The rise and fall of the.., p.6
The Rise and Fall of the Neoliberal Order, page 6
Few Republicans detested the New Deal as much as Taft did. In this he resembled one of his mentors, Herbert Hoover, for whom he had worked in 1919 and 1920 in the Paris headquarters of the US Food Relief Administration. For Taft, as for Hoover, individual liberty was the most prized political value in America. Taft regarded America’s federal political system, with a central government sharply limited in its powers and political authority diffused across countless states and municipalities, as the key to maintaining that liberty. From the start, Taft saw the New Deal as a threat to America’s liberty-enhancing political system. He denounced the emergency programs Roosevelt had put in place in 1933 and 1934 to save the banks, relieve suffering, and revive industry and agriculture. The “permanent incorporation” of these programs into “our system,” Taft warned in 1934, “would politically abandon the whole theory of American government, and inaugurate what is in fact socialism.” By 1935, he regarded the New Deal as revolutionary, bent on destroying what in America was most dear. FDR’s rhetorical attacks on wealthy Americans could trigger “a redistribution of wealth” that “would soon lead to a Socialistic control of all property and income.”49 Redistribution of wealth could happen only through a vast augmentation of the powers of the central state, which Taft saw as the worst evil of the Roosevelt administration. “History shows,” Taft intoned in 1936, “that once power is granted it is impossible for the people to get it back. In Greece republics gave way to tyrannies. The Roman Republic became an Empire. Medieval republics became monarchies. If we extend Federal power indefinitely, if we concentrate power over the courts and the congress in the executive, it will not be long before we have American fascism.”50
Even before he took his Senate seat, Taft had become a leader of a movement first to stall, and then to undo, the New Deal. As late as 1940, when German tanks were already rolling through Europe, Taft was still arguing that “excessive Executive authority” amassed by the Roosevelt administration in the United States was a greater danger to American liberty than “armed autocracy in Europe.” If that degree of concentrating power in the executive continued, he warned, America would soon “see here a completely totalitarian government.”51 He even declared that “there is a good deal more danger of the infiltration of totalitarian ideas from the New Deal circle in Washington than there will ever be from any activities of the communists or the Nazi bund.”52 Taft never ceased decrying the New Deal for turning America into a “totalitarian state.” He applied the same criticism to Truman’s 1948 elaboration of a Fair Deal, meant to secure and extend the New Deal.53 To tar the Democratic reform program with the totalitarian brush was a serious smear, for it cast the New Deal as being no different in its essence than Nazism or communism.
When the Republicans gained control of Congress in 1946, Taft led the charge to roll back the New Deal state. The historic 1947 anti-labor legislation, Taft-Hartley, bears his name. He was also deeply involved in movements to shrink the US military, eliminate the extensive regulatory apparatus that had emerged in World War II, and roll back the high taxation state that the New Dealers had brought into being.
Briefly, Taft’s reputation soared. But as the Cold War ramped up again in 1948 and 1949, Taft stumbled. He did not have a convincing response to the Truman declaration that America had to mobilize all its resources, and concentrate power in a central state, in order to contain the communist threat wherever it appeared. Taft adhered to an older view of America in the world, one aligned with those known in the 1930s as isolationists. This group believed that America should do everything it could to avoid foreign entanglements, especially with European powers. Too much time spent on a war footing and too much money expended supporting a large standing army, Taft argued, would eviscerate the foundations of the American republic. Taft believed that geographical isolation, in the form of broad oceans on its east and west borders, gave America a great natural advantage. This dispensation, which Taft and many others regarded as providential, meant that the United States did not have to concern itself unduly with European crises and conflicts.
For an uncomfortably long time after the outbreak of war in Europe, Taft had been willing to sacrifice all of continental Europe to Nazi domination. In the early years of the Cold War, he seemed ready to cede all of continental Europe to the Soviets. He had trouble accepting the foreign policy implications that flowed from the totalitarian theory he had ostensibly embraced: namely, that every muscle had to be turned toward containing totalitarian regimes within their existing borders. He was untroubled by the prospect of additional nations falling to the Soviet Union as long as they were located far away from American shores.54
Taft was not wrong about the dangers to America of remaining on a war footing indefinitely, fighting everywhere, and degenerating into what the sociologist Paul Lazarsfeld warned would be a “garrison state.”55 But he never offered his fellow Republicans a convincing alternative policy to the Truman plan for containing Soviet power. His pronouncements on what to do about the communist threats in East Asia—in China and Korea—were particularly muddled. So, by the late 1940s and early 1950s, his star began to fade. Leadership of the GOP passed to a man who was perceived as far more capable than Taft of containing the Soviet threat. His name was Dwight D. Eisenhower.
Eisenhower did not see a strong central state as a force that unduly trammeled American freedoms. His military career had languished under the small government administrations of Coolidge and Hoover, and flourished under the big government regimes of Roosevelt and Truman. A large centralized state able to mobilize massive numbers of men and materiel had won the Second World War and brought Eisenhower the general his coveted fifth star. Eisenhower’s command of US and Allied forces in Europe meant that he had sat at the center of an immense public bureaucracy, in this case a military one. Eisenhower came away from that experience with a deep respect for what government—and a well-organized bureaucracy—could do. The US government, he believed, would be indispensable in winning the Cold War, as it had been in winning the Second World War.
In his first inaugural, delivered in January 1953, Eisenhower made clear that communism was by far the largest threat confronting America. It was a dire threat, and it was global. “Freedom is pitted against slavery,” he intoned, “lightness against the dark.” It was imperative that “all free peoples” of the world unify to resist. “Destiny had laid upon” the United States “the responsibility of the free world’s leadership.” This required the United States not just to be strong but to inspire “the hope of free men everywhere.”56 Repeatedly, Eisenhower referred to his and the American people’s religious faith as a critical source for this inspiration. The struggle against communism was not just a global chess match; for Americans and many of their allies, it had become a religious crusade to save the world from godlessness and darkness.
Nowhere in Eisenhower’s speech about communism and faith can one discern a sympathy for the views that so animated Taft and his colleagues: namely, that the New Deal was evil, that the power of labor had to be rolled back, that government regulation of the economy had to end, that federal budgets had to be slashed and balanced, and that a nineteenth-century conception of liberty had to be restored. Senator Lyndon Johnson, the new Democratic minority leader, was being a bit cheeky when he noted that Eisenhower’s inaugural contained “ ‘a very good statement of Democratic programs of the last twenty years.’ ”57 In fact, Eisenhower, in his speech, said nothing about his support for or his opposition to domestic reform. But Johnson was right in reading into Eisenhower’s silence on domestic politics a repudiation of Taft.
Indeed, Eisenhower’s actions in office would soon reveal that he had acquiesced to the core elements of the New Deal. He believed in using Keynesian fiscal and monetary tools to smooth out the highs and lows of the business cycle. The historic contract that the UAW had achieved with America’s major car manufacturers in 1950, the Treaty of Detroit, did not trouble him.58 To the contrary, he accepted that strong unions were necessary to moderate the power of corporations and spread the affluence of American capitalism through the social order. What the UAW and the automobile manufacturers had done in the private sector, Eisenhower wanted to accomplish in the public sector. Thus, rather than curtail or abolish social security, Eisenhower actually worked successfully to expand the number of Americans covered by this welfare program and to increase its benefits. Eisenhower even endorsed the progressive, high taxation regime that the New Deal had put in place across the 1930s and early 1940s. Taft-style Republicans regarded the progressivity of that tax system as a horror, amounting to nothing less than a communistic strategy for confiscating and redistributing private property.
Eisenhower’s decision to maintain this high tax regime was driven, in the first instance, by the imperatives of fighting communism everywhere. Eisenhower was well aware that 70 percent of every tax dollar in 1950s America went to support the country’s large Cold War military and rapidly growing nuclear arsenal.59 It is also true, however, that Eisenhower was beginning to discern the good that a high tax regime would generate not simply to contain the Soviet military threat but to improve the lives of millions of Americans. This stance became plain when he spoke to the nation in 1954 about the importance of supporting the omnibus tax bill working its way through Congress, a bill that would maintain the highest marginal rate at more than 90 percent.
In that 1954 speech, Eisenhower did not justify his support for high tax rates simply in terms of the need to maintain a high level of military preparedness. He also shared with the American people his vision of “a great program to build a stronger America for all our people,” all of it paid for by a broad and progressive tax regime. “We want to improve and expand our social security program,” Eisenhower declared. “We want a broader and stronger system of unemployment insurance. We want more and better homes for our people. We want to do away with slums in our cities. We want to foster a much improved health program.” Broadened social security, better unemployment insurance, urban renewal, and national health care—here, in embryo, was the vision that would animate the Great Society, the ambitious legislative program pushed through Congress by Democratic president Lyndon Johnson in the 1960s to complete the welfare state that Roosevelt and the New Deal had launched in the 1930s. Already in the 1950s, this reform vision was being articulated not just by Democrats but rather by a moderate Republican.60 Eisenhower would soon commit major federal tax dollars to building a massive interstate highway system and overhauling the St. Lawrence Seaway. Over the course of his two terms in office, his administration’s expenditures on public works actually exceeded those of FDR and Truman.61
Eisenhower was careful to justify this expansion of government activity by reference to national security. The bill authorizing a new interstate highway system was labeled “The National System of Interstate and Defense Highways.” Supporters of the legislation argued that building 41,000 miles of new roads would facilitate both the quick transfer of military units to parts of the United States under attack and rapid evacuation of people from areas threatened by atomic bombs.62
Likewise, creating a free and bountiful society for all its citizens was now also framed as a Cold War imperative. Fashioning such a society, Eisenhower believed, could no longer be left to the vagaries of the free market. Too many Americans had seen their livelihoods destroyed in the 1930s, the longest period of market failure in American history. National security now required a managed capitalist system; it demanded that the New Deal be maintained, even expanded. Social programs once anathema to Republicans were now legitimate, for they would help to contain the Soviet threat—both at home, so that Americans would have no cause to find communism appealing, and abroad, by demonstrating the success of the American system to the emerging nations of Asia and Africa.
Which system was better at generating a consumer society—filling stores with alluring goods, putting citizens of the two systems in a position to participate fully in those marketplaces—became a central bone of contention between the Cold War adversaries. Hence the slightly comical but deadly serious “Kitchen Debate” involving Nikita Khrushchev and Richard Nixon in Moscow in 1959. This was the third meeting of the first secretary of the Soviet Union and the vice-president of the United States to debate the comparative merits of the communist and capitalist systems. This one occurred inside a cutaway kitchen of an American suburban home whose components had been disassembled for transport to Russia and then reassembled in Moscow just for this occasion. Nixon took pride in showing off a refrigerator, an electric range, and, most enticing of all (because it was a machine yet to become standard in American homes), a dishwasher. Khrushchev thought the American addiction to gadgets a bit much, even as he understood that the superpower that best provided the common man and woman with a comfortable life might well win the Cold War. Khrushchev playfully told Nixon that the latter’s grandchildren would grow up under communism, and Nixon responded in kind, predicting that Khrushchev’s grandchildren would know only capitalism.That Nixon felt compelled to spar with Khrushchev about the comparative virtues of Soviet and American kitchens revealed the geopolitical importance he attached to putting an attractive consumer marketplace within reach of every American. This goal was too important to be left in the hands of “free markets.” Nixon and Ike had both come to understand that New Deal policies, specifically Keynesianism, were necessary to sustain aggregate demand and the flow of goods into the much- celebrated suburban utopias in which many Americans now lived.63
Perhaps, in his heart, Eisenhower wanted to return America to Taft’s imagined pre–New Deal past. But, in his judgment, a politician wanting to succeed in America in the 1950s could not do it. As Eisenhower wrote to his brother in the early 1950s, “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws . . . you would not hear of that party again in our political history.”64 Eisenhower felt the same way about high rates of progressive taxation and about the compression of economic inequality that those high rates had triggered. Under Cold War pressure, Eisenhower made the Republican Party a supporter of Democratic Party programs. This was the moment when the New Deal transitioned from political movement to political order, when all meaningful players in the political arena felt compelled to abide by its principles.
There were, of course, dissenters. The brilliant and iconoclastic Yale graduate William F. Buckley was, at this very moment, assembling a fiercely anti–New Deal group around a new journal, National Review.65 The actor and former New Deal enthusiast Ronald Reagan had become an evangelist for America’s free enterprise system, speaking on TV in spots sponsored by General Electric to audiences across the country.66 Henry Hazlitt, an economics columnist for the popular magazine Newsweek was another figure who, like Reagan, had migrated from the center-left (he had once been literary editor of the Nation) to the right, entering Hayek’s orbit as a member of the Mont Pelerin Society along the way. He found Eisenhower’s politics repellent, a betrayal of Republican Party principles. Early in Eisenhower’s presidency, Hazlitt sounded an alarm, calling Ike’s policies a “semi–New Deal.”67 Soon after, he declared, with deepening dismay, “that the President had accepted the heart of the Keynesian and New Deal philosophies.”68 After a dissection of Eisenhower’s fiscal and monetary policies that revealed how much the president was following Keynesian prescriptions, Hazlitt lamented, “We are all Keynesians now.”69 Milton Friedman, who, in the 1960s and 1970s would lead the ideological assault on the New Deal order, is thought to have been the originator of this lament in a December 1965 column for Time, then Newsweek’s arch-rival in the newsmagazine business. But Hazlitt beat Friedman to it by a decade, and he made his point about the dominance of Keynesian thinking not in reference to the Democratic politics of the 1960s (as Friedman did) but in reference to the Republican politics of the 1950s.70 As Hazlitt’s commentary about the hegemonic character of Keynesian economics reveals, even in the 1950s under a Republican president, critics of the New Deal order had precious little political space in which to operate.
The Cold War was the engine driving the mainstream Republican Party to the left. Its imperatives forced a political party that loathed a large centralized state and the extensive management of private enterprise in the public interest to accept these very policies as the governing principles of American life. The threat of international communism made possible the transition of the New Deal from political movement to political order and ensured its dominance in American life for thirty years.
The Cold War, then, secured the New Deal order. That order was not as expansive a reform project as it had been in the late 1930s and early 1940s, but it remained the most successful such project that the United States had enacted since the Civil War. Its achievements in terms of managing capitalism, strengthening labor, and establishing a welfare state followed long records of American failure in each of these areas. That the New Deal compelled its political opponents to abide by its principles is a most revealing sign of its power and influence. Those who remained opposed to New Deal politics were pushed to the margins of American politics where they exercised little influence.
In a world dominated by the New Deal order, Herbert Hoover never regained his stature nor the public respect so often bestowed on ex-presidents. His death in 1964 attracted little notice. He would make a comeback of sorts, not through a rehabilitation of his presidential reputation but through a transformation in the nature of the Hoover Institution he established at Stanford in 1919 to house a global collection of documents pertinent to the Great War. In the 1960s, under the direction of W. Glenn Campbell, the Hoover Institution not only widened its collecting to include other subjects having to do with war, revolution, and capitalism. It also embraced a new mission: to become a think tank, and a nerve center, for those committed to taking down the New Deal order. The Hoover Institution would succeed in that mission and, in doing so, perhaps bring a bit of posthumous vindication to its founder. But the Hoover Institution’s ultimate success does not alter the reality of Hoover’s long period of political exile and the fact that he spent what should have been the best decades of his political life ruled by a political order that he despised. The threat of communism had made Roosevelt’s New Deal into a formidable political order.
