Wonkblog book club: Ira Katznelson’s “Fear Itself” — Part IV

June 28, 2013

All right, with any luck, everyone's reached the end of Ira Katznelson's “Fear Itself: The New Deal and the Origins of Our Time”. So let's discuss Part IV in comments. A few points to kick things off:


1) The 1940s were a much, much more significant decade for domestic U.S. policy than they often gets credit for. While World War II raged on, Katznelson argues, this was the period when the basic relationship between the U.S. government and the economy became crystallized.

The big dispute was within the governing Democratic Party. Everyone was worried that recession or worse would return once World War II ended. So one faction of New Dealers argued that the government would have to stay actively engaged in "planning," molding labor markets, shaping firms, and micro-managing labor relations in the postwar era. Another faction thought the government's role should be mainly limited to fiscal policy, setting budgets to promote high employment and low inflation.

These two positions were represented in the White House by the National Resources Planning Board and the Bureau on Budget. As late as 1942, President Roosevelt thought both agencies would play a key role after the war. But the fiscal view won out decisively — and not just because of Keynes' influence (or Hayek's critique of planning). Southern Democrats feared that a government involved in active planning would pose a menace to the South's ability to manage its own economic and racial affairs.

So the Bureau of Budget became the dominant economic force in the White House (it's now known as the Office of Management and Budget). The South also joined with the Republican Party to make sure much of the safety net was devolved to the states. The U.S.Employment Service, which matched workers to jobs, was decentralized (and, in the South, segregated). Unemployment insurance was administered by the states.

2) One big question over this period is why many Southern Democrats didn't just join the GOP. After all, they clearly sided with Republicans on a number of big measures — like reining in labor with the Taft-Hartley Act of 1947 and decentralizing the welfare state.

But Katznelson takes pains to note that Southern Democrats really did align with their northern Democratic counterparts on a wide variety of measures: "[They] could agree to back significant spending based on revenue generated by progressive income taxes, and find sufficient, if often uneasy, harmony to garner the votes needed to pass federal programs for hospital construction, public housing, and urban renewal, each of which was crafted to conform with existing racial rules."

Another big split between Southern Democrats and the GOP was over military spending.  Katznelson notes that during World War II, the South accounted for 60 percent of the country's new army bases. "Defense spending," he notes, "came to supplant in many ways the region's prior agricultural dependency." That put them at odds with many Republicans who were more skeptical of high levels of defense spending after World War II wound down.

3) The debate-less origins of the security state. Speaking of which, it's remarkable to see in Chapter 12 how drastically President Truman reshaped the national security state in the late 1940s — and how readily Congress rubber-stamped it all. The Central Intelligence Act of 1949 gave the CIA "almost limitless powers" and freed the agency from oversight. It passed by voice vote in both chambers without debate.

So what struck you about these final chapters? And what were your overall impressions of the book?

Related: Here are our earlier book club discussions, Part I, Part II, (and a follow-up), and Part III.

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Sarah Kliff · June 28, 2013