New Deal Reversal Or Just DOGE On The Loose?

Someone commented that the Trump administration and DOGE were playing out the 1930s New Deal in reverse. I thought that idea merited some investigating, so let's take a look.

When Franklin Roosevelt was elected by a landslide in 1932, the country was in the third year of the Great Depression. The US banking system had collapsed, nearly 25% of the labor force was unemployed, and prices and productivity had fallen to 1/3 of their 1929 levels. Reduced prices and reduced output resulted in lower incomes in wages, rents, dividends, and profits throughout the economy. Factories were shut down, farms and homes were lost to foreclosure, mills and mines were abandoned, and people went hungry. The resulting lower incomes meant the further inability of the people to spend or to save their way out of the crisis, thus perpetuating the economic slowdown in a seemingly never-ending cycle.

Roosevelt understood the gravity of the problem, but he wasn't sure how to proceed. Still, he accomplished many things in the first 100 days after his inauguration on March 4, 1933. Roosevelt was helped along by filibuster-proof majorities in both houses of Congress (Senate 58-36 and House 311 to 117).

On March 5, the president called a special session of Congress. Later that day, he gave his first fireside chat to the American people on the subject of the banking crisis. On March 22, Roosevelt wrote to Congress and asked it to permit beer (3.2%) and wine sales to lift the public mood and generate tax revenue. The percentage of alcohol would be below the minimum to be enforced under the Volsted Act. On April 5, Roosevelt created the CCC (Civilian Conservation Corps) to hire unemployed men and put them to work on worthy civic projects.

On May 12, Roosevelt signed three pieces of legislation: The Emergency Relief Act to build public works, the Agricultural Adjustment Act to subsidize farmers limiting production, and the Emergency Farm Mortgage Act to help farmers avoid foreclosure. On May 18, The TVA (Tennessee Valley Authority) was created to build dams that would use hydroelectric power to provide electricity to the region.

On June 5, Roosevelt signed the bill creating the SEC (Securities and Exchange Commission), which sought to rein in speculation and fraud in the investment community. Finally, on June 12, he signed the Glass-Steagall Act, which separated investment banks from commercial banks to prevent speculation from causing bank failures.

The Securities and Exchange Commission was the first federal department to operate separately from the executive branch. Most of Roosevelt's public relief actions did not have the desired impact because the amount of money allocated to each was too small to impact the economy as a whole. It took World War II to end the Depression Era for good.

Roosevelt put in place many new programs, like Social Security, that increased the size of the government. However, this was not reflected in government employment figures during the New Deal Era. World War II caused a big spike in government employment, which abated after the war ended.

The following chart shows the growth of federal employment since the post-World War II period.

Notice that the number of employees has been relatively constant for the last 50 years. What accounts for the recent increases in government spending if it is not an increase in the number of federal employees? The answer, to a significant degree, is contractors. There are 5 times the number of federal government contractors now compared to 50 years ago.

Today, there are two contractors for every federal government employee. The government does not manage these contractors; they are managed by the private corporations that employ them. That means their loyalty is not to the government, and their interest in delivering efficiency is subservient to their bosses' interest in profit. The private companies are also interested in growing their businesses by placing more consultants in government positions, so they are constantly looking to justify new work.

Is Trump reversing the New Deal? Yes, but only to the extent that the New Deal increased the size of the government, and Trump is trying to reduce it. The national debt has become an important public issue, and that is helping to drive Trump's policy.

Here are some scary statistics:

The year George Bush took office, the debt was $ 5 trillion.
The year that Obama took office, the debt was $ 11 trillion (200% increase by Bush)
The year Trump began his first term, the debt was $ 20 trillion (70% increase by Obama)
The year Biden took office, the debt was $ 28 trillion (40% increase by Trump)
The current debt is $ 35 trillion (25% increase by Biden)

Obviously, these increases are unsustainable.

Trump did not show himself to be a good shepherd of the public debt during his first term. This time, he appears to be more focused on the issue. Interest on the national debt is now over $ 1 trillion, or 15% of the federal budget.

Above is a chart of the National Debt versus GDP (gross domestic product, or the country's economic output). The United States sits at its debt at 120% of GDP. For comparison, Denmark is 29%, Germany 62%, Italy 135%, the UK 95%, and France 111%. These numbers are red lights flashing for the leading Western societies. Historically, when societies bankrupt themselves, they die.

In Trump's mind, the number of federal employees is the problem, and in some cases, he sees some departments as having no value. The information about contractors discussed earlier suggests that DOGE is taking a haphazard approach. For departments not targeted for elimination, the contractor portion should be evaluated before firing government employees. Those contracts that are underperforming should be renegotiated or canceled. All other agreements should be reviewed in terms of value received. If only half of the contractors were eliminated, that would equal the total number of federal employees.

It has been publicized that DOGE is reviewing and eliminating contracts, but the public focus has been mostly on employees. Government employees should not be eliminated unless they fail to comply with work requirements (e.g., in-office attendance) or their jobs are not needed. It appears that employees are being terminated at the same frequency as contractors, all happening very quickly and clumsily. Large corporations cut workers all the time, but the employees are given notice when that happens. There have been some rapid firings by DOGE that are troubling.

Americans tend to hate the government bureaucracy and don't have sympathy for federal employees, but there needs to be some care given to the process. Otherwise, it will become a PR nightmare for Trump. Another potential PR problem is the impact of the cuts being made. We hope that no cut will impact the health and welfare of Americans or others to whom we are providing services.

Until recently, the DOGE website was awful, and it received criticism for not being transparent about its work. Now, the site is much better at providing relevant information.

What is the endpoint of the DOGE efforts? Elon has said he is shooting for $ 1 trillion in savings. That's half of the deficit of last year's federal budget and an enormous figure. Politicians must use these savings to start reducing the debt and not redirect the funds to finance other programs. The deficit must remain a top priority in the budget.

Wrong Speak is a free-expression platform that allows varying viewpoints. All views expressed in this article are the author's own.