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Hugh Hewitt Book Club

Newsweek’s Jonathan Alter on the economic comparisons between the Great Depression and now.

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HH: Joined now by Newsweek’s Jonathan Alter where he is a senior editor. He’s also, of course, a contributing correspondent to NBC News. His book, The Defining Moment: FDR’s 100 Days And The Triumph Of Hope is in a lot of people’s hands in Washington, D.C., including the President of the United States. I spent a lot of time talking about The Defining Moment with Jonathan. You can go Google Jonathan Alter and Hugh Hewitt and find that interview, and you should get the book. Jonathan, welcome back, good to have you.

JA: Hey, thanks very much, Hugh.

HH: The market is down 2,200 points since Barack Obama was elected president. Why doesn’t Wall Street like him?

JA: That’s a great question. I think that they just don’t have their confidence yet. You know, the credit crisis has not been cleared up, credit’s not flowing. And they believe that along with Ralph Waldo Emerson that events are in the saddle, and tend to ride mankind. And certainly for the last six months, events have been in the saddle, and Obama has not yet been able to convince people that he has mastery over the crisis. I personally think that there’s some indications that he will eventually achieve such mastery and restore confidence. But he has not put the pieces in place quite yet.

HH: Jonathan Alter, you obviously studied deeply FDR’s 100 days. That’s what The Defining Moment is about. And so as a wordsmith yourself, as a deep student of FDR and the 100 days, what would you tell the president, the new president, about his rhetoric, and how it differs from that of FDR at the time that FDR took office?

JA: Well, I think that he has to stop some of the dire predictions. You know, before the stimulus vote, he said that it would be a catastrophe if this bill wasn’t approved. That’s not the kind of thing that does a lot for confidence. So you don’t want to sort of hold out a threat of dire consequences if you don’t get your way. Roosevelt didn’t have to do that, because things were already in a catastrophic state.

HH: Right, right.

JA: So in that sense, you know, he had an advantage over Obama, so I think you know, fairly soon he needs to transition to more inspirational rhetoric, which he’s perfectly capable of doing. The problem is it’s not clear what he can ask people to do. Roosevelt could ask them to take their money from out of the mattress, under the mattress, and redeposit it in the banks as they reopened in 1933. Obama can’t really tell people to go to the mall, not just because President Bush did that, but because people don’t have the disposable income to go out and lead a retail-led recovery.

HH: But I do think, Jonathan, as you know, right now the Fed came out with a prediction yesterday that unemployment could go as high as 8.8% this year, it might stay above 8% all of 2010 before beginning to drop rather steadily in ’11 and ’12. That’s a tough recession. It’s nowhere near what the Great Depression was. I just would like him to put the world that we live in, in the context of this enormous American economy that we have, and how it’s very, very resilient. And he’s just not doing that yet. I hope his friends take him aside and say look, you’ve got to stop drawing these comparisons to the Great Depression. It’s not.

JA: Yeah, I mean, it’s a tight rope that he’s on, because he’s proposing very, very big changes. I mean, we could end up having nationalization of the banks. Greenspan said that was possible, and McCain and Lindsey Graham both indicated that they agreed with that. So there are very, very heavy duty changes afoot in housing, the auto industry, and other areas. So for him to kind of go Pollyanna right now on the strength of the economy might not be too realistic. So what he’s trying instead is a, it’s a fascinating kind of confidence game where he tells people the truth about the shape that the economy’s in, which is it’s not the Great Depression, but it ain’t anything to write home about, Hugh.

HH: But it’s not even close, Jonathan. This may be where we part.

JA: It’s not…

HH: It’s not even close.

JA: It’s not close. 25% unemployment is a lot higher, the stock market was down 90%. But you also, you know, if you’re going to get people ready for some pretty big changes, you also can’t soft-pedal what’s going on now.

HH: But isn’t that what he’s trying to do, which is alarm people into accepting changes in the basic economic structure of the United States that are not justified by a recession, and may not even be justified if it were the Great Depression again?

JA: Well, that’s…you know, to say that they’re not justified, that’s where you and I would disagree.

HH: Nationalization of the banks?

JA: Well, why do you think that the great free marketeer and libertarian, Alan Greenspan, believes that that might be necessary? Now we know that he’s not any authority anymore.

HH: Because he’s old and embarrassed at what he did at the Fed.

JA: Well, he’s certainly embarrassed at what he did, but you know, they are loaded with rotten assets. Nobody wants to nationalize the banks, Hugh. I mean, it’s not like somebody, some socialist in there is going oh, let’s take over the banks. First of all, it’s temporary. I mean, every time the discussion comes up, it makes it sound like they want to move to some sort of socialist model. They said they would denationalize the banks as quickly as possible…

HH: Jonathan…do conservatives have…

JA: So nobody wants…

HH: Do conservatives have any reason to doubt the word of the left when they say socialism of the banks would be temporary? Do we have any reason to doubt that?

JA: Oh, absolutely.

HH: Yes.

JA: Look, Hugh, these are not flaming lefties. You’re talking about guys who come off of Wall Street to go work in the Treasury Department, okay? So I mean, there’s this cartoon that has been created on the right that somehow because these folks are members of a Democratic administration that they’re a bunch of bomb-throwing communists.

HH: Well of course, Lawrence Summers isn’t…

JA: They don’t…

HH: Timothy Geithner isn’t, but when I hear talk about socialism and nationalization of the banks, I say to myself what? This is 8.8% unemployment. This is basically Jimmy Carter times two. I mean, we’re just living…the 70s didn’t bring about the nationalization of the banks.

JA: Yeah, but they didn’t have this kind of credit crisis. They had a misery index that was through the roof, and they had terrible stagflation. But they did not have the arteries of commerce clogged to a point where serious people on Wall Street, people who agree with you politically, are talking about some kind of, don’t call it nationalization, massive restructuring of our banking system being required. The alternative, which is not scaremongering, is Japan, where they have a bunch of zombie banks that they propped up because they didn’t want to inject themselves too deeply into the private economy, and they ended up with the lost decade. We don’t want that.

HH: Well, that’s another debate. We’ll continue it, Jonathan Alter, author of The Defining Moment. Thanks, Jonathan.

End of interview.


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