The Forgotten Legacy of the New Deal: Fiscal Conservatism and the Roosevelt Administration, 1933-1938

When President William Clinton elevated deficit reduction to the top of his domestic agenda in 1993, he tapped into a long-standing Democratic tradition that was rooted in the 1930s. Liberalism and fiscal conservatism have been interwoven since the construction of the New Deal state. Liberal Democratic presidents never felt that they could or should exclude fiscal conservatism from their agenda. Harry Truman, for example, fought with the military establishment to balance the budget, while John Kennedy and Lyndon Johnson adhered to modest levels of spending and only hesitantly accepted temporary deficits. Jimmy Carter emphasized deficit reduction more than a decade before Clinton championed the issue. In fact, liberal administrations have usually encountered great pressure to demonstrate a commitment to fiscal responsibility to refute conservative warnings that their policies would result in economic instability and limitless government expansion. Indeed, the histories of liberalism and fiscal conservatism have been intimately related. The key to some of the most durable state-building efforts in United States history has been a pragmatic alliance between liberals and moderate fiscal conservatives, who accepted an active role for government subject to budgetary constraints. This alliance produced bold federal initiatives in a nation historically resistant to centralized government. Most accounts of the New Deal coalition downplay the influence of orthodox conservative ideas within the Roosevelt administration. The importance of fiscal conservatism to the New Deal has been acknowledged but rarely analyzed. Serious treatment of this tradition, like the rest of modern conservatism, has been relegated to the periphery of contemporary historical scholarship (Brinkley 1994). Instead, historians have written Whiggish accounts of Keynes- ianism (Brinkley 1995; Collins 1987; May 1981; Barber 1985; Snowiss 1971; Stein 1969). They have paid little attention to the influence of fiscal conservatism--defined as an agenda of balanced budgets, private capital investment, minimal government debt, stable currency, low inflation, and high savings which remained normative for most of the New Deal period. When New Deal historians mention fiscal conservatism in these years, moreover, they treat it as monolithic, static, and irrational. Liberal historians understood that Roosevelt was a fiscal conservative (Leuchtenburg 1963; Schlesinger 1959; Friedel 1990). Yet, since they were interested in the expansion of liberalism, they never knew what to make of that fact. The ideology thus remains at the periphery of their analysis, a curious relic from earlier political times. More recently, social scientists have treated fiscal conservatism as a barrier to state building. Mark Left's landmark book on New Deal taxation lacks a detailed examination of the fiscal conservative ideology, and variations of that ideology, even though he admits that it influenced national politics during this period (Leff 1984). At most points in his book, fiscal conservatives appear simply as sinister advisers who want to pay for the New Deal on the backs of the poor. But the ideology of fiscal conservatism was much richer and more nuanced than he suggests. Brown, another scholar to deal with this issue, also presents a limited understanding of Roosevelt's acceptance of fiscal conservatism (Brown 1999). For Brown, fiscal conservatism was the key obstacle to state building since low revenue constrained the growth of the federal government. He downplays the fact that Roosevelt succeeded in state building, in part because he took fiscal concerns seriously. While Brown defines fiscal conservatism as the agenda of investors, Roosevelt felt that voters of all classes disliked taxes and wanted balanced budgets. Indeed, this was the principal reason the United States did not create a mass income tax until World War II. Given the broad cross-class averison to taxes and deficits, portions of Brown's argument become less persuasive. …