RUTHFULLY YOURS

Seldom in history has a program been undertaken with such lofty intentions and ended in such bitter disappointment as Lyndon Johnson’s “Great Society.” In her latest book Great Society: A New History, Amity Shlaes provides a fresh appraisal of the idealistic policies that came to define the 1960s and a historical narrative that is especially timely now.

Shlaes’ book is a follow-up to The Forgotten Man, her excellent history of the Great Depression. This book is an apt sequel, since the Great Society was promoted as the completion of the “unfinished business” of the New Deal. However, there was a significant difference between the two programs. The New Deal originated in response to a severe economic crisis. In contrast, the Great Society was enacted at a time of economic prosperity, when poverty rates were dropping.

Indeed, as Shlaes makes clear, it was the very prosperity and confidence of the postwar years that made the Great Society possible. “Compared to overcoming a Great Depression or conquering Europe and Japan,” Shlaes writes, “eliminating poverty or racial discrimination had to be easy. American society was already so good…This good society had to become, in the words of President Johnson, a Great Society.”

Shlaes begins the book by discussing Bonanza, a TV western that premiered on January 2, 1960. It was an entirely new kind of Western, as Shlaes describes:

“Heretofore, Westerns treated the single gunslinger’s efforts to make his fortune, whether by staking a claim to land or at the card table. By 1960, however, the story of one loner striking it rich lacked allure. Americans nowadays routinely became prosperous. It was time, Bonanza’s creator, David Dortort, determined, to transcend ‘the myth of the lone gunfighter.’ Bonanza therefore featured not one but four main characters: a patriarch… and his sons…The important thing, Bonanza’s first episodes suggested, was what a man, family, or community did with a bonanza. You had to protect your bonanza from the bad guys. You had to spend your bonanza carefully… You had to tend to your bonanza. Most importantly, you had to share your bonanza, and teach others how to earn and share … The wealth part, that initial bonanza, was a given.” [My emphasis]

In Shlaes’ telling, Bonanza was a reflection of the mindset that prevailed in America in the early 1960s. John Kenneth Galbraith, whose book The Affluent Society had captivated America’s intelligentsia, argued that America had now solved the problem of producing goods, but lacked a sufficiently strong “public sector” to ensure that wealth was distributed “equitably.”

Early on, Shlaes tells us, Johnson was contemplating spending a billion dollars on poverty (an enormous amount at that time), but that sum was dismissed by one advisor as “nickels and dimes.” After LBJ’s massive electoral victory in 1964, the programs were rolled out at a frenetic pace. By the end of the decade, federal spending on social programs had, for the first time, exceeded spending on defense, which itself was at heightened levels due to the Vietnam War. And the pace continued under Nixon. “Total annual entitlement outlays,” Shlaes reminds us, “grew 20 percent faster under the Republican Nixon than under President Johnson, the Democrat.”

However, Great Society is not a dry recitation of economic data. Rather, it reads like a novel, albeit a tragic one. There are fascinating portraits of the dramatis personae on both sides. Shlaes profiles the Great Society planners, including Sargent Shriver, LBJ’s “poverty czar”; Michael Harrington, the socialist academic who penned the influential bestseller on poverty, The Other America; Daniel Patrick Moynihan, presidential advisor and later senator; and Walter Reuther, the leftist labor leader. These were among the “best and the brightest,” brimming with unbounded confidence in central planning. She also describes some of the figures who tried to push back against the incursions of the federal government, such as L.A. mayor Sam Yorty, Texas governor John Connally, and California governor Ronald Reagan, the former actor who had become an evangelist for free enterprise during his stint as spokesman for General Electric in the 1950s.

By the end of the decade, the spending on guns and butter had led to a monetary crisis, upending Bretton Woods, the international monetary system that had been in place since the end World War II. “Under the Bretton Woods system,” Shlaes explains, “foreign governments could go to what was called the gold window at the U.S. Treasury and turn their dollars in for gold at $35 an ounce. At that time, the U.S. Treasury had … mountains of gold and never imagined that the gold would be drawn down.”  But, as U.S. spending soared, foreign governments began exchanging dollars for gold, drawing down U.S. reserves. On August 15, 1971, President Nixon “temporarily” suspended the link between gold and the dollar, ushering in a decade of stagnation, high unemployment, and inflation. In 1980, the country elected Reagan to clean up the mess.

The 1970s “stagflation” was the short-term effect of Great Society spending. The longer-term effects are still with us. “Starting in 2002,” Shlaes notes, “the expense of Great Society-era benefits commitments outpaced the expense of benefits established by the New Deal.” Taken together these commitments represent a ticking time bomb of debt in the decades ahead. Moreover, we are still stuck with the system of fiat money established by Nixon in 1971.

The social programs of the 1960s, Shlaes concludes, “moved America closer to socialism than it had ever been in a period of prosperity.” Yet the Great Society failed on its own terms. Poverty wasn’t cured. Worse, Shlaes argues, the programs “established a new kind of poverty, a permanent sense of downtroddenness.”

Her book is thus a cautionary tale. The current crop of Democrats campaigning for the Presidency promise even more ambitious government spending programs designed to address poverty and alleviate inequality: in effect, the Great Society on steroids. To many young people, it all sounds imaginative and exciting. But, as Amity Shlaes’ book reveals, it is merely old wine in new bottles.