Look to Lincoln
Not to FDR, when designing legislative agendas.
Apr 6, 2009, Vol. 14, No. 28 • By WILLIAM J. STUNTZ
A lot of ink has been spilled on what might be called the Roosevelt and Reagan models of the presidency. In the recent past, the conventional wisdom has been Reaganite: New presidents should focus on one or two clear objectives, as Ronald Reagan emphasized tax cuts and a defense buildup. Barack Obama's ambitions are more Rooseveltian. This president seeks not only to address the nation's banking crisis but to upgrade the nation's system of public education, produce an economy based on green energy, and transform American health care. And on the seventh day, he'll rest.
The current debate about the merits of these two presidential models misses the most problematic feature of the Obama agenda. Obama isn't overreaching by addressing too many issues at once. He's overreaching by addressing those issues in the wrong way.
To see why, one must compare FDR's First New Deal not with the Reagan Revolution, but with Abraham Lincoln's other presidency--the one that wasn't spent fighting the Civil War. In the first 16 months of his administration, Lincoln signed three of the most important and successful pieces of legislation in American history: the Homestead Act, the Land-Grant Colleges Act (sometimes called the Morrill Act), and the Pacific Railway Act. The first populated the prairie and kept urban wages high; the second created Cornell, MIT, and the great state universities of the Midwest; the third led to the building of North America's first transcontinental railroad. Congress and the president--Lincoln supported all three laws and was a factor in their passage--found the time to enact this ambitious program while battling Robert E. Lee and Stonewall Jackson, and while building the world's second-biggest navy almost from scratch. How did they do it?
The answer to that question is the same as the answer to this one: Why did Lincoln's laws work? Their success did not depend on complex judgments made by members of Congress or government regulators. The statutes in question were meant to confer opportunities, not to solve problems--yet they offer a terrific model for problem-solving government. Notice who did the hard work: not members of Congress, not Lincoln's omnicompetent cabinet, and not the president himself. Rather, the necessary elbow grease was supplied by the private citizens whose prospects Lincoln aimed to improve.
The Homestead Act hastened the day when the American farm belt would become the world's most productive farmland. The universities established by the Morrill Act helped produce the world's most educated workforce. The transcontinental railroad knit a continent-sized nation together without the need for centralized autocracy: an achievement then unique in world history. Each of these pieces of legislation was simple. Complex calculations were left to the homesteaders, to students and professors, to the workers who laid the track and the engineers who helped find a path through the mountains. They, not some 19th-century Timothy Geithner, were the ones who put in 15-hour days in order for these laws to succeed. The results were abundantly positive. These three laws helped America become both the world's workshop and the world's farm--a combination no other nation has achieved.
Compare that approach with the key statutes of the early New Deal. The National Industrial Recovery Act (and the National Recovery Administration that it created) aimed to cartelize the manufacturing sector of America's economy--to restrict production by having producers and government regulators, working together, allocate market share to different producers. The Agricultural Adjustment Act did the same for America's farms, dictating how much of which crops farmers could grow in order to prop up farm prices. The Securities Acts of 1933 and 1934 and the Glass-Steagall Act established detailed regulatory systems for the world of banking and finance. The only one of these acts that empowered private citizens was the NIRA--and the private citizens in question were industrial CEOs, not ordinary Joes on the assembly line. Success turned not on the wisdom and hard work of the citizenry, but on the knowledge and insight of corporate managers and government regulators. As Amity Shlaes shows in her recent book The Forgotten Man, the results were less than stellar: Seven years after FDR took office, unemployment still stood at 15 percent, nearly double today's figure.
Obama's program is more Rooseveltian than Lincolnian. Whether the stimulus works depends on the wisdom of Larry Summers and Nancy Pelosi, who appear to have been its primary authors. (Now there's an odd couple.) Geithner's proposed bank rescue plan will succeed if Geithner has given hedge funds enough incentive to invest in toxic assets while bearing enough risk if those assets prove worthless--i.e., if Geithner made all the right calls. As for green energy, cap-and-trade will succeed in reducing emissions without destroying the economy only if the number and size of permits are correct: too many, and carbon-based emissions won't decline; too few, and a host of businesses will be driven into bankruptcy. The success of cap-and-trade also depends on Congress's willingness to resist the temptation to tinker with the permits. Good luck with that. The administration's health care and education programs are as yet unclear, but it seems a fair bet that they too will be exercises in centralized, command-and-control governance.
This is worrisome, for two reasons. The first has to do with the politics of legislation. No 1,000-page bill will be written by 535 members of Congress, or by the few hundred who belong to the majority party (or by their staffers, to whom the drafting is usually delegated). In order to avoid the death of a thousand cuts, those who back the relevant legislation must do the drafting behind closed doors--and in order to be sure the doors stay closed, the number of people involved in the drafting must be kept small. No matter how many degrees they have, a handful of people sitting around a conference table are unlikely to devise wise plans for large sectors of a complex economy.
Which leads to the second reason: The Lincoln model regularly succeeds; Rooseveltian legislation usually fails. Consider the following examples of simple and successful legislation. The Sherman Antitrust Act of 1890 embodied a simple idea in simple language: "[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce" is illegal. That proposition guaranteed competitive markets, the key factor in America's long economic dominance. The G.I. Bill fueled the long post-World War II economic boom by investing in veterans' education; what those veterans made of the investment was up to them. Even as it raised the safety and lowered the price of shipping goods, Eisenhower's Defense Highways Act made possible the rise of middle-class suburbs. The Civil Rights Act of 1964 created an integrated national economy; the Voting Rights Act of 1965 created an integrated democracy. Both acts gave black Americans opportunities they had long been denied. Obama's presidency is evidence of the success of that venture. All these pieces of legislation depended on the energy and talent of the private citizens they benefited.
Top-down, command-and-control legislation is inevitably more complicated, and the list of successful statutes of that sort is a good deal shorter. The Clean Air and Clean Water Acts of the 1970s were massively complex; nevertheless, they worked well, as those of us who remember smog alerts and polluted bays and rivers can testify. So did welfare reform in the 1990s--another notably complex legislative endeavor. Sometimes, government regulators get it right. But even those success stories are double-edged. Welfare reform worked because welfare recipients did so: The victory was as much theirs as any government official's. As for the landmark environmental legislation of the Nixon and Carter presidencies, America's economy performed poorly in the 1970s and early 1980s. Environmental progress may have carried a higher price tag than politicians imagined. Not an encouraging story for supporters of cap-and-trade.
The lesson seems clear enough. Banking on the innovation, hard work, and entrepreneurial spirit of ordinary Americans is smart policy. Betting on the wisdom of staffers in the White House and on Capitol Hill isn't.
Saving the nation's banks may be an unavoidably complex enterprise that necessarily depends on the judgment of those who craft the relevant strategy. Not so the rest of Obama's agenda. On health care, John McCain's campaign proposal offers a good model: Create a working national market for health insurance that is not tied to employers. Then, let the medical and insurance markets work, as they will. With respect to education, Congress could give troubled school systems money for more charter schools--the best education idea of the last generation--then step back and watch test scores rise. As for greener energy, a wise Congress would take two steps. First, fund the construction of nuclear power plants, which would create jobs and provide greener energy than oil and coal. Second, fund energy research. According to Bjorn Lomborg, that is the only cost-effective move on climate change. America has the best scientists in the world. Given the needed funds, there are few problems they cannot solve.
Unfortunately, the president and congressional Democrats are placing a different bet. They seem to believe that America has the best politicians in the world--that, given enough tax dollars, there is no problem they cannot solve. We will see who wins that bet. America's taxpayers may turn out to be the losers.
William J. Stuntz is the Henry J. Friendly professor at Harvard Law School.