Sunday, March 15, 2020

The Not-So-Great Society

By Nick Gillespie - March 15, 2020 at 06:00AM

In 1964, President Lyndon Johnson announced plans for what he called "the Great Society," a sweeping set of programs that would represent the most ambitious and far-reaching expansion of the federal government since Franklin Delano Roosevelt's New Deal. Johnson declared war on poverty, jacked up federal spending on education, and pushed massive new entitlement programs that promised to deliver taxpayer-funded health care to the elderly and the poor. When Republican Richard Nixon succeeded Johnson, a Democrat, as president after the 1968 election, he expanded many of Johnson's programs.

Did the Great Society achieve its goals of eradicating poverty, sheltering the homeless, and helping all citizens participate more fully in the American Dream? In Great Society: A New History (Harper), Amity Shlaes argues that Johnson's bold makeover of the government was a failure despite the good intentions of its architects and implementers.

Shlaes is the author of The Forgotten Man, a best-selling history of the Great Depression, and the chair of the Calvin Coolidge Presidential Foundation. She says remembering the Great Society's failure is especially relevant in an election year when presidential candidates are promising to spend huge amounts of money on new government programs. "Once again, many Americans rate socialism as the generous philosophy," she writes. "But the results of our socialism were not generous. May this book serve as a cautionary tale of lovable people who, despite themselves, hurt those they loved. Nothing is new. It is just forgotten."

In January, Reason's Nick Gillespie spoke with Shlaes about the origins of the Great Society, why it didn't work, and what lessons we can draw for the 21st century.

Reason: What was the Great Society?

Shlaes: When Johnson became president, he wanted to do something that would make him look great—greater than President [John F.] Kennedy, who preceded him and died tragically—so he put together a program called the Great Society. The impulses came from sources beyond Johnson. Young Americans, as today, wanted to change the society, clean up any errors, and make us go from good to great.

LBJ gave a speech in which he said, "We will build a great society. It is a society where no child will go unfed and no youngster will go unschooled." 

No accident it was at the University of Michigan—the center of auto land, the university of the elite of Motor City, the heartland—where he declared these goals.

He didn't say, "I will provide a useful palliative." He said, "I will cure poverty." And to be fair, at the time everyone thought maybe poverty could be cured. Norman Podhoretz later said, "We thought this stuff was just the mopping up action, not a big deal. If you can win Europe, you can certainly win poverty."

All presidents are just a collection of impulses. One of Johnson's impulses was to complete Franklin Roosevelt's New Deal from the 1930s; he wanted to deliver to the rest of the poor people Roosevelt didn't get to.

Poor people in urban areas, like Detroit, as well as the countryside, like Appalachia and Texas' hill country.

Nothing is new. It's just forgotten. They had their own Hillbilly Elegy, a book called The Other America, which focused on poverty in Appalachia. Same thing—intractable, difficult, a shame, a humiliation involving hunger.

Johnson didn't really think too hard about what he was doing. He created a czar, Sargent Shriver—the brother-in-law of Kennedy, the man who led the Peace Corps, a man with all the goodwill in the world—to head up the [newly created] Office of Economic Opportunity. But it didn't turn out like they had imagined.

Other programs included Medicare and Medicaid. How did they sell Medicare?

Johnson said, "We'll complete the health care program that [President Harry] Truman so loved and was not able to get through Congress. Maybe we'll do it for poor people, not just old people. These things are expensive, but we'll just append them to Social Security. They can't be that expensive." Remember, life expectancy was not where it is today. These men thought that for a few years, old people could be taken care of.

This is a story of unintended consequences. Those programs would become so giant they would effectively begin to dwarf Social Security itself.

We created a lot of institutions and allowed progressives to run them. I mean, Sesame Street—how can you disagree with that? These were institutions that didn't seem set to change our culture but came to shape it in ways that today seem regrettable.

In addition, they had the legal aid office at the Office of Economic Opportunity. [The idea was that] a lady gets beaten up, she wants to get divorced, she has no money, she's Mexican-American, she may not even have citizenship, so she gets a lawyer funded by the federal government. That legal aid office, instead of representing individual hardship cases, became almost instantly an office to change America through litigation rather than through legislation. All of a sudden, this office from Washington would be funding an office in California to sue the governor of California. This was not quite what Johnson or Shriver had really thought through. It was a dynamic that grew on its own: Let's litigate ourselves to utopia.

Is it right to say that the Great Society is the final act of the New Deal and the Rooseveltian vision of government?

It's the final act of the New Deal and even further than Roosevelt [went].

Think of Norman Rockwell's The Four Freedoms. One of them was freedom from want—a tall order. That's a positive right. Roosevelt never got it all through. What's interesting is that in the '30s, we had a genuine crisis. One in four men were unemployed in the early '30s, hence the New Deal. In the '60s, we didn't have a crisis. It's like now. We just had idealism.

The question is, do you get to great through the public sector or the private sector? Is the public sector the only way? Could the private sector conceivably ever mail letters or [enable] mass communication?

Obviously not.

No, no. The private sector could never do that. [laughs]

We went for the public sector over and over again in the 1960s, with the idea that the private sector was the milk cow that provided the money. The private sector was taken for granted. Someone like Johnson or Shriver would think America will always grow, all things being equal.

They didn't have a clear understanding of a capitalist, creative destruction model. They took wealth production for granted.

It's easy for us to talk about creative destruction, because we've seen eBay destroy some kinds of retail, we've seen Amazon destroy other kinds of retail. Brutally, but arguably interestingly, and maybe for the better. They hadn't seen that.

In the beginning of the book I describe the employees of Fairchild, the camera parts company that made microchips, wondering if they would ever have a contract that was not a government contract. The entire state of California was dependent on the military. They said lawmakers would get up on their hinds like donkeys and bray when defense contracts were taken away from their states. [Then someone got the idea that] "Oh, yeah. We can make these little chips and we can put them in things people want at home. And not just refrigerators. We can make things that help the economy grow without the government."

At the beginning of each chapter, you give the amount of the federal budget that's devoted to defense (guns) vs. butter (entitlements). Tell me about that.

The idea is that guns cost so much more than everything else. Everyone thought, "We can't afford the Great Society because of the guns."

But by 1971, the federal government was spending more on butter than on guns.

That's right—a big change for the United States. If you look at defense spending today relative to the Korean War, or World War II, or Vietnam, it's very small as a share of GDP. When you look at the whole budget you'll see that entitlements are so much more than guns.

Right. Although we do spend a lot of money on guns still, but as a share of the federal budget—

It's smaller. They were just beginning to see this. A few characters see it early. One is Arthur Burns.

Burns is one of the major figures of the book. Who was he and why is he important?

He pioneered numbers crunching. It was said he could predict the business cycle by the strength of the tobacco in an auto dealership sales room. He considered himself the mentor of Milton Friedman. Burns had written a monograph of which he was very proud called Prosperity Without Inflation. He's like a character in a Greek tragedy, because he warns of inflation, sings like Cassandra, and then is complicit in causing the great 1970s inflation.

He became the head of the Federal Reserve.

Oh, yes. Nixon liked Burns, since he'd given Nixon a precious gift. Nixon had lost in 1960, and Burns had given him an explanation for that defeat, which suggested the defeat was not Nixon's fault but had happened because interest rates weren't low enough. It was the Fed's fault. Vain people, all of us, love to know a big defeat of ours was not our fault.

Nixon made him Fed chairman, and Burns expected that Nixon would do everything that Burns—the Fed god—wanted. Just as now we see President Trump and the Fed chairman at odds, Nixon realized that if interest rates didn't come down, then he might not win re-election. Burns gave in because he wanted Nixon's love.

So he helped the Fed lower interest rates to serve Nixon.

Rates lower than he otherwise might have, let's just say that. Nixon sends his yes men to Mr. Burns and says, "The president made you Fed chairman, Arthur. He expects you to be loyal, Arthur. We need lower interest rates." And Burns basically caves.

This is the story of working for a charismatic boss—the OxyContin of being in the White House, right? It's a terrible failure for the economics profession that an economic leader would act so irresponsibly.

Talk about the show Bonanza, a gigantic hit TV show that spanned the '60s. Why is Bonanza in your book?

The book is about economic growth and whether you can get it through the public or private sector. One of our preoccupations at the very beginning of the '60s was: What do you do with the growth?

Bonanza was a different kind of Western. It wasn't a cowboy coming into town, shooting a bad man, and leaving with the girl. It was about cowboys, the Cartwrights at Ponderosa, so wealthy that they have responsibility to civilize Main Street. To teach men not to shoot, to figure out what the price of a bull should be, and mainly to figure out how to be leaders in their community. It's a very different kind of Western. It was the story of America: We're rich now, so what should we do with that?

In the beginning of the decade, it squeezed out some other shows. It was on Sunday prime time. When presidents had to give addresses, they had to decide whether to pre-empt Bonanza. But you risk offending Americans and we, Americans, were addicted. Nixon actually pre-empted Bonanza to make his announcement of his awful populist economic plan in 1971.

This was lower interest rates, wage and price controls, and a bunch of tariffs?

And going off the gold standard was the main thing—denying any accountability for inflation.

Who is Walter Reuther?

Reuther was the head of the mighty UAW, the United Auto Workers. We, today, cannot imagine how important big unions were, since unions in the private sector have faded since then.

Reuther was a social democrat. He wanted to replicate Scandinavia, Germany, or maybe Yugoslavia in the United States. He got out the vote. Unions were much closer to the Democratic Party than they are today, in part because we've created laws that distance unions from the party. [Reuther] could claim he helped to elect Johnson more than he helped to elect Kennedy. Therefore he was owed these things, and Johnson knew it.

In the '60s, the one thing unions wanted that they didn't get was an end to what we call "right-to-work," the loophole whereby some states don't have to have the most stringent union culture, where you can start a company without unionizing, where the people who work in your shop don't have to join the union.

The union men, Reuther and George Meany, the leader of the AFL-CIO, said, "Oh my gosh, this loophole threatens our existence, because state after state is opting to be right-to-work. Let's close that darn loophole," just as Elizabeth Warren is suggesting today. They almost managed to get Johnson to do it, [but he] ran out of steam late in the game. Therefore, the natural experiment of a right-to-work state versus a state where unions are dominant came to pass. America saw that right-to-work states did grow faster and, indeed, drew manufacturing jobs. We have a record of what damage an overly demanding union can do that we never would have had if the Great Society had succeeded.

Pruitt-Igoe, a housing complex, is very early in the book and very late in the book.

This book is about the folly of planning. The smart guys who planned Vietnam with their spreadsheets…they were a kind of fool who failed to look at reality. Domestically, the best and brightest existed, too. Men who thought they could edit lives to achieve optimal outcomes.

Pruitt-Igoe was actually started before the Great Society, in the '50s. It was the first area where we had this vanity that we could manage lives. It was a housing project in St. Louis, one of the largest in the nation…but instantly it began to have troubles.

The troubles partly had to do with the absence of growth. It was imagined that St. Louis would fill these towers, 22 towers of 11 stories each, because of its incredible rate of growth. St. Louis began to stop growing in part because of its heavy unionization. You could move somewhere else and make an auto or rocket part more cheaply, so the housing project by sheer arithmetic failed. It didn't have enough tenants who paid enough rent for it to succeed.

Rather than acknowledging the failure, we compounded it by spending more on such housing projects. The architect of Pruitt-Igoe, whose name was [Minoru] Yamasaki, by 1965 or so was saying, "It's a project I wish I never had built." What a stunning admission from an architect.

It was a tragedy of the commons. Nobody cared about it and everyone trashed it.

A great way to think about your book is as the domestic policy version of The Best and the Brightest, David Halberstam's story of how the Vietnam War happened. Daniel Patrick Moynihan comes in for a lot of abuse. Talk about how he's the patron saint of the failure of the Great Society.

Moynihan was the wise fool. He was the jester who sees through what the king is doing. Moynihan was devoted to government, willing to admit a mistake and persevere. There's some beautiful humility to that. Moynihan was present—and complicit—at the scene of many errors.

In the beginning, he wrote a federal architecture manifesto, which basically says, "We like modern. You can build modern, and you can impose modern on people." What if people don't like modern? No, that doesn't matter. Buildings such as [the Department of Housing and Urban Development headquarters, designed] by Marcel Breuer, a very ugly building in Washington, loved by no one.

[Moynihan] also wrote the memo that gave us the modern public sector union and became Kennedy's executive order, 10988, which didn't give public sector unions the right to strike—so they didn't figure it had much effect—but emboldened unions to expand and demand more wages, leading to the budget-busting at the federal level and even at the state level that public sector unions represent today.

He tried guaranteed income, which is popular now. Moynihan said, accurately enough, that by funding social workers we were feeding the horses to feed the sparrows. What he failed to recognize was the complexity of giving a lot of people money. There's a tremendous incentive not to work when you get a guaranteed income.

What was the role of Vietnam in both the passage of Great Society programs and their ultimate failure?

In the standard history, Vietnam was everything. I found Vietnam was surprisingly less important.…The Great Society was much-loved even without any Vietnam.

Johnson and Reuther were afraid of riots in the cities. They had riots. Vietnam did, in part, force those riots. "If you're sending my son to Vietnam I deserve adequate housing, I deserve police who don't beat me up." But less than I thought, frankly, when I went over it. Imagine a stage of actors, these geniuses who think they can re-engineer society in an almost Aldous Huxley sense, and in the background, off-stage, loud thunder and rumbles made by contraptions. That's the way it felt.

One thing Vietnam did for the left: They took a look at North Vietnam and they said, "Oh, there's socialism. I'm going to go check it out." There's a chapter here where Tom Hayden, the progressive activist, goes to Hanoi. He was completely hoodwinked by the North Vietnamese and their Soviet allies. He [felt] a sense of unity. He said they had a socialism of the heart—which I think many Vietnamese would disagree with—and he drew inspiration from it.

Hayden wanted a mass movement. How do you get that? Socialism is a great rallying cry. It sounds good and it's never finished. Anyone who criticizes socialism can be rebutted: "Well, we're on the way. We're not really there." He came back from Vietnam very pleased with himself because he'd found a modus operandi for protest.

How do we know the Great Society failed? How do we total up the cost?

Our government, our people, and most importantly, our markets realized we were overspending. In order to control the resulting inflation, we had to do something terrible and brutal: [We had to] raise interest rates to 15 or 18 percent. What does that mean, when an interest rate goes up like that? You get two fewer bedrooms in your house. You want three bedrooms? You get one and a half. You want four bedrooms? You get two. Your prospects shrink.

In the '80s you see people writing, "In the future people will live in smaller and smaller houses." A loss of hope is the most important thing.

In this period, because we appeared to run out of energy and money as a result of the Great Society, we thought we had to control our population. On television, there was this serious suggestion that we should introduce a heavy diaper tax so that families wouldn't reproduce so much. [That we should] create a whole tax structure that was the opposite of a child credit. Disincent procreation—that was regarded as absolute common sense. [The '70s saw] a dimming of hope, imagination, and inspiration.

Ronald Reagan, governor of California from '67 to '75, was against the Great Society. He saw it as the federal government taking more control, spending more money, causing more problems. But later, he describes saving Social Security and Medicare through a big tax hike in the '80s as one of the most significant actions he took as president. Medicare, Social Security, and Medicaid today take up two-thirds of the federal budget. The Great Society as a concept seems to have lost, but in terms of spending, it seems to just keep winning. What do we need to remember about the Great Society for the current moment?

That government failed. Both parties are too vainglorious; both parties often fail. In the book, Nixon is as bad as Johnson. And in some areas, as John Cogan of Hoover points out, Nixon's [domestic] programs grew faster than Johnson's. Politicians will do that, but the positive lesson of the period is carried by three companies: [General Electric], what became Intel, and Toyota. What it suggests is the answer to American problems is often the private sector, which can outgrow the public sector if you make key reforms. If you capped Social Security and did something with Medicare and lowered the capital gains rate, you'd probably get enough growth that we wouldn't be in trouble.

You write at the beginning of the book that many Americans today rate socialism as a generous philosophy, "but the results of our socialism were not generous. May this book serve as a cautionary tale of lovable people who, despite themselves, hurt those they loved." How will you know if your book has succeeded?

Well, there's no limit to what you can achieve if you don't care who gets the credit, as Reagan said. I'm just part of a group of people who are looking at history in a frank, analytic way, and saying, "Here are the results. Let's remember those." In high school we don't get this material. In college we don't get it anymore.

My hope is that education changes. I'm sure that change won't come from the teachers. It has to come from young people, who resent being fed a mono-line about how the Great Society was great, the New Deal was great, and everything else is cold, mean, nasty, and discriminatory. Young people know that can't be the only truth. My interest is in seeing them have the opportunity to ask important questions.

This interview has been edited for style and clarity. For a podcast version, subscribe to The Reason Interview With Nick Gillespie.


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