Thinking about an Edwards presidency

Stuart Rothenberg ponders the difficulties that a President Edwards would have in governing. Running as this year's Howard Dean angry populist, he'd have a tough time trying to bridge the hyperpartisanship dividing Washington. More importantly, his economic rhetoric is just plain bad economics.

Just as important, a President Edwards might well find that his view of the American economy is built on sand. For while Edwards bashes corporate America and "them," this nation's economy depends on the success of both small business and big business.

Scare the stuffing out of Corporate America and watch the stock market tumble. That's certain to make retirement funds - including those owned by labor unions and "working families" - happy, right? Stick it to Wal-Mart, and their 1.8 million employees are at risk. Beat up on IBM, and you are beating up on their 330,000 employees. Take a pound of flesh from General Electric, Citigroup, Home Depot and United Technologies, and you've put the squeeze on just under 1.2 million employees.

And don't forget the millions of "working families" who now have their savings invested in 401K's and elsewhere in the stock market. There is no "us" and "them" anymore. We'll either prosper or suffer together, but Edwards would still like to talk as if it were in the 1930s.

Speaking of the Great Depression, read Amity Shlaes today on why big public works programs are not the panacea to save the economy as some politicians, including Edwards, are now proposing.

The New Deal also created a lot of jobs--millions. And the New Deal did cause significant business activity. Industrial production--factory activity, basically--came back to 1929 levels around the time of Roosevelt's re-election. All of these outcomes are taken as evidence of public spending's success.

But what really stands out when you step back from the picture is not how much the public works achieved. It is how little. Notwithstanding the largest peacetime appropriation in the history of the world, the New Deal recovery remained incomplete. From 1934 on--the period when the spending ramped up--monetary troubles were subsiding, and could no longer be blamed alone for the Depression. The story of the mid-1930s is the story of a heroic economy struggling to recuperate but failing to do so because lawmakers' preoccupation with public works rather got in the way of allowing productive businesses to expand and pull the rest forward.

What was wrong with those public works jobs? Many created enduring edifices--New York's Triborough Bridge, for example, the Mountain Theater of Mount Tamalpais State Park outside San Francisco, the Texas Post Office murals, which were funded by Henry Morgenthau's Treasury. But the public jobs did their work inefficiently. That was because the jobs were scripted to serve political ends, not economic ones.

She goes on to give evidence from her excellent book on the Great Depression, The Forgotten Man which is an even-handed look at how the New Deal programs affected individuals, giving relief jobs to many, but still stifling efforts by private businessmen to start investing again in the economy.