Dealing prosperity

At Jacobin, Doug Henwood accuses Bryce Covert of New Deal-bashing in a piece she wrote in the New York Times connecting Donald Trump’s ethno-nationalist nostalgia movement to the racial exclusions carved into 1930s social programs.  “Large national programs that radically changed the country kept America great specifically for white men,” Covert points out, noting that Social Security, unemployment insurance, minimum wage, and union protections “transformed the country and created a booming middle class. But they all purposefully left out most women and minorities.”  Henwood objects to Covert’s “emphasiz[ing] only the exclusions [of the New Deal], and identif[yng] them as the source of the nostalgias that Donald Trump, not previously known as a friend of social programs, has been basing his campaign on.”

It’s true that the New Deal submitted to the bigotry of its time.  It particularly left African-Americans out of its post-Depression and post-war mass economic uplift.  But it’s also true that these very programs dramatically improved economic security for millions, creating a booming and predominantly white middle-class.  The lesson of the New Deal is that government has awe-inspiring power to define and create the middle-class.

Covert relies on Ira Katznelson’s history of the New Deal’s race exclusions, When Affirmative Action Was White.  Katznelson explains that in order to get Social Security passed through Congress, President Roosevelt and congressional liberals acceded the demands of powerful Southern Democrats, who wanted government benefits for whites while retaining Jim Crow’s racial hierarchy.  As such, Southern Democratic committee chairs insisted that Social Security be structured to exclude predominantly black occupations like agricultural workers and maids.  For the first generation of Social Security, most black workers were unable to participate in the nation’s groundbreaking retirement security program.

African-Americans drew little benefit from New Deal efforts to expand home ownership, as well.  The Roosevelt administration created the Federal Housing Authority to guarantee home loans and expand credit for Americans to buy property.  But in the 1930s and ‘40s, black neighborhoods were routinely redlined out of the zones eligible for FHA-backed loans.  They were also the victims of overt discrimination, real estate steering, violence, and intimidation if they even attempted to look into purchasing a home in a white neighborhood, with or without government-sponsored credit.

Even the G.I. Bill—seemingly universal to all who served—had race discrimination baked into its very structure.  Long hailed as a triumph in building the modern middle-class, the G.I. Bill was passed by Congress in 1944 to provide benefits to returning soldiers to buy a home or attend college.  But while it was facially race neutral, Katznelson argues that the G.I. Bill was nonetheless implemented in a predictably discriminatory fashion because its federalist structure disadvantaged blacks.  While early versions of the bill envisioned a single national benefits office, Southern Democrats in Congress insisted that G.I. Bill benefits be administered by decentralized state and local offices.  Because their votes and committee approval were necessary for the bill to pass, the G.I. Bill relied on implementation by state and local authorities.

The consequence was that black servicemen in the South had to seek benefits from segregationist local officials.  African-Americans returning from the war were thus routinely denied home loans from community banks, even though these loans were guaranteed by the Veterans Administration.  They were denied admission into the still segregated flagship universities in the South.  This led to an over-supply of applicants into the South’s all-black colleges, widely regarded as substandard schools with minimal resources in the era of supposed “separate but equal” education.

With black colleges at capacity, some African-Americans used their G.I. Bill benefits to attend vocational and training programs.  But many programs that sprouted up were of dubious quality, and amounted to little more than schemes of private profiteering off of a new government benefit while providing little in the way of real education.  (This legacy persists today, with for-profit universities targeting poor and minority non-traditional students while providing a subpar education at exorbitant cost and debt.)

The New Deal defined the vision of a broad middle-class American dream, founded on a college degree, home ownership, and secure retirement.  But its limitations and exclusions populated that dream only with white Americans.  It would be years before blacks could fully enjoy any of these benefits.  And the reverberations of both the New Deal’s discrimination and its mass economic uplift for whites remain with us.  Today, African-Americans possess only a fraction of the wealth that whites have in part because of the lost returns from this still-recent history of economic advancement denied.

But it’s worth recognizing the other implication of the moral ambiguities of the New Deal: that government has the power and ability to generate a new middle-class.  On the heels of the Great Depression and World War II, Roosevelt’s muscular liberalism set out the terms of a middle-class life and put the government to work to provide Americans with access to these key elements.  Because government steered benefits toward whites, they became the middle-class.  Because these same benefits were denied to African-Americans, they were largely left out of the middle-class.  The contours of a middle-class life were legislated by government.

The discrimination baked into the New Deal is a regrettable vestige of the political realities of its time.  But its demonstrated ability of exerting government might to expand prosperity is a tremendous power.  In an age where the middle-class dream is slipping further out of view because of rising inequality, stagnating wage growth, and the mounting cost of living, we can wield government power again to shore up the middle-class.  In fact, Katznelson’s prescription for restorative justice to compensate for the discriminatory New Deal and other social ills looks a lot like Roosevelt’s agenda itself, just without the color lines: subsidized mortgages, generous education and training grants, small business loans, subsidized childcare, guaranteed health insurance, and more.

Katznelson wants to re-do the post-war programs to bring African-Americans into the middle-class.  And indeed we should.  To renew the New Deal in the twenty-first century would expand access to American prosperity for all.  For the ultimate lesson of Katznelson’s New Deal history is that by and large, the modern American middle-class was created by government programs.

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