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Obama’s Economic Challenges.

Will he have more Happy Hot Dogs?

By Michael Patterson

A lot of commentaries have compared Obama’s economic challenges to those facing Franklin Roosevelt when he took office in 1933.  Clearly President Obama faces some major hurdles.  The probability of a major economic collapse has been estimated at around 20%, although in recent weeks at least, the future seems to have brightened a bit.

While Obama could see a major collapse, when Franklin Roosevelt took office the collapse had already occurred.  In 1933 the American economy was in an absolutely disastrous condition.   The New York Stock Exchange had suspended trading and the Chicago Board of Trade had closed.  Banks were shut down in thirty-four states.  The official unemployment rate among non-farm workers was 37 percent, although it was probably much higher. In cities such as Toledo unemployment was 80 percent.  People who had put their savings in banks that closed were wiped out. Sixteen millions jobs had disappeared along with the entire savings of millions of Americans   In 1933 journalist Earle Looker stated that “Capitalism itself was at the point of dissolution.”

Here is where we can make comparisons.  Neither FDR nor his advisors had any real plan, or according to critics, any real grasp of what was going on.  The phrase “New Deal” sounded great but there was no substance behind it.  It did not represent any plan or specific programs.  The term “new deal” had cropped up many times in the prior hundred years and a presidential speech writer Sam Rosenman simply plugged it into FDR’s nomination acceptance speech.   Critics suggest Obama and his advisors also lack a substantive plan.

To save the economy, FDR had little choice but to experiment, and this is also the case with Obama.  Many of FDR’s advisors were protégés of Harvard law professor Felix Frankfurter, and were thus named the “Happy Hot Dogs.”  The “Hot Dogs” have been variously described as young, bright, Ivy League, talented, arrogant, creative, and very left-wing.  In fact some later became communists and a few ran into trouble with the law.   

FDR’s New Deal and Obama’s plan were actually trial and error, although the common goal was the desire to expand the federal government and federal regulation.  Roosevelt and his advisors simply experimented to see what would work.  In other words, they winged it.  However, some of FDR’s experiments did work.  The WPA and CCC did provide jobs.  There was help for the aged poor, and the physically handicapped.  The minimum wage and the SEC were established.  Social Security was initiated.  And perhaps most importantly, FDR helped Americans regain confidence in their country’s future.   

President Obama finds himself in a similar, although less drastic, situation than did FDR.  To solve his daunting economic problems he has decided to spend his way to success.  He and his staff seem to have held their breath and plunged into the new changes. As with FDR, Obama is inexperienced, but articulate, and exudes confidence.  Increased regulation and government control is obviously a goal.  Greater regulation is clearly needed, although one might argue about the details.  Will President Obama’s advisors prove to be skilled and perceptive?   Will they provide the right advice?

A reasonable prediction is that the economy will slowly turn around, based partly on its own momentum.  President Obama will respond to his staffers’ happy hot dog advice and embrace a number of very interventionist policies as they move things to the left.  The American economy will rise again but it will be very different from the one that has been sinking. 

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