People Must Live By Work Book Club: Week 3 (Chapter 2)

Last week the online book club of my new book (available to the reading public here and here), discussed how direct job creation programs built a place for themselves within the New Deal’s vision of a social security system, even if that place was through a different bill than the Social Security Act.

This week, I’m going to look at that bill – the 1935 Emergency Relief Appropriations Act – and how the brand-new Works Progress Administration had to hustle to get its hands on the record-setting $4.88 billion, and how in the process redefined the core of the New Deal’s economic policy.

Summary:

Because he believed in competition improving the effectiveness of his subordinates, FDR set up the process by which the ERA’s funds would be doled out as a competition: the Division of Applications would receive project applications from every level of government and every relevant Federal agency and pass them on to the newly-formed Works Progress Adminstration (WPA); the WPA would analyze the applications based on their ability to put the unemployed to work and provide lists of unemployed workers on relief in the project’s locality who could be hired; and once those projects were approved by FDR’s National Emergency Council, the Public Works Administration (PWA) would carry out the planning and building of projects using that manpower.

That was how the process was supposed to work, but what ended up happening was that the WPA and PWA – two alphabet soup agencies headed up by fierce rivals Harry Hopkins and Harold Ickes – clashed repeatedly as to which of their agencies would dominate the process.

Building on the economic theories they had developed during their time in the Committee on Economic Security, WPA experts came to the conclusion that the key to winning the fight against mass unemployment was scale, and that only their new method of labor-intensive “light construction” projects which used “force account” (where the government acts as the employer and manager of the project’s workforce) could generate enough jobs. This theory dovetailed with their “democratic philosophy of relief,” which held that because the poor wanted and needed work rather than traditional poor relief, the state had to step in and provide a right to a job. Thus, the WPA stepped over the boundaries envisioned for it by FDR of running “small, useful projects” and proposed a series of escalatingly ambitious programs ranging from 3.5 million workers (which they saw as the bare minimum) to 6-8 million workers (their middle case), all the way up to 80% of the unemployed as a first step to realizing the right to a job.

In the other corner, the planners of the Public Works Administration operated under an economic theory that combined a mild, over-producerist version of counter-cyclical spending with a keen interest in long-term economic planning aimed at fixing market failures. Ideologically, however, the PWA’s experts believed that they could combine modernization with a rebalancing of the supply of public and private goods, but their quasi-municipal socialism was leavened by a strong belief in fiscal probity. Thus, while they dreamed up ambitious five and twenty year plans that sought to bring the TVA’s model of hydro-electricifcation, highway construction, public utilities, and public housing to the whole nation, they insisted that public projects had to be handled through traditional systems of letting out and carefully auditing contracts to private construction firms, and only approving projects that would produce revenues that would pay back their costs.

When these two groups of advocates came together to argue their cases before the NEC, they marshalled both bureaucratic and intellectual forces to sway the “jury.” The WPA subdivided its massively ambitious proposals into $25,000 chunks (because FDR’s executive order had given them the authority to directly carry out projects of up to that level without having to go through the PWA); the PWA responded with memos that sought to close those loopholes with strict definitions of operational responsibilities. The WPA rejected PWA projects for hiring insufficient numbers of people from the relief rolls; the PWA went to the press to argue that only they could spend money responsibly without wasting taxpayer funds.

But the real action was on the intellectual side: the WPA’s social scientists turned the PWA’s own data against itself, showing that the PWA’s careful contracting process lead to massive delays in the money actually getting spent, and that the PWA’s use of capital-intensive, labor-cost-minimizing private contractors meant that the PWA had high levels of non-labor costs, leading to few jobs being created per dollar. Against this, they could point to their own experience running the Civil Works Administration, which had put 4.26 million people to work in less than three months.

Up against this assault, the PWA could only retreat to traditional nostrums about spending money responsibly and producing value, which was a poor fit for the “jury” of New Dealers who made up the NEC. Labor Secretary Frances Perkins (who had arguably been a rival of direct job creation advocates in the Committee on Economic Security) sided with the WPA’s arguments about employing more workers per dollar; New York City Mayor Fiorello LaGuardia was particularly attracted to the fact that the WPA provided most of its money as grants, whereas the PWA insisted on loans which had to be repaid. FDR himself was particularly persuaded by the argument that the WPA’s model would put people on relief to work – thus satisfying both his uneasiness with “the dole” and his pledge to aid the “forgotten man” – and that it would produce the most number of jobs per dollar spent, which he believed to be the immediate goal.

The result was that the WPA received the vast majority of EPA funds, and quickly grew from a workforce of thousands to 2.7 million in its first year; within the first year too, they were already planning to go back to Congress for a supplemental appropriations bill. The WPA’s model of “jobs-first” economic policy had become the New Deal’s model.

Inspiration:

The inspiration for this chapter actually came from a Google search. As I was learning the complicated terminology that New Deal planners used to describe their projects, I wanted to learn more about these terms and whether they were still used today.

Imagine my surprise when I googled “force account” – the term employed by WPA planners to describe projects where the government would directly hire and manage the workforce rather than contracting out – and I found not some economics or civil engineering paper, but a watchdog website:

Even though the New Deal’s jobs programs are more than seventy years in the past, here was a contemporary organization, funded by the construction industry, whose entire job was to ensure that government agencies would never use the WPA’s methods to build public works. As their website puts it:

“CIFAC’s focus is on local government agencies of all types and certain state agencies that undertake public works construction. Too often, these entities are tempted to keep new construction projects in-house and use their staff to perform the work. California law contains force account limits and bidding thresholds. If project costs exceed the limits, the work must be bid. There is no State agency that monitors these requirements resulting in the formation of CIFAC in 1977. CIFAC is a non-profit enforcement association of concerned contractors organizations, contractors and various trade organizations whose members want an opportunity to bid.”

This convinced me that the scholarly literature on jobs programs and the New Deal was wrong about something important.

Research:

When I was doing my literature review, one of the things I had noticed was scholars often grouped a wide array of different agencies and approaches under the term “public works.” On one level, I can see how this makes sense: the PWA and the WPA both involved large groups of construction workers using various tools and machinery to turn raw materials into roads, bridges, public buildings of all kinds, so what did it matter how these projects were overseen?

But on another level, this description made less and less sense the more I read. If there’s no difference between letting out contracts to private companies and the government directly hiring the unemployed, why was the construction industry acting as if there was a huge difference that justified the outlay of dues money on watchdog organizations? Even if the only difference between the WPA and the PWA was the personal rivalry between Harry Hopkins and Harold Ickes – and the two men really didn’t get along; Ickes believed his entire life that Harry Hopkins had chosen the confusing acronym to try to steal his thunder – what kind of arguments did they use to carry out their contest?

By using another theoretical schema, one that disaggregated these different programs, I began to see important differences between direct job creation and public works: it wasn’t just that the WPA and PWA were rivals for money or bureaucratic prestige; they came down on different sides of intellectual debates between underconsumptionist and overproducerist explanations of the Great Depression, they had different views about how fiscal policy should be carried out, and ultimately they had different views about the role of the state in the American economy and society.

Relevance:

If there’s one lesson to draw from Chapter 2, I think it’s that there is, in fact, a left-wing and a right-wing way to fill a pothole. There are real material differences between direct job creation and contracted public works: the former hired the unemployed and the poor, throwing them a lifeline in their hour of need; the latter generally tended to give work to people who were already employed by private construction firms, who tended to come from a narrower demographic of skilled white men. The same is true for other areas of public policy – there is a real difference between the direct provision of services and the subsidization of private sector services that shows up whether you look at workforce issues (unionization rates, wages and benefits, minority representation at all levels of employment), quality of services, and the ability of people of access programs.

If there are two lessons, I think it’s that we have to be wary of simplistic, one-dimensional calls for “fiscal responsibility.” The PWA’s focus on “self-liquidating” projects above all else meant that they only looked at how cheaply they could build projects, and ignored all other metrics. They were deeply concerned about efficiency when it came to dollars spent per project, but completely overlooked efficiency when it cames to jobs generated per dollar. Similarly, when it came to the American Recovery and Reinvestment Act of 2009, there was way too much of a focus on demonstrating “fiscal responsibility” by keeping the price tag down and not enough of a focus on creating a big enough stimulus to bring down unemployment rates; too much of a focus on whether there were enough “shovel-ready” projects and too little of a focus on helping the unemployed.

As job guarantees push their way to the fore of Democratic policy proposals for 2020 and beyond, we have to win this fight with other people on the center-left. Because as I’ll show in later chapters, bad things happen when we lose this fight.