the skepticism?
Maybe there’s just been too long a run of bad news.
Arthur Hogan, chief market analyst at Wachovia Securities, blames much of the negativity on “the fact that people are so down. They have no confidence in the future.”
Republicans complain about wasted money. Some Democratic supporters say the plan won’t help very much very quickly.
Former President Bill Clinton, who gives Obama high marks for straight talk in telling the nation the bad economic news, says his successor might try a more upbeat approach now. “I just want the American people to know that he’s confident that we are going to get out of this and he feels good about the long run,” Clinton said Friday on ABC News’ “Good Morning America.”
Patience, pleads the administration. Lawrence Summers, Obama’s chief economics adviser, says the success of the plan will be measured “not by daily market reaction but what happens over time.” Still, he says, “We are moving rapidly.”
No matter how people feel about the plans, they are undoubtedly ambitious — and expensive. Tomorrow’s taxpayers will still be paying for them long after Obama is out of office.
So far in his month-old presidency:
— Congress passed and Obama signed into law a record $787 billion mix of tax cuts, job-creating projects and aid to struggling states.
— The president pledged up to $275 billion in federal aid to help stem a tidal wave of home foreclosures.
— The Treasury Department and the Federal Reserve announced financial-rescue steps that could send up to $2 trillion coursing through the economy.
In all, the plans would raise the federal portion of the U.S. economy to some 31 percent, more than twice the level after eight years of FDR’s historic New Deal spending.
“All Americans have a stake in making this work,” says Treasury Secretary Timothy Geithner.
But you wouldn’t know it from the reaction.
Rather than the bipartisan support Obama first sought, Republicans remain in near unanimous opposition. They contend that the stimulus package is tainted by wasteful spending and that the mortgage-foreclosure plan leaves out many struggling homeowners while rewarding lenders and borrowers who made bad decisions. Some Republican governors from the South even talk of spurning the new federal money.
Even while supporting the initiatives, some Democrats suggest the efforts won’t deliver enough quick help to make a difference, despite the eye-popping price tags.
Joblessness keeps rising. Consumers and businesses are cutting back. Bank lending remains down. And auto demand keeps falling, with two Detroit automakers saying this week that they may need up to $21.6 billion more in U.S. loans beyond what they received in January.
Rutgers University political science professor Ross Baker said, “There is a degree of skepticism involved. Not surprisingly, people are wary of some very expensive proposals with no guarantee of success or even a high probability of how well they’ll work.”
Economists argue that many of the benefits from the Obama initiatives will take months, if not years, to arrive. The administration cites the complexities of trying to heal a downturn that has turned global.
“The president balances the challenges that we face with the understanding that we’re going to get through tough times as we always have in this country,” White House spokesman Robert Gibbs said Friday when asked about Clinton’s comments.
As for the New Deal, it’s hard to compare Obama’s moves to FDR’s initiatives. They were a series of programs spread over years, not all-encompassing packages like the new proposals.
Some of Roosevelt’s signature programs dealt with revamping government structure rather than job creation, such as securities-market regulation, insuring bank deposits. His biggest idea, Social Security, didn’t really have much impact until later.
The largest of Roosevelt’s jobs programs, the Works Progress Administration, begun in 1935, did provide jobs across the nation building roads, bridges and other projects. Among his other job-creating programs were the Civilian Conservation Corps, the Civil Works Administration, the Public Works Administration and the Tennessee Valley Authority.
Historians and economists still debate whether FDR’s New Deal fixed the crisis or prolonged the pain.
After taking office in 1933, he first tried to slash government jobs and spending. And his efforts to balance the budget in 1937 backfired and triggered a new recession within the broader Depression.
“Roosevelt came late to some of the ideas of big public spending to stimulate the economy,” said John Halpin, a senior fellow at the Center for American Progress, a liberal think tank.
The 1930s began with federal outlays representing just 3.4 percent of the nation’s economy as measured by the gross domestic product. Roosevelt’s efforts to fight the Depression with government spending caused outlays to rise to 10.3 percent of GDP by 1939 and to 12 percent by 1941 on the eve of U.S. involvement in World War II.
By contrast, government spending was 21 percent of GDP last year. Obama’s economic recovery policies are expected to bring it up to 30 percent or more.
“The New Deal by today’s standards involved a minuscule amount of spending,” said Allan J. Lichtman, a professor of political history at American University. He said Obama is more of a “big spender” than was Roosevelt.
Roosevelt had a bigger crisis on his hands. Unemployment was at 25 percent when he took office.
Last month’s jobless rate was 7.6 percent, up from 4.9 percent a year before but still shy of the postwar high of 10.8 percent reached in 1982 — and far from Great Depression levels.