In this entry I articulate my thoughts and feelings on domestic policy relating to the underpinnings of republican economic thought and the quantitative support for policy decisions. I will discuss FDR’s ideas on the role of government in providing for the general welfare. I will discuss Regan’s ideas on the same topic. Finally, I will share a moderate position while reflecting on the ideas of both these men in light of my understanding of their enacted policies.
According to “FDR, A Presidency Revealed”, FDR believed in enabling the American people to contribute to the labor-force and protecting the right to work. He envisioned government programs would lay a strong foundation for the continuation of capitalism and the free market because he valued the American people’s contribution as a vital input in the means of production. He redefined liberalism; pushing the limits of constitutional powers granted the federal government. The judiciary pushed back, declaring the newly created NIRA unconstitutional. FDR attempted to pack the court with sympathetic judges, but lost public support. His positions also regularly clashed with conservative businessmen of the time. As President, FDR felt it was his role to stand up and fight for the underdog, who in his eyes consisted of the professional working class. In 1943, it was clear from FDR’s GI Bill of Rights that he was interested in shaping the society that American troops would come home to. He did not want American heroes to come home to bread lines and soup kitchens.
In his 1944 State of the Union Address, FDR makes the argument that to obtain true individual freedom we need the addition of economic rights for the public. He bases this argument on two assumptions. First he assumes that “individual freedom cannot exist without economic security and independence.” He supports this assumption as self-evident: “Necessitous men are not free men”; “people who are hungry and out of a job are the stuff of which dictatorships are made.” Secondly, he assumes that the assurance of equality in the pursuit of happiness is not guaranteed by political rights. These two assumptions are the foundation for his conclusion that his economic bill of rights will secure the missing foundations required for freedom and liberty. He defends this ideology with an appeal to goodness: “We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth— is ill-fed, ill-clothed, ill-housed, and insecure.”
Regan also valued the American people’s contribution to the free market. He believed that people should be free to pursue their private interest and that government’s role is to support this function. Regan championed the paradigm of supply side economics in the 80’s resulting in the portmanteau reganomics. His domestic policy can be divided into three parts, each a core tenant of supply side economics: reduce income tax and capital gains tax, reduce government regulation, and reduce the growth of government spending. Regan’s inaugural speech spoke to each of these tenants.
Lower taxes. Regan argued that all of us together must bear the tax burden. He stated that, “those who work are denied a fair return for their labor by a tax system which penalizes successful achievement and keeps us from maintaining full productivity.” This policy has its basis in the Laffer tax model. Simply stated, at the extremes of a 0% and 100% tax rate the government would not collect any taxes; Laffer concluded that in-between there would be a positive amount of tax receipts and that mathematically there must be at least one maximum point with an associated optimal tax rate.
Unregulated free trade and free markets. Regan chided his opponents for their temptation in believing “that society has become too complex to be managed by self-rule.” He reasoned, “if no one among us is capable of governing himself, then who among us has the capacity to govern someone else? In this area Regan relies on the principles of supply side economics which encourages individual initiative and entrepreneurship unfettered by government regulation.
Privatization. Regan argued that government, like a household, should live within its means: “Why, then, should we think that collectively, as a nation, we are not bound by that same limitation? He believed in the private sector: “all must share in the productive work . . . and all must share in the bounty.” Lastly, he channeled Locke’s ideas that our government has no power except that power that we give it. He reminded the nation, “the Federal government didn’t create the states; the states created the federal government.”
I don’t care much for political rhetoric. I am more persuaded by quantifiable results. For example, I am persuaded by the theoretical and social principles of supply-side economics. The Laffer model makes logical sense. However, these models simply lack the support of empirical data; attempts to estimate an optimal tax rate vary greatly (Hsing, Pecorino, Stuart). For all his effort, FDR’s programs did not end the depression. However, there is anecdotal evidence that they helped people facing difficult choices.
I agree with FDR that there are basic economic rights that need to be universally available. First, it is my moral imperative. Second, it is democratic. Third, it is sound policy for the long term economic strength of the nation; I submit Bernake’s expertise on the Great Depression and his response to the great recession as evidence. I believe in three of FDR’s economic rights: the right to a good education, the right to adequate medical care, and the right of every family to a decent home.
However, personal development and freedoms would be lost if the remaining rights enumerated in FDR’s Economic Bill of Rights could be demanded as a matter of right. There is something to be gained in the pursuit of happiness; it is the equal opportunity of this pursuit that must be protected. Conversely, I challenge his first assumption; there will always be a portion of society that exercises their freedom to be necessitous. I submit this based on my experience working with the homeless population in New York City. This idea balks at basic economic assumptions about material goods affect on utility and the nature of choice.
I identify with Republican ideas of fiscal and moral conservatism and I am concerned because the leadership doesn’t support the brand. This is important because many voters use party affiliation to vet political candidates. I am troubled by Regan’s deficit spending because it diverges from his political stance and I submit demonstrates a lack of integrity. Republicans are branded as fiscally responsible but, deficit spending raises questions. One question that I am now researching is if reganomics has subverted the economic landscape at the expense of small businesses and professionals in order to secure wealth in the hands of the few. Evidence of this would support the spirit of FDR’s big government policies.
I have touched on two points at the heart of my thoughts and feelings on spectrum of political ideas including those of FDR and Regan. I would have liked to further explore the empirical evidence for supply-side economics as this is the basis for Regan’s policies. As such, I have only included a high level summary. I would also have like to develop a deeper exploration of Bernanke’s ideas on the great depression and how this informed his response to the financial crisis of 2008. As such, this paper really only serves as a starting point.
FDR: A Presidency Revealed. History Channel. Youtube, 2009. Streaming
Hsing, Y. (1996). “Estimating the Laffer curve and policy implications”. Journal of Socio-Economics 25 (3): 395–401. doi:10.1016/S1053-5357(96)90013-X. Retrieved 2009-04-21
Pecorino, Paul (1995). “Tax rates and tax revenues in a model of growth through human capital accumulation”. Journal of Monetary Economics 36 (3): 527–539. doi:10.1016/0304-3932(95)01224-9
Stuart, C. (1981,October). Swedish tax rates, labor supply and tax revenues. Journal of Political Economy, 89, 1020-38.
Roosevlet, Franklin. “The Economic Bill of Rights.” 1944 State of the Union Addresss. Congress, Washington D.C. 28 January 11th, 1944.
Regan, Ronald. “First Inaugural Speech.” 1981 Inauguration of the President. Washington D.C. January 20th, 1981.
 The plural of anecdote is not data.