Fiscal and Monetary Policies of Obama and FDR

Fiscal and Monetary Policies of Obama and FDR

The fiscal and monetary policies of both Obama and FDR reflect their time and a lot of the policies will be different and unique in their own way. However, there are distinct similarities of policies of which they have made such as public works programs. Obama somewhat mirrors FDR in terms of trying to create jobs when there is an employment deficit and both Democrats. Their ground work is somewhat similar however; reasons and situation are somewhat different.                        

For Roosevelt one reform policy that really stood out was called the Tennessee Valley Authority which was led by three directors Arthur Morgan of Antioca College, Harcourt Morgan of University of Tennessee and David Lilienthal the youngest at 33. The TVA faced according to the TVA website, “whether it was power production, navigation, flood control, malaria prevention, reforestation, or erosion control—was studied in its broadest context.” In 1933 the Tennessee Valley was in horrible shape the land was over farmed and was eroding the soil, crop yields went down, and good timber was cut. The TVA according to the TVA website, “TVA developed fertilizers, taught farmers how to improve crop yields, and helped replant forests, control forest fires, and improve habitat for wildlife and fish.”(TVA 1) During TVA in the Great Depression the TVA managed power, rivers, and dams all three through Tennessee Valley. There was a town called Norris which that caused a flooding of a vast area of 153,000 acres that were bought out from 3000 farmers for the building of a dam. After the start of the Norris dam, construction began on the Wheeler dam TVA hired thousands of people in 1934 there were 9000 or more employees at TVA. TVA also saw a shift toward government ran electric power with the erection of the Norris Dam.(Shales 174-178)                                                                                                

 In Obama’s speech which was given on Feburary 24, 2009 there was mention of the creation of jobs. Obama like FDR wanted to create jobs and have better infrastructure in the United States and is in essence creating the very same infrastructure projects that mirror FDR’s policies. According to the White House speech, Obama on employment and infrastructure issues, “Over the next two years, this plan will save or create 3.5 million jobs.  More than 90% of these jobs will be in the private sector – jobs rebuilding our roads and bridges; constructing wind turbines and solar panels; laying broadband and expanding mass transit.” (Obama 1) On a website called recovery.gov there will be $150 billion dollar investment in infrastructure which means it will, “enact the largest increase in funding of our nation’s roads, bridges, and mass transit systems since the creation of the national highway system in the 1950s;”(Recovery 1) Obama’s infrastructure is more geared to transportation recovery.                                                                      FDR and Obama have similarities in respect to the infrastructure of the United States. The difference between FDR’s plan and Obama’s plan is that both are centered in helping a different group. For instance, FDR wanted to help farmers have a better standard of living and helping farmers with projects such as TVA and provide electricity to all for a low price. FDR’s job programs were mainly toward the agricultural sector. Obama is dealing with a population of people who have lost their jobs because of outsourcing industries or globalization in FDR’s era that rarely happened. Obama’s main plan is to help the people who lost jobs in the recession a job in the infrastructure of building better highways, bridges, roads, transportation etc.                           One notable monetary policy was when FDR took the US off the gold standard from 1933 to 1934. Roosevelt had a bank holiday and suspended all gold convertibility and gold exports. The dollar reacted horribly to the suspension of the gold standard when it sank 11.5 percent against the gold standard currencies. The gold standard apparently didn’t work in Roosevelt’s favor quoting from bnet,” Relieving unemployment, instituting a massive public works program, and increasing domestic prices were foremost in the objectives of the New Deal. The new administration saw the need to subordinate the gold standard to the pursuit of these domestic objectives.” The Roosevelt administration wanted more deflation which it according to bnet,” On June 5, 1933, the U.S. Congress undid the final link between the gold standard and the domestic economy when it abrogated the gold clause in government and private contracts.” However many participants of the conference drafted a policy declaration to return to the international gold standard but, Roosevelt rejected the proposal. In 1934 under the influence of Roosevelt the Gold Reserve Act was passed which transferred gold from the Federal Reserve to the US Government and banned gold from circulation and also banned gold coinage.(BNET 14-19)                                                                                                                                             Another reason for the bank holiday was that in places like Nebraska there were 1.3 million people and 1,000 people per one bank. There were banks that were struggling to take deposits and give out loans. The depression made farmers more poor and banks failed at high rates. According to the Living History Farm article, “During the 20s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed – 10 times as many. In all, 9,000 banks failed during the decade of the 30s. By 1933, depositors saw $140 billion disappear through bank failures.”(Living History Farm 1) Also according The EconReveiw there was problems with loans that were dealt to the investors, “In the early years of the Depression, banks with loans to investors in the stock market were immediately at risk.  Bank runs compounded these problems even for apparently healthy banks.”(EconReview 1) A bank run happens when a lot of bank customers withdraw their deposits in account because, of a belief that their bank is insolvent.(About.com 1) This enacted Roosevelt to pass the, Emergency Banking Act of 1933 which authorized the government to, “strengthen, reorganize, and reopen solvent banks”.(Britannica 1) After reexamination of the banks 5,000 were reopened within three days. In 1933 the Banking Act was passed which gave Federal Reserve tight control over investment practices and created the Federal Deposit Insurance Corporation to insure deposits up to $5000 dollars at the time.(Banking Acts 1)              

This is somewhat similar to the banking crisis that we are in today and the method of fixing the banks seems to be somewhat similar. Like FDR Obama is using government intervention to help banks however, all he is doing is injecting cash into the banks to keep them afloat. Although there are signs that the banks will be strengthened and reorganized just like in the FDR era. Recently as March 03, 2009 AIG asked for a $30 billion dollar bailout in agreement to give the government two of their divisions.(Szustek 1) Also contained in the Obama speech on February states that, “we will act with the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money to lend even in more difficult times.  And when we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.”(Obama 1) Apparently Obama judging from this quote of his speech will take the Roosevelt path of strengthening and reorganizing.                                                                     

 Roosevelt and Obama’s plans seem similar in comparison however, there are very big differences. For instance, Obama does not have a commodity standard problem like FDR did. FDR did not have the big multinational bank problems and failures that Obama has had such as AIG. However, both are in an age of uncertainty of future and both strive on the goal of giving the unemployed a chance to work by infrastructure programs. Both have a platform that is more similar than different however, the FDR’s situation was far more troubling than Obama’s.

Bibliography

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"Remarks of President Barack Obama -- Address to Joint Session of Congress." The White House. 24 Feb. 2009. 4 Mar. 2009 .

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