The New Deal and FDR’s art of fiscal reimagination

Historical re-evaluations of fiscal policy are often a futile and tedious bore. The recycling of contemporary economic lines: liberals praising the liberators, interventionists praising the interveners, and so on, grows exceedingly stale exceptionally quickly. Debates in political economy often overlook vital context, with the intent not to reach a reasoned conclusion, but instead to align with a particular ideologue or perspective. There’s a certain irony, then, in this article opening with a lament on the drab nature of economic commentary, only for it to begin with one. 

That’s the issue so often with economics (no offence to my dear friend, the Finance Editor): it’s a field in which Einstein’s suggestion, “if facts don’t fit the theory, change the facts”, is eerily apparent; it is cold, often laborious, and overly principled. Except when it isn’t. 

Sometimes, albeit rarely, fiscal policy can give rise to something far greater than a spike in GDP, consumer confidence, or productivity, and there is no greater example than the New Deal, implemented by the 32nd US President, Franklin D. Roosevelt (FDR). Purposed to address the State’s crumbling economy burdened by the weight of the Great Depression, the New Deal rerouted America’s cultural identity away from a fixation on restoring an idealised perspective of the past, to a forward-facing vision for the future. 

FDR seized the moment to expand the federal government, creating a more compassionate American politics

It is all too easy to dismiss FDR’s New Deal as the beginning of the end for idealised America. It involved the implementation of federal policies to intervene in the economy, including increased fiscal monitoring and influence over the banking sector, direct city and state relief funding, and mass federal employment for the construction of public works. This Keynesian expansion of the federal government marks the beginning of, in the eyes of conservatives, the erosion of the American Dream, as individuals were no longer financially free from the influence of Washington amid the normalisation of top-down, so-called socialist economics. 

This sentiment is flawed for a couple of reasons. Firstly, although the expansion of the state was undeniable, it was hardly the socialist force that many conservatives portray it as. The policies may have had roots in social democratic thought, yet these policies did not tilt America to the economic left, but toward a more tangible, less anarchical, economic right, in which the government was an actual aid for the widespread populace. Two of the key legacies of the New Deal were that it instilled within Americans “a readiness to turn to the federal government to deal with domestic […] problems” and a readiness on behalf of the American government to actually respond. 

Secondly, the idea of the American Dream existed at the time of the New Deal’s implementation as essentially just that: an idea. No systems propelled those in poverty to transcend to wealth, and instead, pre-New Deal, the government frequently left many to starve at worst and subsist at best. It is commonplace today to suggest the American Dream is dead, whether it be because of its sheer cost or the entrapment of wealth within family or corporate lineages. Now, imagine if there were no presidential precedent to mobilise the federal government to address these issues at all. The US’s laissez-faire capitalism may be unruly, but the brunt of market forces would be far deeper and harsher if the government remained entirely removed from the fiscal affairs of the masses. FDR seized the moment to expand the federal government, creating a more compassionate American politics, while simultaneously distancing the US from its past notions of a Dream only historical revisionism could truly elicit. 

While notable success was seen through a sharp drop in unemployment, a true economic U-turn did not bear its head until after the Second World War. 

The New Deal transformed America into a new entity; many refer to it as New Deal America, marking a distinct separation in US history before and after. The rare fusion of empathy, political compassion, and national reidentification through fiscal policy provided a rare moment of economics transcending its indicators, spreadsheets, and stocks. But as a set of fiscal policies, how did it fare in solely economic terms? 

On the whole, poorly. It fell profoundly short of stimulating a full economic recovery, failed to redistribute income, and skyrocketed the national debt. While notable success was seen through a sharp drop in unemployment, a true economic U-turn did not bear its head until after the Second World War. 

Earlier in this article, I described economics as “cold, often laborious, and overly principled”. Perhaps New Deal America explains why. As an isolated case study, it presents the poor monetary performance that a well-intentioned but inefficient set of policies can have, while still maintaining a dramatically positive long-term effect on the country. The New Deal rewired the American political environment to consider the utilisation of the federal government as not just an entity for the preservation of the Union, but as a tool for its people to an extent it had never been intellectually or Congressionally conceived. 

There has been no fiscal reimagination as potent as FDR’s. Since its implementation, the New Deal has allowed the US government to ask not what the country does for it, but what it can do for the country, and Roosevelt himself deserves a great deal of credit for this transformation. 

Many great men have held the Oval Office, but very few have made their mark in office in such a ferocious yet immensely beneficial manner

Bradford Lee, for The Wilson Quarterly, penned a sentiment that resonates strongly with the argument presented within this article: “To a historian […] the New Deal lacks the epic quality that it has for many who lived through it. In countries with pluralistic political systems and market economies […] it is difficult for any government to bring about sudden but enduring transformations in the structure of society.” Seizing the need for action and a palatable political environment, FDR managed to shift the lives of millions both during and long after his presidency through the creation of New Deal America. Many great men have held the Oval Office, but very few have made their mark in office in such a ferocious yet immensely beneficial manner. He ought to be known as the Carpe Diem President. 

A defining example of fiscal reimagination and the unfortunate wider need for inconsiderate economics, the New Deal redefined the US’s political-economic landscape, prompting its government to serve the people it was intended to represent. FDR is historically lauded, and it is not difficult to understand why. He changed America, bringing its Dream far closer to reality than ever before. While the term New Deal America honours his policies and contribution, it would be more fitting to refer solely to a New America, for his impact was truly that profound.