Editor’s Note: This article appeared in the September 27 edition of the Wall Street Journal.
The Bush administration has proposed the most expensive government spending plan in American history, allocating as much as $700 billion to a Wall Street bailout. The proposal was attacked by members of both parties, who immediately began negotiations to find an alternative. The Bush plan was not only a political blunder; it was also a complete repudiation of the administration’s own economic policies. It could not be justified by any of the core beliefs governing free enterprise and the free market.
As with the decision to invade Iraq, the administration sought to commit the federal government to massive spending without a clear exit strategy. Most important, it drew upon the New Deal’s legacy of government intervention in the marketplace–without any of the New Deal’s fundamental concern for the well-being of ordinary Americans.
This year happens to be the 75th anniversary of the New Deal, a revolution in governmental philosophy that began with the Emergency Banking Act of 1933. That first piece of New Deal legislation was a hurried response to the worst banking crisis in U.S. history–until now.
President Franklin Delano Roosevelt outlined the problem clearly in his first fireside chat, a week after taking office. “We had a bad banking situation,” Roosevelt said. “Some of our bankers had shown themselves either incompetent or dishonest in the handling of people’s funds. They had used the money entrusted to them in speculations and unwise loans . . . It was the government’s job to straighten out this situation and do it as quickly as possible.”
President Roosevelt’s banking plan ended the panic. But it did much more than that. In Roosevelt’s words, it “reorganized, simplified, and made more fair and just our monetary system.”
Compare those aims and that achievement with what the Bush administration proposed. Having championed the free market, small government and deregulation for years, the administration asked taxpayers to assume the costs of Wall Street’s poor investments–while allowing Wall Street to hold on to the good ones.
The size and scale of the Bush administration’s proposal are mind-boggling. During the New Deal, the Roosevelt administration spent about $250 billion (in today’s dollars) on public-works projects, building about 8,000 parks, 40,000 public buildings, 72,000 schools and 80,000 bridges. The entire cost of all the New Deal programs (in today’s dollars) was about $500 billion. The secretary of the Treasury now wants to spend perhaps twice that amount, simply to prevent a financial collapse.