The Magazine

Private Sector Blues

What Obama thinks is good for America is bad for business.

Aug 9, 2010, Vol. 15, No. 44 • By JOHN CHETTLE
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You will also realize that the model here is the administration of Franklin Delano Roosevelt. (“I would put these four months,” said Obama after four months as president, “up against any prior administration since Franklin Roosevelt.”) FDR, according to the myth, gave the country the courage to face its problems, and Democratic leaders believe that Roosevelt succeeded because of his tough rhetoric against the rich. The truth is almost exactly the opposite. Roo-se-velt’s economic policies were a failure. If it had not been for the war that came in 1939, Roosevelt would have retired as a discredited president, having failed for eight years to build the confidence that was essential to restoring the economy.

It would have been hard to have devised an economic program more calculated to deepen the Depression than the one employed in FDR’s second term. And indeed it did—unemployment climbed back above 17 percent in 1939. Hoover had raised the top marginal tax rate from 25 to 63 percent, but Roosevelt, over the protests of his secretary of the Treasury, Henry Morgenthau, boosted it to 79 percent and then later to 91 percent. Morgenthau presciently argued, “We must have additional revenue, but in my opinion the way to make it is for businessmen to make more money.” Roosevelt refused to make any reduction in personal or corporate taxes, dismissing it as a “Mellon plan of taxation,” a reference to the secretary of the Treasury who had spurred growth in the 1920s by lowering the top tax rate to 25 percent. 

Keynes himself wrote a letter to Roosevelt telling him that it was time to stop talking about the “wickedness” of the utility holding companies and to consider a guarantee of fair earnings on new investment. “Businessmen have a different set of delusions from politicians,” Keynes wrote. “You could do anything you liked with them, if you would treat them (even the big ones), not as wolves and tigers, but as domestic animals by nature, even though they have been badly brought up and not trained as you would wish.” Keynes was politely told to get lost.

But it is not just that Obama views the abuse of businessmen, erring or otherwise, as a political masterstroke in the Roosevelt tradition. The truth is that Obama himself knows nothing about business. There is a good example of his fundamental lack of economic understanding in his book Dreams from My Father when he describes his thoughts on returning to Chicago after completing his law degree at Harvard: 

I tried to imagine the Indonesian workers who were now making their way to the sorts of factories that had once sat along the banks of the Calumet River, joining the ranks of wage labor to assemble the radios and sneakers that sold on Michigan Avenue. I imagined those same Indonesian workers ten, twenty years from now, when their factories would have closed down, a consequence of new technology or lower wages in some other part of the globe. And then the bitter discovery that their markets have vanished .  .  . [and] they would settle into their own Altgeld Gardens, into a deeper despair. 

This was written more than halfway through a 20-year period in which 40 million new jobs were created in the United States, and several hundred million more abroad—including in Indonesia, China, and India—all of which combined to create an unprecedented global prosperity. Obama’s account is based on the belief that the workers in Indonesia were somehow leading idyllic lives weaving their baskets. 

The Obama administration consists of politicians who believe that a crisis is too good to waste, academics whose main contact with business has been soliciting money for endowments, bureaucrats impervious to economic considerations, environmental visionaries, and—to the extent that there is anyone who has spent time in business—quick buck artists who went briefly into “finance” to translate their political connections into money. Obama has appointed a cabinet and a White House staff which contains not a single former business executive. It is an administration whose only contact with Main Street is shopping.

John Chettle is completing a book on what presidents read and why it matters.


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