Ever wonder if Rush Limbaugh and his counterparts on the left realize how stale their bellyaching about the government's economic rescue efforts is? Eight decades ago, Herbert Hoover heard the same script when that Mr. Republican created the Reconstruction Finance Corporation to battle the Great Depression.
The RFC, blessed by Hoover with a then-extravagant budget and expanded by Franklin Roosevelt, lavished loans on financial companies, railroads, and states and bought stock in thousands of banks. Conservatives howled about the first baby steps toward socialism; liberals decried a Robin Hood in reverse, taking from the taxpayer and giving to large, elite institutions. Alas for both, history's verdict came in long ago: The RFC helped stabilize the financial system and became, as Felix Rohatyn writes in "Bold Endeavors," "the spigot that poured out the enormous sums funding the New Deal."
I opened "Bold Endeavors" with trepidation. This manifesto for federal infrastructure spending comes from octogenarian investment banker Rohatyn, who deserves all credit for helping stave off New York City's bankruptcy in the 1970s. But I expected a public works spreadsheet between covers, and if I'd wanted that, I'd have gone to engineering school. So it's with surprised pleasure that I heartily recommend the book.
It turns out that Renaissance man Rohatyn - a physics major in college and former ambassador to France as well as a banker - counts the study of history among his interests. Rather than a numbers-crunching yawner, "Bold Endeavors" is a breezy, popular history of 10 instances in which either the federal government or a state government intervened in the economy, with positive results. More than interesting, the book is a good counter to the allergy some have to massive government spending in the current recession. The past teaches that thoughtful public investment pays dividends, in good times and especially bad.
How breezy? Rohatyn's first case study, about the Louisiana Purchase, opens with a naked Napoleon bawling out his brothers from his bathtub. Another vivid anecdote recalls the controversy in 1810 over whether to build the Erie Canal, when one enraged farmer greeted the canal's planning commissioners by tossing his pitchfork at them.
Critics of President Obama's stimulus are right that some of the money is sure to be wasted. Rohatyn acknowledges the corruption and waste that attended previous "bold endeavors." But he also shows how the good outweighed the bad. His epilogue pleads for a federally funded National Infrastructure Bank to finance repairs of our disintegrating roads, bridges, school buildings, and drinking-water systems. He'd pay for this massive undertaking with currently budgeted infrastructure dollars, existing taxes, and fees connected to public works (such as port fees and fuel taxes) and with new taxes (for example, consumption and energy taxes). His discussion of these financing options is a little thin.
Another legitimate quibble concerns Rohatyn's choices of which case studies to include. I wish he'd discussed the Internet, which began its existence as a military program, since it makes a particularly resonant example in our high-tech age. Meanwhile, his inclusion of the Homestead Act, signed by Abraham Lincoln to sell affordable federal lands to home-seeking settlers, is dubious. Regardless of the benefits of that long-ago act, it's a bit inept to showcase it during our current straits, when the theory behind the American dream - that everyone can and should own a home - has been shattered.
Nevertheless, in a concluding confession of capitalist faith, this successful capitalist pointedly writes that "only capitalists can kill capitalism," by opposing needed government regulation and investment.