Myth: Forty years of liberalism have ended in failure.



Fact: It's been 60 years, and the most liberal years were the most successful.







Summary



The last 60 years can be divided into two parts: the New Deal era (1933-1975) and the corporate special interest era (1975-present). America experienced its greatest economic boom in history during the New Deal era; it has seen a stumbling economy in the current one.







Argument



Virtually every part of this bumper sticker slogan is wrong; it hasn't been 40 years, it hasn't been all liberalism, and it hasn't been a failure.



Most of the time, the 40 years in question refer to the period that Democrats controlled Congress from 1955 to 1994. But the modern American welfare state first arose in 1933, with Franklin Roosevelt and his New Deal government. With only a few brief exceptions (1947-48, 1953-54, 1995-? for both houses, and 1981-86 for the Senate), Democrats have been in control of Congress ever since, a period of six decades, not four.



But more important than who controlled Congress was the governing philosophy of the nation. In the 19th and early 20th centuries, it was laissez-faire ("leave it alone" or "let it be," referring to the economy, of course). After 1933, the New Deal ushered in historic changes that created a broad safety net for workers and the poor. Subsequent presidents strengthened that net -- Harry Truman with his "Fair Deal," Lyndon Johnson with his "Great Society."



Although the New Deal programs (Social Security, welfare, etc.) live on, the New Deal era actually came to an end in 1975, with the rise of the corporate special interest system. It was in that year that the SUN-PAC decision legalized corporate Political Action Committees, the lobbyist organizations that bribe our Congress today. In the ten years after the SUN-PAC decision, the number of corporate PACs exploded from 89 to 1,682. (1) By 1992, corporations formed 67 percent of all PACs, and they donated 79 percent of all contributions to political parties. (2) Inevitably, an enormous shift of power occurred in Congress, from workers and the poor to corporations.



The corporate special interest system immediately began scaling back the New Deal. Even under Jimmy Carter -- a president often criticized for being "too liberal" -- corporate lobbyists started scoring many important victories. They killed a proposed tax hike and Ralph Nader's campaign for a Consumer Protection Agency. They reversed the rising tide of federal regulation, winning deregulation on airlines, trucking, railroads, oil and interest rates. They even secured a capital gains tax cut, and raised Social Security taxes (a regressive tax that hits the poor the hardest). In fact, they persuaded Congress to impose a tax on unemployment benefits! "Success," journalist Hedrick Smith drily noted, "brought more bees after the honey." (3) Corporate political activism soared; one lobbyist described the atmosphere in 1980 as "a genuine virtual fervor." (4) And all this happened before Ronald Reagan.



The Reagan Revolution constituted a full scale assault on the New Deal. The top income tax rate was slashed from 70 to 28 percent. Corporate taxes as a percentage of all federal tax collections dropped like a rock: from 27 percent in the 1950s to 8 percent in the 1980s. The Federal Register, the book where all of America's proposed and adopted regulations are found, was cut almost in half -- from 87,012 to 47,418 pages -- between 1980 and 1986 alone. (5) Combined individual benefits for the two largest welfare programs, AFDC and food stamps, were significantly cut in real dollars:

Average Monthly Benefits (Constant Dollars, CPI-U) (6) Program 1980 1993 ------------------------------------- AFDC (per family) $350 261 Food stamps (per person) 42 47

Income inequality soared. During the New Deal era, the incomes of all quintiles grew together at roughly the same pace, despite their original differences. But under the corporate special interest system, the rich got richer and the poor got poorer:

Income Growth by Quintile (7) Quintile 1950-1978 1979-1993 --------------------------------------- Lowest 20% 138% -15% 2nd 20% 98 -7 3rd 20% 106 -3 4th 20% 111 5 Highest 20% 99 18

Now let's compare the accomplishments of the two periods, dividing them into the New Deal era (1933 to 1975) and the corporate special interest system era (1976 to present).



THE ACCOMPLISHMENTS OF THE NEW DEAL



The New Deal started out successfully, by making gains against the Great Depression. Under the Republican presidency of Herbert Hoover, the economy shrank each year. Under Roosevelt, it grew five out of seven years:

Changes in GNP, by President Year %Change in GNP President --------------------------------- 1930 - 9.4% Hoover 1931 - 8.5 Hoover 1932 -13.4 Hoover 1933 - 2.1 Hoover/Roosevelt 1934 + 7.7 Roosevelt 1935 + 8.1 Roosevelt 1936 +14.1 Roosevelt 1937 + 5.0 Roosevelt 1938 - 4.5 Roosevelt 1939 + 7.9 Roosevelt

World War II saw an explosion of productivity, and the U.S. emerged from the war as the world's only economic superpower. Even though the social values of the 50s were conservative, the economic values of the time were in fact thoroughly liberal. The top income tax rate fluctuated between 88 and 91 percent until 1963, when Kennedy lowered it to 70 percent (still stratospheric by today's standards). The economy was ruled by Keynesian policies at the Federal Reserve, with one especially dramatic success: the complete elimination of the depression from the American experience. Before World War II, the U.S. suffered eight depressions; in the nearly six decades since, it has suffered none.



Even Republican presidents during the New Deal era promoted government activism in the economy. President Eisenhower's interstate highway program connected an entire nation with highways, and allowed middle class families to migrate from the cities to the suburbs. President Nixon declared, "We are all Keynesians now," and created the Environmental Protection Agency, the Food and Drug Administration, and the Occupational Safety and Health Administration.



One of the greatest accomplishments of the New Deal era was the vast reduction of poverty. In the so-called "Roaring 20s", fully half of all Americans could not buy the essentials of living. The Great Depression made things worse, but, upon taking office, Roosevelt immediately began redistributing wealth more equally. By the 1950s, the poverty rate had been reduced to 20 percent. Johnson's Great Society reduced this even further, to an all-time low for this century: 11.1 percent in 1973. (8)



Many remember the 50s and 60s as the undisputed age of the American Dream: when a family could afford a house, car and array of modern appliances, all on a single paycheck. Between 1945 and 1973, the Gross Domestic Product grew at a torrid pace: 3.4 percent a year, compared to only 2.5 percent since. Individual worker productivity was a record high 2.8 percent before 1973; but it has averaged only 1 percent since. Economists still don't know what caused the 1973 slowdown, and debate on it rages even today. But the point is that the New Deal saw 40 years of record-breaking growth, and nothing about the corporate special interest system has restored it.



THE ACCOMPLISHMENTS OF THE CORPORATE SPECIAL INTEREST SYSTEM



As mentioned above, the New Deal's tremendous economic growth was not restored.



Income inequality has steadily grown: between 1979 and 1994, the Gini Index rose from 0.352 to 0.395 (The scale is from 0 to 1; the higher the number, the worse the income inequality.) (9)



Americans have tapped into their savings accounts to shore up their eroding standard of living. Disposable personal savings fell from 7.9 to 4.1 percent between 1980 and 1994. (10)



Americans also have gone heavily into debt to shore up their eroding standard of living. Combined home mortgage and consumer debt rose from $1.3 trillion to $3.4 trillion between late 1980 and late 1990, about 50 percent faster than the consumer's income grew (due to inflation). (11)



American families have also formed more two-paycheck households to shore up their eroding standard of living. On average, the number of hours that wives worked was 32 percent higher in 1989 than in 1979. Without the increased hours and wages of wives, incomes for 60 percent of families would have been lower in 1989 than in 1979. (12)



Poverty has generally risen, from 11.1 percent in 1973 to 15.1 percent in 1993. (13)



The rich have greatly reduced their charitable giving, causing the poor to increase theirs:

Charitable donations in the 80s (14) Percent Percent of Income 1980 1988 change 88 income ----------------------------------------------------------------- $25,000-30,000 $665 $1,075 +62% 3.6 - 4.3% $500,000-$1 million 47,432 16,602 -65% 1.7 - 3.3 Over $1 million 207,089 72,784 -65% *

* Dividing $72,784 by $1 million seriously skewers the percentage because of the open-endedness of this income group, which includes multi-millionaires and billionaires. In 1990, the poorest income group -- under $10,000 -- actually gave the highest share to charity: 5.5 percent. (15)



And, of course, America has acquired a $5 trillion national debt. In international trade, the U.S. went from the greatest creditor nation in the world to the greatest debtor nation in the world. By 1988, the weakened dollar had allowed foreign control of U.S. manufacturing assets to reach 12 percent -- a record for the century. (16) Several studies have shown that roughly 80 percent of the profits from these companies are taken from the U.S. and brought to the overseas parent corporation. (17) The reason for these last two statistics is that the corporate special interest system not only serves American corporations, but foreign corporations as well.



Return to Overview



Endnotes:



1. Hedrick Smith, The Power Game: How Washington Works (New York: Ballantine Books, 1988), p. 31.



2. Center for Responsive Politics, Washington D.C., 1993.



3. Smith, p. 31.



4. Anonymous quote from a corporate PAC director in Dan Clawson, Alan Neustadtl and Denise Scott, Money Talks: Corporate PACs and Political Influence (New York: HarperCollins, 1992), p. 142.



5. "Rolling Back Regulation," Time, July 6, 1987, p. 51.



6. AFDC figures from U.S. Social Security Administration. Food Stamp figures from U.S. Department of Agriculture, "Annual Historical Review of FNS Programs" and unpublished data. Current dollars converted to constant 82-84 dollars from CPI-U.



7. U.S. Bureau of the Census, Current Population Survey, annual.



8. U.S. Census figure reported by Sam Cook, Who We Are (New York: Random House, 1994), p. 228.



9. U.S. Bureau of Labor Statistics, Measure 15 of the Gini Index (after all taxes and redistribution of income).



10. U.S. Bureau of Economic Analysis, National Income and Product Accounts of the United States, vol. 2, 1959-1988 and Survey of Current Business, July 1994.



11. Federal Reserve Board figures cited in "85% of All Households in Hock," Investor's Daily, April 22, 1991.



12. Congressional Study: Families on a Treadmill: Work and Income in the 80's, January, 17, 1992.



13. 1993 figure by U.S. Census, Current Population Reports, P60-188.



14. Internal Revenue Service data of Adjusted Gross Incomes for itemized reductions. Cited by Business Week, "Look Who's Being Tightfisted," November 5, 1990, p. 29.



15. Survey by Gallup Organization and Independent Sector, cited by Boston Globe, "U.S. Charities See Increase in Gifts," December 16, 1990.



16. "U.S. Once Again Weighs Price of Foreign Ownership," Christian Science Monitor, November 21, 1988.



17. Jonathon Yates, "Why Make It Easy for Foreign Investors?" Philadelphia Inquirer, March 20, 1989.