NY Times' Krugman: Not the New Deal

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Fri, 16 Sep 2005 19:02:34 -0500

NY Times' Krugman: Not the New Deal

 

 

 

 

Not the New Deal

By Paul Krugman

The New York Times

 

Friday 16 September 2005

 

Now it begins: America's biggest relief and recovery program since

the New Deal. And the omens aren't good.

 

It's a given that the Bush administration, which tried to turn

Iraq into a laboratory for conservative economic policies, will try

the same thing on the Gulf Coast. The Heritage Foundation, which has

surely been helping Karl Rove develop the administration's recovery

plan, has already published a manifesto on post-Katrina policy. It

calls for waivers on environmental rules, the elimination of capital

gains taxes and the private ownership of public school buildings in

the disaster areas. And if any of the people killed by Katrina, most

of them poor, had a net worth of more than $1.5 million, Heritage

wants to exempt their heirs from the estate tax.

 

Still, even conservatives admit that deregulation, tax cuts and

privatization won't be enough. Recovery will require a lot of federal

spending. And aside from the effect on the deficit - we're about to

see the spectacle of tax cuts in the face of both a war and a huge

reconstruction effort - this raises another question: how can

discretionary government spending take place on that scale without

creating equally large-scale corruption?

 

It's possible to spend large sums honestly, as Franklin D.

Roosevelt demonstrated in the 1930's. F.D.R. presided over a huge

expansion of federal spending, including a lot of discretionary

spending by the Works Progress Administration. Yet the image of public

relief, widely regarded as corrupt before the New Deal, actually

improved markedly.

 

How did that happen? The answer is that the New Deal made almost a

fetish out of policing its own programs against potential corruption.

In particular, F.D.R. created a powerful " division of progress

investigation " to look into complaints of malfeasance in the W.P.A.

That division proved so effective that a later Congressional

investigation couldn't find a single serious irregularity it had missed.

 

This commitment to honest government wasn't a sign of Roosevelt's

personal virtue; it reflected a political imperative. F.D.R.'s mission

in office was to show that government activism works. To maintain that

mission's credibility, he needed to keep his administration's record

clean.

 

But George W. Bush isn't F.D.R. Indeed, in crucial respects he's

the anti-F.D.R.

 

President Bush s to a political philosophy that opposes

government activism - that's why he has tried to downsize and

privatize programs wherever he can. (He still hopes to privatize

Social Security, F.D.R.'s biggest legacy.) So even his policy failures

don't bother his strongest supporters: many conservatives view the

inept response to Katrina as a vindication of their lack of faith in

government, rather than as a reason to reconsider their faith in Mr. Bush.

 

And to date the Bush administration, which has no stake in showing

that good government is possible, has been averse to investigating

itself. On the contrary, it has consistently stonewalled corruption

investigations and punished its own investigators if they try to do

their jobs.

 

That's why Mr. Bush's promise last night that he will have " a team

of inspectors general reviewing all expenditures " rings hollow.

Whoever these inspectors general are, they'll be mindful of the fate

of Bunnatine Greenhouse, a highly regarded auditor at the Army Corps

of Engineers who suddenly got poor performance reviews after she

raised questions about Halliburton's contracts in Iraq. She was

demoted late last month.

 

Turning the funds over to state and local governments isn't the

answer, either. F.D.R. actually made a point of taking control away

from local politicians; then as now, patronage played a big role in

local politics.

 

And our sympathy for the people of Mississippi and Louisiana

shouldn't blind us to the realities of their states' political

cultures. Last year the newsletter Corporate Crime Reporter ranked the

states according to the number of federal public-corruption

convictions per capita. Mississippi came in first, and Louisiana came

in third.

 

Is there any way Mr. Bush could ensure an honest recovery program?

Yes - he could insulate decisions about reconstruction spending from

politics by placing them in the hands of an autonomous agency headed

by a political independent, or, if no such person can be found, a

Democrat (as a sign of good faith).

 

He didn't do that last night, and probably won't. There's every

reason to believe the reconstruction of the Gulf Coast, like the

failed reconstruction of Iraq, will be deeply marred by cronyism and

corruption.

 

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