Because he is well to the left of FDR

Barack Obama's approach to the budget talks puts him well to the left of Franklin D Roosevelt

By Tim Stanley US politics Last updated: July 23rd, 2011

Compared to Obama, FDR and Truman were budget hawks

America has just edged a little closer to financial disaster. On Friday, Republican House Speaker John Boehner walked out of talks with the President over raising the debt-limit – a little over a week away from the deadline when the US Treasury says the country will no longer be able to pay its bills.

At this stage in the game it’s hard to work out who is being intransigent. Given the severity of the situation, it’s hard to care. Boehner said that Obama pushed an unacceptable tax increase, that, “Dealing with the White House is like dealing with a bowl of Jell-O”. The President insisted that he had offered a fair bargain: cutting $640 billion from entitlements and $1 trillion in discretionary spending, while raising $1.2 trillion in taxes. What is interesting is that Boehner has framed the debate in terms of conflicting ideologies: he said, “In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.”

Inevitably, a lot of scorn is being poured on the Republicans for injecting dogma into a matter of house-keeping. But it’s worth meditating on the role that ideology has played in dictating Obama’s every move, too – an ideology that places him outside the historical mainstream of his own party.

The New York Times recently asked several historians to comment on the crisis, to assess how previous presidents approached their deficits. David Kennedy, a professor at Stanford University, made an interesting point: Franklin D Roosevelt, that Democratic idol, was a budget hawk (or, at least, he thought he was). To quote Kennedy, Roosevelt was “a stubborn fiscal conservative … In only two New Deal years, 1934 and 1936, did the federal deficit, as a percentage of gross national product, exceed the 4.6 percent of [his Republican predecessor] Herbert Hoover’s last year in office. The year 1936 saw the New Deal’s biggest absolute deficit, $4.4 billion, or 5.3 percent of G.N.P., largely because Congress – over Roosevelt’s veto – passed the notorious Bonus Bill, awarding some $2 billion to World War I veterans. The following year Roosevelt warmly embraced the conventional budgetary counsel of Treasury Secretary Henry Morgenthau and submitted an austerity budget, sharply contracting government spending and thereby triggering the so-called Roosevelt Recession.” Roosevelt also insisted that his Social Security plan not become a European-style unemployment benefit: “Instead, Social Security was to be funded ever after by matching payroll contributions from employers and employees.”

Historians have long struggled to connect the Democratic Party’s fiscal conservatism prior to the 1930s and its decadent Keynesianism thereafter. For a long time, they simply wrote that Classical Liberalism was converted into Social Democracy by the psychic shock of the Great Depression. There’s some truth in that, but historians of the last two decades have started to emphasise a lingering legacy of fiscal conservatism in Democratic politics (for an introduction, check out British historian Iwan Morgan’s excellent book on this subject). In 1946, President Truman cut spending by more than 50 per cent, retired one million civilian employees from the federal payroll and slashed many New Deal regulations. President Kennedy cuts taxes to stimulate growth and Jimmy Carter obsessed about balancing the budget as a means to reduce inflation. Bill Clinton famously declared that the “era of big government is over”. The only Democrat who really embraced Keynesianism as a way of life was Lyndon Johnson, and the consequences of his Great Society experiment were probably greater than its intentions.

Arguably, the pre-1930s Democratic aversion towards big government and big spending never entirely disappeared: the gut instinct that the budget should be balanced and the free market remain the motor of growth and opportunity remained. These were articles of faith for some segments of the party, particularly amongst Southerners and Blue Dogs.

Therefore, it is important to recognise that Obama’s variety of deficit spending puts him significantly to the left of even the Democratic Party tradition. It does not entirely fit into the category of “social democratic” because the President is capable of u-turning on social reform and will reject redistributive policies if he just can’t be bothered to campaign for them (see the public option for an example). But his total disregard for budgetary discipline does imply a willful blindness strong enough to resist economic reality.

In the next few weeks, the press narrative is bound to turn the negotiations into “Obama the Moderate vs Boehner the Fanatic”. But such a story is one-sided. It would be wrong to forget that Obama’s own economic dogma – a peculiar mix of compassion, lethargy, incompetence, corruption and Messianic fever – first took America to the point where such a battle was necessary. There are militants on both sides of this debate.