Deal or no deal?

"Deal or no deal?" Continued...

Issue: "'To stay is to be killed'," Nov. 29, 2008

Obama has said he favors lending automakers a hand, but is yet noncommittal as to just how far a government bailout should go to prevent an industry collapse. The new president-elect maintains similar ambiguity in other matters of economic policy, hinting at dramatic measures while eschewing talk of another New Deal. "For us to simply re-create what existed back in the '30s in the 21st century, I think would be missing the boat," he told 60 Minutes in his first television interview since the election. "We've got to come up with solutions that are true to our times and true to this moment."

In Roosevelt's time, the tumultuous moment provided sufficient popular support to establish permanent reforms that still shape the country's political identity. At least one prominent member of Obama's future cabinet views the current state of the union as similarly opportune: Chief-of-staff appointee Rahm Emanuel told BBC News, "You don't ever want a crisis to go to waste; it's an opportunity to do important things that you would otherwise avoid."

Exit polling from Election Day showed that Americans chose Obama with the fluttering economy at the forefront of their minds, perhaps indicative of a growing national squeamishness with free-market capitalism. Such data might well embolden the new president to move forward with the economic policy on which he campaigned-namely, permanent tax increases for top earners and so-called "cuts" for middle- and low-income earners, many of whom already pay no income tax.

On the other hand, economists running the political gamut are condemning the prospect of any tax hikes amid the financial downturn. Left-leaning economist Sherle Schwenninger of the New America Foundation has suggested Obama should table his plans to raise taxes on the wealthy. Bob Scharin, senior tax analyst for Thomson Reuters, believes the market may force the 44th president at least to postpone his intention to raise the high earner capital gains rate from 15 percent to 20 percent.

Shlaes says not raising taxes may not be enough. She worries that a public infrastructure initiative might preclude Congress or the Obama administration from delivering tax cuts for fear of losing needed revenue: "Usually when you cut the capital gains rate dramatically you get more money than you got before, but clearly a lot of people don't see that."

Just how a wide-ranging stimulus package might impact Obama's longer term domestic agenda for health-care reform and strict climate-change policy is unknown. Many liberal Democrats still hold out hope that he can keep such promises. Conservatives hope that for the good of country he breaks them.

New Deal timeline

By The Editors

Associated Press

Franklin Delano Roosevelt did not "waste" the crisis of his day, implementing regulation and liberal reform, much of which remains central to U.S. markets today.

March 5, 1933: The day after his inauguration, Roosevelt declared a national four-day bank holiday, shutting down the country's financial institutions until federal inspectors could declare them stable. The measure was a first step toward the creation later that year of the Federal Deposit Insurance Corporation, which provides government insurance for bank deposits to this day.

May 27, 1933: The enactment of the Securities Act of 1933 required full disclosure of risks and prohibited misrepresentations in the sale of securities to the public. The measure led to the creation of the Securities and Exchange Commission the following year.

Nov. 8, 1933: Roosevelt announced the creation of the Civil Works Administration, which hired 4 million people at high wages. The prohibitive government cost of $200 million per month combined with limited effectiveness led to the program's demise by March of 1934.

April 8, 1935: Congress approved funding for Roosevelt's Works Progress Administration, which employed as many as 3 million people at a given time in government jobs ranging from construction to sewing to art projects. But guaranteed wages undermined production and unemployment remained high. Congress shut down the program in 1943.

Aug. 14, 1935: The Social Security Act established a government bureaucracy for the collection and distribution of retirement income. The program did not begin paying out until several years later, but its immediate tax burden on the American workforce triggered the "Roosevelt recession" of 1937 and 1938, according to historian Edward Berkowitz, author of America's Welfare State: From Roosevelt to Reagan (The Johns Hopkins University Press, 1991).

April 12, 1937: The Supreme Court upheld the constitutionality of the National Labor Relations Act of 1935, a measure granting workers the right to strike and form unions without fear of employer reprisal. The resultant National Labor Relations Board remains in existence today.

June 25, 1938: The creation of the Fair Labor Standards Act established a federal minimum wage, outlawed child labor, and set the standard 40-hour work week with required overtime pay of time-and-a-half for qualifying employees. The law, still in existence today, discourages some employers from offering entry level jobs or extra hours for industrious workers.


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