People Must Live By Work Book Club: Week 2 (Chapter 1)

Last week, the online book club of my new book (available to the reading public here and here) began with a discussion of the origins of direct job creation policy, the scholarly and political reasons why I took on this project, and the necessity of academics engaging in a struggle for the historical memory of the public.

This week, I’m going to discuss the central importance of direct job creation to the cornerstone of the New Deal: the Social Security Act. No really, I’m serious.

Summary:

In 1934, FDR managed to avoid the traditional curse of a first-term president losing big in the midterm elections and instead found himself with some of the largest Congressional majorities in American history. As the possibilities of legislation expanded, FDR followed through on a promise he had made to Labor Secretary Frances Perkins by establishing a committee to design a comprehensive system of social insurance.

When this Committee on Economic Security (CES) met in the winter of 1934, a large number of different pressure groups sought to use this opportunity to put their ideas into law: the Children’s Bureau wanted to establish family allowances, the Rosenwald Foundation wanted universal health insurance, and the rival Ohio and Wisconsin schools warred over which of their models of unemployment insurance would prevail.

One of these groups was a cluster of experts and bureaucrats who worked for Federal Emergency Relief Administration (FERA) chief Harry Hopkins: his deputy Aubrey Williams, statistician Emerson Ross, amateur planner and civil engineer Jacob Baker, economist Corrington Gill, researcher Eveline Burns, and assistant (and future historian of the WPA) Josephine Brown.

While they were deputized to represent FERA at the Committee on Economic Security, these second-tier actors began developing not just proposals for direct job creation within the emerging Social Security system – building on their experiences with the Civil Works Administration – but a body of economic thought to explain and justify their policy. Borrowing from proto-Keynesian ideas about underconsumption and insufficient purchasing power being the cause of the Great Depression, FERA staff argued that government-provided work was a superior form of demand stimulus. Giving people jobs directly reduced the numbers of the unemployed and reduced competition for private sector jobs (thus boosting the ability of workers to bargain for wage incrases); it produced public works that added to economic production and productivity; and most importantly to these left-liberal social workers, it answered the demands of the unemployed, who preferred work over public handouts, and thus provided a psychological wage that no amount of government checks could replace. In a series of back-and-forth memos, the right (Corrington Gill) and left (Jacob Baker) flanks of this group fought over whether a direct job creation program could absorb “only” three million workers or should be expanded to a right to job for all.

All of these ideas conflicted with the agenda of the CES’ Executive Director Edwin Witte, a University of Wisconsin-trained economist who had devoted his life to Unemployment Insurance (UI), and who was determined that UI and no other program would be at the heart of the Social Security system. This united FERA behind a competing alternative, and a close-quarters bureaucratic battle was joined, with Emerson Ross fighting to ensure that the CES would fund research into direct job creation, and proposing that “employment insurance” could either replace or complement UI, and Aubrey Williams insisting on keeping DJC proposals in the various reports of the Executive Staff, Technical Board, and the overall Committee.

The result, which you can read in the Report of the Committee of Economic Security, was a compromise vision. “Employment assurance” would work hand-in-hand with Unemployment Insurance, covering those workers not eligible for UI while making them eligible through their participation in New Deal jobs programs, and feeding payroll-tax premiums into the system while reducing the demand for UI benefits. While the WPA and Social Security would come into law through two of FDR’s “Big Bills,” they were seen as interlocking parts of one system for universal social protection.

Inspiration:

While we like to believe that academic research is motivated by a pure desire for truth, sometimes general orneriness is the “sharper spur.” In reading the secondary literature on the New Deal, I had been frustrated that jobs programs were frequently dismissed as mere “emergency” or “temporary” reponses to the Great Depression, and thus of secondary importance compared to the Social Security Act, which embodied the New Deal’s vision of what America’s future should look like.

Thus, when I found that the FERA experts I had been following through the archives of the Civil Works Administration had spent several months working on the Committee on Economic Security, I thought that there might be an opportunity to change the narrative, and put direct job creation at the center, rather than the margins, of the New Deal. Imagine my surprise when I dug into the papers of the CES at the National Archives, and found a treasure trove of memos, policy proposals, and inter-agency memos…

Research:

One of the things that I was looking for in these documents was a sign that FERA administrators and experts thought of their own program as something more than a temporary, emergency response. I had a hunch that this might be the case, if only out of the normal bureaucratic incentive to entrench and expand one’s agency.

What I found was a series of incredibly ambitious proposals, some of which called for a jobs program more than twice the size of the WPA at its height, and others of which called outright for the government to guarantee the right to a job to all Americans. This was more than just bureaucratic politics, there was a political ideology here that centered on the idea that the unemployed deserved more than just income, they deserved dignity and an opportunity to contribute to the common weal. This ideology was wedded to an entire economic worldview, as I describe above.

And as I chased this worldview through memos and policy proposals, I found in a box labelled “Staff Subject Files Miscellaneous” the most amazing historical document I’ve ever encountered:

This “National Balance Sheet” was a full model of the U.S economy, created for FERA by Lewis Baxter, a consultant for Economic Security Analysts, a consulting firm located in New York’s Financial District. Conceiving of the U.S economy as a Möbius strip where the public and private sector were two halves of a whole linked together by intricate flows of income, the “National Balance Sheet” allowed the reader to move a spreadsheet of numbers behind the figure-8 to simulate changes in Federal spending  and their impact on the economy.

Baxter argued that the Federal government could permanently achieve “permanently stabilized national prosperity” by guaranteeing “universal useful employment based on assured jobs in public service to all potential producers otherwise unemployed.” Further, he argued that the much-balleyhooed differences between the public and private sectors didn’t exist:

…government activities constitute, in effect, an auxiliary industry, might might always utilize advantageously the entire current labor surplus; and that such “industry” differs from the others only with reference to the nature of its “products” and the method of marketing them.

…Total income remains constant. The average personal income remains constant. The sole change is that the average producer is buying less individually and more cooperatively.

This may be the most radical document ever produced for the Federal government – a proposal to partially or completely nationalize the labor market – and I was astounded by the way in which it confidently and cheerily transcended divisions between public and private, liberal and socialist, so often thought to be insurmountable barriers of thought.

This forced me to reconsider the ideology and the scope of ambitions of the New Deal, so often described by scholars as a pragmatic programme lacking in ideology, a cautious attempt to save the capitalist status quo. And it absolutely convinced me that direct job creation was something much more than a temporary emergency program.

Relevance:

Especially in a political system that elevates the intent of the originators of constitutions and policies alike to something like holy writ, it is absolutely necessary that historians scrutinize the conventional wisdom of that intent. Not only do we usually find multiple, competing intents at work, but we can also uncover roads not taken.

In this case, by examining the role of direct job creation in the Social Security Act’s formation, we see an entirely new conception of what the system was supposed to look like, one in which DJC acted as a safety net under the safety net, expanding the sphere of protection and keeping people from falling through gaps in coverage, simultaneously keeping the economy at full employment and its social insurance system fully funded.

Thus, rather than looking at modern proposals for a Job Guarantee as either a pernicious innovation or solely “about” unemployment, we should think of it as the missing link of our Social Security system and a necessary component of any broader plan to combat poverty and inequality in America.