A New Deal for New York by Mike Wallace Bell & Weiland, 128 pp., $18.95

In 1918, the philosopher John Dewey wrote about the "social possibilities of war." World War I presented Progressives like Dewey the opportunity to voice support for their vision of government's role over the economy. Higher taxes, economic planning, and the regulation of wages and work hours were all unthinkable in peacetime. Yet war brought with it a sense of national unity that provided a rationale for the dreams of men such as Dewey. Ever since, liberals have been looking for war's moral equivalent.

So it came as no surprise that after September 11, many American liberals saw opportunity in tragedy. The nation was more united than it had been in decades. Fighting the war on terrorism, rebuilding lower Manhattan, and strengthening national security all seemed to demand a powerful (and expensive) response from the federal government. Could this mean an end to the Reagan-era skepticism about big government?

New York senator Charles Schumer articulated this view in the Washington Post two months after the terrorist attack. He wrote that the "the tectonic plates beneath us are inexorably moving us to larger federal involvement" and that a "'new' New Deal is upon us." The article was triumphantly entitled "Big Government Looks Better Now."

But the recent off-year election shows how little has actually changed on the domestic front. Even the scandals surrounding companies like Enron have barely budged Schumer's "tectonic plates." But this will most likely not deter other voices from joining the "social possibilities of war" chorus, the latest of whom is Pulitzer Prize-winning historian Mike Wallace.

Wallace's "A New Deal for New York" begins with a compendium of ideas for rebuilding New York in the wake of 9/11--not just lower Manhattan, but the entire city. From reviving and diversifying the city's economy, to improving its infrastructure, to increasing affordable housing, many of Wallace's ideas are culled from various organizations, think tanks, and interest groups throughout the city. (Curiously, Wallace ignores the right-of-center Manhattan Institute.)

Politics aside, this section of the book teems with energy and a love for New York that is unmistakable. Ideas for the city's renewal--some reasonable and some half-baked--leap from nearly every page of the book. The redevelopment of the former World Trade Center site has opened up discussion about further improvements in the city's infrastructure. To this debate, Wallace's book is a welcome addition.

But Wallace does not stop there. Like Schumer, Wallace sees the war on terrorism as an opening for something more far-reaching. "Catastrophe," he writes in the spirit of Dewey, "has presented us with a great, historic opportunity." The answer to many of the nation's ills, he argues, is to be found "inside the box" with "a massive program to create and enhance the nation's social capital. . . . What we need, I think, is a new New Deal."

Conjuring up images of noble relief programs, compassionate social insurance plans, and grand public works projects, Wallace wants Americans to abandon their skepticism about government and their aversion to taxes and warmly embrace the spirit and policies of the New Deal, not just for New York but for the entire country.

But is this really what the country needs? The New Deal still exerts a considerable influence over modern America; take for example Social Security, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation. Yet the rationale for a "new New Deal" is hardly self-evident.

Proponents of greater government activism try to evoke memories of the Great Depression as a rationale for their policies. That's why Democrats speak of the "worst economy since Herbert Hoover." Wallace gamely tries to convince the reader that the recent mild recession is 1929 all over again with "palsied producers, listless investors, persistent unemployment, maxed-out consumers."

Yet Wallace's dark view of the American economy is unconvincing. One need not rehash the dire economic numbers of the 1930s to know that our current economic situation, if not ideal, is hardly catastrophic. Of course, if things were as bad as Wallace says, why would the average taxpayer in tight financial straits want to pay more taxes to support the grand vision of government set forth in "A New Deal for New York"?

WALLACE is quite cavalier about financing the many proposals throughout his book. "First, we must firmly reject the notion that 'there's no money'; . . . it isn't true; there's plenty of money around." It should come as no surprise that what Wallace really means is that taxes are too low. I quickly gave up tallying the cost of all the programs Wallace proposes, as well as the amount of the new taxes needed to pay for them. Suffice it to say, the numbers are substantial.

The issue of taxation has indeed been the Achilles' heel of modern American liberalism. One reason for the popularity of the New Deal was that so few people actually paid to fund it. In 1939, only 4 million people paid personal income taxes (out of a population of around 130 million). It was not until World War II that the tax burden began to hit the middle class in any real way, leading to the institution of the payroll deduction. This democratization of taxation has greatly affected attitudes toward government, and defenders of activist government still haven't quite come to grips with it.

Liberals dismiss talk about taxes as a form of selfishness on the part of an ungrateful or ungenerous public. Tax the rich, they say. But progressive federal taxation has hurt New York City, with its hyper-wealthy enclaves. As people like Pat Moynihan have repeatedly pointed out (and Wallace acknowledges), New York simply does not get as much back from the federal government as it sends to Washington in taxes. Every time Jerry Nadler and Charlie Rangel call for more federal taxes, they are simply digging a bigger hole for their city.

Wallace also needs to convince those pesky taxpayers that these new programs will actually work. He needs to explain how a government that can't operate an efficient Department of Motor Vehicles can run an increasingly larger share of the economy. This is not to say that government can't do anything right, but the shoulders of bureaucracies (especially in cities) are simply not strong enough to bear the kind of burden that Wallace, Schumer, and others want them to carry. Wallace supports a government-funded venture capital program, yet why should government be any better at picking successful businesses than the market?

Beneath the surface of this book lies a deep mistrust, bordering on distaste, for the private sector. Although Wallace pays lip service to the idea of entrepreneurial energy, it seems that too often the private sector is seen merely as a cash cow to finance the schemes and dreams of academics and activists. Creating a system of national health care, contrary to Wallace's most urgent wishes, is not going to stimulate the commercial energies of the city or nation. The great flaw of FDR's New Deal was that it ultimately failed to spur much economic growth. Wallace does little to suggest that a "new New Deal" would be any different.

SKEPTICISM of New Deal-type programs, though, is not restricted to free-market models. Many historians criticize the Federal Housing Administration and the Home Ownership Loan Corporation for subsidizing suburban development at the expense of cities. Robert Moses, New York's New Deal hero of the 1930s, is now condemned for sabotaging the city with his roadbuilding obsession. And nearly everyone--left and right--agrees that urban renewal and high-rise, low-income, public housing were well-intentioned government failures.

If Wallace's quest for a "new New Deal" is at best quixotic, he still makes some good points. He is correct that for decades New York has largely ignored its manufacturing sector and that the city's economy needs to diversify beyond finance. He also is right that the tactic of corporations finagling large tax breaks from local government by threatening to move is often a velvet-gloved form of extortion.

Yet what is oddly missing from this book is any acknowledgment of the strides New York City made in the last decade toward economic and social revitalization. The rebirth of New York City in recent years is one of the great stories of the 1990s, but one would be hard-pressed to find a good word about it in this book. The urban policies of Rudy Giuliani were not in the New Deal tradition and therefore Wallace has little use for them.

THIS HISTORICAL AMNESIA also goes hand-in-hand with a sometimes snarky tone that substitutes caricature for sound historical and political judgments. Phrases like "the Lay/DeLay Axis of Avarice" or the repetitive use of "Big Guv'mnt" might elicit howls of laughter from Wallace's colleagues at the Radical History Review collective, but they quickly become tiresome and cheapen Wallace's overall argument.

Maybe these outbursts mask something deeper. Liberals often accuse conservatives of yearning for a more traditional past where women did not work outside the home and a laissez-faire government kept its nose out of the economy. Yet nostalgia, that most reactionary of emotions, seems to have crept into the ideology of our most "progressive" thinkers. As historian John Patrick Diggins has written, "nostalgia is one way to ease the pain of the present." Adrift and confused, the left has little to offer other than a longing for a misunderstood past.

The New Deal was a historically distinct era, created in reaction to very serious problems unique to the 1930s, and supported by a political coalition that has long since vanished. Barring another Depression to rival the 1930s, it's highly unlikely that America will grant Wallace's wish. We can't restore the New Deal any more than we can recreate the administration of Calvin Coolidge or the mythical world of "The Waltons." Nor should we want to.

Vincent J. Cannato teaches history at the University of Massachusetts, Boston, and is an adjunct fellow at the Hudson Institute. He is the author of "The Ungovernable City: John Lindsay and His Struggle to Save New York."

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