Amity Shlaes warns that another Great Depression looms due to unchecked debt and policies ignoring trade-offs, tracing roots to the New Deal’s $6B+ missteps—like the Public Utilities Holding Company Act—that stifled recovery by "playing God" with markets. LBJ’s 1964–65 Civil Rights Acts missed employment gaps, sparking Watts riots, while his family-unification immigration reforms and public sector union laws fueled today’s border crises and budget strains. Nixon’s entitlement expansions and lost gold-standard guardrails enabled reckless spending, now threatening stability as rising rates or crypto challenges expose vulnerabilities. Shlaes urges reform through logical trade-offs but notes political inertia, hoping future crises will force leaders like Rand Paul or Thatcher to act before collapse. [Automatically generated summary]
Hey everyone, it's Andrew Clayman with this week's interview with Amity Schlays, a terrific writer about American history, one of my favorites actually about American history.
And I wanted to talk to her because I feel there are two major problems with political discussion in America.
One is this, that everything in life is a trade-off and we never talk about that.
We never talk about the fact that nothing is free because our culture is thoroughly corrupted by leftism.
Our arguments are generally put in terms of leftist solutions versus why you're hateful.
And instead of putting possible solutions to problems as what are its costs, what are its moral hazards and drawbacks, we just don't have those debates.
And I think that needs more, we need more knowledge in order to have those debates.
And the second problem, I think, is this.
Our young people, many of them, are schooled in ignorance.
Literature, history, politics are never taught to them as facts and processes, but are glossed over by leftist political opinions of their academics.
And our students know that, you know, for instance, from the river to the sea, Palestine must be free, but they don't know which river, which sea, or what Palestine is, if it's anything.
And so a lot of times on the show, I talk about where, how we've gotten to where we've gotten.
And I mention the Great Society.
And the other day, I was talking to a young friend of mine who's a very intelligent guy, and I made a comment about the Great Society.
And he said, I don't know what that is.
And this is a guy who works in the literary world, and he's very smart and has read a lot of stuff.
He did not know what the Great Society is.
Amity Schlays has written a terrific book on the Great Society called The Great Society and another about the New Deal, which is kind of the prototype for the Great Society.
Her book is called The Forgotten Man.
And they just tell us a lot about how we got to this moment today when we're basically in debt up to our eyes and our programs are sacrosanct and can't be challenged by either Republicans or Democrats.
Amity Schlays is a, like I said, a terrific author.
She's written five books.
Three of them are New York Times bestsellers.
She currently chairs the board of trustees at the Calvin Coolidge Presidential Foundation.
She's a recipient of the Bastia Prize and more recently, the Bradley Prize, which are like the Pulitzer Prize for Honest People.
It's great to see you again.
How are you?
Thank you.
I hope the Bradley people all hear that, the Honest Prize.
That's wonderful.
It's a very Midwestern prize.
And we need more of the Midwest in our coastal life.
But I'm so pleased to be here.
I'm such a fan of the show and you.
Oh, thank you.
Well, back at you.
I mean, I just think I just finished The Great Society, and it's just a terrific book.
And you have a really unique way of writing these histories without commenting on them, but making them clear what their effects were.
So let's start just briefly with the New Deal.
I mean, the New Deal is basically the gold standard for Democrat change.
But in The Forgotten Man, you sort of depict it as something that actually made the Depression longer than it needed to be and a kind of hit and miss thing.
Can you give us a kind of just a quick summary of what that was, what the New Deal meant?
Oh, absolutely.
Well, when you think of the early 30s and the Great Depression, we were in trouble.
America was in trouble.
And we're going to contrast that with the Great Society period.
One, so President Roosevelt campaigned, so he's only Governor Roosevelt, and says, just what Vice President Harris recently said, we're going to have bold, persistent experimentation till we find a way out of this awful canyon of despair that we are in.
That's standard political fare and it's heartening to people.
But the New Deal, which was the program he developed to take us out of the canyon of despair and specifically to restore employment, because unemployment when Roosevelt spoke as a campaigner was 20%.
So let's go back to the American norm of 5%.
The New Deal was, quote unquote, as he put it, to put people back to work.
Unfortunately, it failed in that regard.
So the evidence is fairly, it's totally clear.
If you look at the unemployment throughout the 30s, it didn't go below 10%.
So it sounded good, the New Deal, a bunch of government programs, but it didn't get unemployment below 10%.
It didn't get the stock market back.
In fact, the stock market only returned to 1929 levels, which were the high in the 1950s.
That's more than a generation later.
Today, we think a rising stock market is our birthright.
Then it was not.
So why?
I think since this show is about great society, I'll just say the man who summarized it best was a mainstream economist named Benjamin Anderson.
He's not taught anymore, sadly.
And he said, well, the government played God.
That's what the Depression was caused by.
The government had so many programs, they confuse business, business-like certainty.
So when you say you're going to experiment, that scares business.
That puts a chill on markets to talk TV market language.
It truly did.
Also, government-aggressed business.
It shut down.
Every downturn has one industry that can pull it out.
One exciting industry recently, that was energy, right?
Mining, fracking, that helped to get us out of 2008.
In the period of the New Deal, the exciting industry that could have pulled us out where customer use was growing even during the Depression was utilities.
And Roosevelt, partly out of kind of political strategy, attacked utilities instead of leaving them alone.
He said this is their fault, the Depression.
He went after the companies rather systematically, both in court through the lawfare of the 30s, where we set the lawfare precedents for what we see today.
In addition, by passing a law that made it very difficult for utilities industries to raise money.
Think about that when you think about Google.
Companies like utilities need a lot of money upfront to lay wires.
To think of the 30s for utilities, that was capital intensive.
And the returns come later when the people start to use the electricity.
He shut that down through a law called the Public Utilities Holding Company Act, which was known as the death sentence in the time.
And he also created government competition for utilities in the form of the Tennessee Valley Authority and most specifically, something we've all but forgotten, the Rural Electrification Administration, make a government competitor that charges lower prices for the same thing.
How does that help a struggling industry that was already losing money or struggling to find money in the downturn?
So that was a real of hope to the utilities industry and is a fair way to characterize it.
I'm not sure Roosevelt was entirely aware of what he was doing.
But in any case, this kind of effort, not so targeted, took place across the economy from the New Deal in stages.
And that is what sustained the unemployment.
That's what made the recovery not want to come back.
Recoveries are like people.
They don't need perfect weather to go out, but they want to know the weather would be okay.
So every year in the 30s, the recovery stayed away.
See, one last thing, If you go to college or graduate school, you'll learn a lot about the monetary components of the Great Depression.
These did exist in the early years.
We really did run out of money in the early years.
We studied deflation.
We learn about Europe.
We learn about the Match King.
We learn from Milton Friedman about the collapse of the bank in New York that was so dramatic, Bank of U.S., a Jewish bank.
But monetary does not explain the duration or the severity of the Great Depression.
So you have to get past the monetary story and look at what really happened.
I will recommend one other book, one other writer, Professor Lee O'Hanion, who's written about what the government did to labor in the 1930s that made unemployment worse.
Unions made unemployment worse in the 1930s, no doubt about it, even in neoclassical models.
And that's important for us today too to know that.
I mean, I know this from my mother, basically, that FDR was this huge hero, especially after World War II began and he was our leader in World War II.
You know, the people just loved him.
They voted him into office again and again.
He was elected four times.
So now it's the 1960s.
John F. Kennedy, who's kind of, you know, a conservative president.
I mean, he was very much anti-communist.
He was very, he cut taxes.
Today, he would be considered like an almost MAGA extremist.
He gets killed and LBJ takes over.
And the economy is going great, right?
I mean, at this point, there is no depression.
Everything is terrific.
Why does LBJ decide to launch the Great Society?
Very different mood.
More political, even, more political than LBJ was an entirely political animal.
He was, you think about what is your comparative advantage.
His comparative advantage was getting laws passed.
Master of the Senate.
Right.
Robert Carroll.
Okay, we've heard about that.
We've listened to the tapes.
So you play to your advantage.
I'm going to produce laws.
I'm just publishing a piece sometime soon with National Review, which is a wonderful line from Joe Califano, later known as a cabinet secretary.
But in this period, just another young aide, another bright young aide.
And Joe Califano wrote down, this man passes laws like children eat chocolate chip cookies.
And Johnson was frenetic and he regarded his input to put it.
And I think your point about trade-offs, Andrew, is very important and logic.
All people are capable of logic.
You just have to talk to that part of their brain.
They have it, not the fear part.
There wasn't much logic to what Johnson did.
So he treated his inputs as results.
He said, look how many laws I passed.
And, you know, when LBJ left office rather young, he published a memoir and the end papers of the memoir, and you can imagine him talking to the publisher lovingly.
The end papers, that glued paper that are on the inside of the two covers of the book, had the beautiful names of all the laws he passed.
And there were so many.
He loved his laws.
There's a long, long, long list of them.
And that's the way he regarded his work.
That also won him re-election.
He learned that from Roosevelt, if you please a constituency, then they vote for you.
And he was actually, you know, LBJ was part of the New Deal.
He worked in the youth administration of the New Deal in Texas, and he saw some of the perversities, such as plowing down crops to what is it?
It's even so counterintuitive to reduce supply to drive up prices at a time when people are hungry.
And the little mules didn't want to plow down the crops and they were being whipped to go over and step on the crops to plow them down.
And they balked because even to mules, it was counterintuitive to destroy growing food.
And he saw that.
He knew that.
But he also saw the large payments that silence the farmers.
Dear farmer, do something you hate to do, but we'll give you a lot of money.
What does the farmer say?
All right, I'll take the money, but I'll be truculent because I don't see it.
I don't see what.
So that was LBJ.
He'd seen the incredible power of a political gift.
And he also liked to be optimistic.
He knew Kennedy had been optimistic.
And one thing that I noted in this National Review article, which is a little subtle, but not really.
Lumen's Personal Touch00:03:31
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Kennedy actually cared about results.
So for example, when Kennedy said, I will be a dreamer and I'll go to Rice University and promises to put a man on the moon.
Talk about an extravagance.
I mean, in some ways, it sounds like an extravagance, but Kennedy said, I'll do it within the decade.
He gave himself a deadline.
And he didn't say, and I'll do everything else in space.
And he also has a line in that speech.
I don't have it before me, where he says, along the way, we'll learn a lot about how we work and how we can improve and how to measure success.
That is, he regarded this as a specific experiment, like something he might do in his boarding school in the lab.
And that is the right way to look at things, not, I will spend forever on space because we have to be great.
Johnson was not like that.
There were very few metrics in Johnson's program.
So that was the basis of the culture.
Johnson was lovable, but he caused a huge amount of damage.
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So we had, I mean, we're talking about around 65, right?
We're talking in the mid-60s when this starts.
By 1972, is it fair to say that the economy has gone sideways a little bit?
Well, yes, right now we're in a strange moment, so don't think about now.
Usually when you run a big deficit, you have trouble with your money.
People withdraw their dollars or their gold, depending on the system, from your country.
So in the olden days, and maybe this, it was reducing moral hazard, to your point, Andrew, in the olden days, the world would remind us when we spend too much by taking its money and even forcing a recession upon the U.S. by taking money out, by taking gold out.
I mean, in this period, there were just some remains of the gold standard, but gold was part of the monetary base.
World's Reaction Matters00:15:26
So it's an automatic contraction that you force on your country if you overspend.
We no longer have that in this little interim.
This is not forever.
So that was beginning to happen.
We added inflation because the dollar was losing value.
You can connect it to international.
Charles de Gaulle gave some great speeches about what goose we were overspending.
That was, but I think more to the point of Johnson and his reason, why did he choose not to run again in 68?
People always say it was because of the Vietnam War.
That's what your mother will tell you to, or you will, that was only partially why he saw that his programs weren't working.
And he didn't want to sit around and be the one blamed for the result.
It's kind of like when you see a bear, you run, even though, you know, you have to really train yourself not to run from that bear.
Johnson had a strong self-preservation instinct, and so he withdrew.
He was very concerned with Bobby Kennedy, who unfortunately, alas, was killed, but he was very concerned he might be humiliated one way or the other in a second elected term.
So he began to withdraw.
What is an example of, I want to talk first about an example of things not working and then, and I know you do too, about the consequences of his laws.
An example would be Johnson really believed in civil rights.
We all believe in civil rights.
So you separate Johnson's programs into spending or opportunity.
We generally like the opportunity ones.
And today, and that's right.
So he passed the Civil Rights Law of 1964.
And, well, that's to correct a wrong.
And then on top of that, he passes the Voting Rights Act of 1965.
Why is that important?
Because people in the South, African Americans were not getting to vote.
Maybe half of the African Americans couldn't vote in some places.
You look at states like Mississippi.
That was wrong.
Johnson intervened.
So Johnson said to himself, I feel better.
I did something, Martin Luther King, and everyone told him he did something.
I'm just thinking about the timeline, but that's right.
So that law is passed.
I looked at my camera, forgive me, at my screen.
Then there were riots in Watts in Los Angeles.
Wait a minute, I gave them something.
You can imagine Johnson saying to himself in his aides, aren't they grateful?
He was really hurt that this particular constituency didn't understand.
Maybe word of the new law hadn't quite reached Los Angeles.
The rise of the television meant that even in Watts, people watched the civil rights movement in the South on TV and there was outrage.
Employment wasn't where it could be.
Longshoremen were bigoted and didn't hire African Americans.
Who knows all the factors of the Watts riot, but it was a terrible riot.
And Johnson was angry.
And this aide, Cal Afano, whose book is truly priceless, Lyndon Johnson, Triumph and Tragedy, said, you know, I was always disappearing because Johnson wore me out.
Johnson would find him anywhere.
This time, Johnson disappeared.
I couldn't find him.
And they want to get the National Guard out.
Well, the president is involved in getting the National Guard out.
An aide can't just order the National Guard, right?
So they were in a dire situation.
And what was Johnson doing in that 24-odd hours?
He was in despair or pouting, depending on whether you're sympathetic or hostile.
You can pick your despairing or pouting, but it was a terrible thing.
And what Johnson didn't see was that what Africans Americans needed wasn't necessarily more laws.
It might be something else, but it wasn't law upon law.
So he came back from his pout or his despair, passed some more laws, and then left office.
So everybody, you know, Nixon comes in afterwards, and everybody thinks of Nixon as a conservative.
I've never thought of him that way exactly, but he was the left hated him so much for being right about the communists.
He came in and he didn't ditch the programs were already going south.
The great society was already causing problems, but he didn't get rid of them, did he?
No, he didn't.
In fact, by some metrics, Nixon's under Nixon, such programs grew more.
And I really recommend a book by John Cogan of Stanford about, I think it's called The High Cost of Good Intentions, but anyway, he tracks entitlements all the way through.
Very analytic, but not too hard.
Because compassion feels good, but if the law isn't working, it's not compassionate to keep the law.
Could I just say one thing?
I'd like to say one thing about LBJ and the consequences today.
Today, when you think about, say, the border crisis, one reason we have a border crisis is we lead with compassion.
So if we see a photo of a desperate child crossing the border, we say, let him in, right?
Sometimes that's a stage photo, sometimes it's a true photo, but compassion is our immigration policy effectively.
And that's why we don't allow ourselves to think logically about how to make things better for the maximum number of people.
Or you think about unions in the public sector, which drag down so many state budgets.
Unionization is the fiscal knife in the breast of state finance, of states.
Or you think about welfare as an entitlement where people think they ought to be paid, even if things can't get better.
All those things came from the Johnson era.
So starting with immigration, Johnson signed what seemed like a really nice immigration law, as he would have put it at Liberty Island.
And he said, this is not an important law.
You can go and see this speech.
It's not a revolutionary law.
He said, but it does two good things.
One is it honors merit.
We like that.
That is, if someone tries hard or has a skill, he should be able to come in this country, some kind, and become a citizen.
And the other is that it's about compassion, this 1965 immigration law.
It's all about helping people who are hurt, who are separated from their families.
The principle of family reunification is principal to immigration policy.
And that part comes from Johnson's law.
He had no idea of what the border would look like now or of our inability to control the border.
But his compassion emphasis was the legacy and contributed to our immigration challenge today.
Regarding public sector unions, Kennedy signed a law, obscure actually an order called Executive Order 10988 for federal government public sector unions.
Okay, it didn't even give the unions the right to strike, but it said you can organize and collect dues.
Kennedy had no idea how important that would be because it set a trend.
And then in every state, the public sector unionized.
And once the unions had money, union dues, they fought for a lot.
And sometimes they became an obstacle to progress in the public sector.
Even Roosevelt did not approve of public sector unions.
He said, that's not a good idea.
There's a conflict of interest.
You're either going to be a civil servant or you're not.
But unionization gets in the way.
So that's another example of an unintended consequence.
But can you explain, you know, I get, so Johnson kind of wants to bring in some these popular ideas.
He's good at passing laws, so he passes laws.
Nixon thinks this is compassionate.
He wants to win over the love maybe of the elites and of some Democrats.
He continues this going on.
But by the end of Nixon's first term, he starts to understand that things are going bad, right?
I mean, he starts to understand that this is having bad effects.
What I want to know is now we're in a position because kind of Biden is in the same, was in the same camp.
He ran as this kind of moderate, but he starts passing laws and doing just what you talked about.
He starts bragging about how many laws he passed, as opposed to saying, well, this accomplished this and that, this accomplished that.
We are now so buried in debt, but nobody seems to care about it or think about it.
It sometimes gets a mention here or there.
But I mean, we're just bare.
And we weren't, when Johnson started, it wasn't like this at all.
Why is that not having a catastrophic effect or is it just a matter of time?
That is the question in the hour.
And we did have a national debt conference at the Library of Congress this year because, of course, Calvin Coolidge understood about debt.
But there's a simple answer.
We have no guardrails.
We have no check on us.
The gold standard, as imperfect as it was, told people right away a reality check.
Wait, your blood sugar is too high.
Your money, i.e. it was a continuous monitor.
You're telling us money would flow out of the United States when the government overspent.
When we went off the gold standard and cut the final cord or close the gold window, it was Nixon who did it.
But Johnson did some of that too.
There was a funny place in the Wall Street Journal where they used to write how much gold the government had because there was a law that said the government had to have 20 or 25 percent of money outstanding, to put it simply, in gold in Fort Knox and on, you know, in Manhattan.
Well, we started to run out of gold.
And, well, somehow a little legislation was passed that we didn't have to have that requirement.
And if you open the Wall Street Journal, one week there was the share of gold we had relative to the currency.
And the next week there was just dot, dot, dot.
It just went away.
It just went away.
And because we're a strong economy, you could say the dollar is just a reflection of the strength of the economy.
It doesn't need anything behind it, but it probably does over time.
And I think cryptocurrencies or Bitcoin, they're sort of like ghosts.
They have value.
People trade them.
They buy with them.
But their main function is to advertise skepticism about the solidity of the dollar.
As bad as the dollar is, the more cryptocurrencies or virtual currencies will rise.
And something more serious very soon will come and challenge the dollar.
So when will we fix things up, get straight, care about the debt?
It won't come from a moral education.
It will come when interest rates go over 15% or 10%, which they one day will.
And then, oh my gosh, everyone will say, I can't buy a house on that.
You think of our parents buying houses in the 80s when the interest rate was 15%.
Now it's five, six, four, you know, in our year.
That's two fewer bedrooms.
That's the rise of the bunk bed, right?
Right.
Was that interest rate in the past?
We will have that kind of check.
It will happen to us.
We don't have to find the courage.
We should find the courage to address it preemptively.
But I think the reality is there'll be some kind of dollar challenge.
And then our interest rate will go up.
And then we'll be sorry.
And there will be reform.
You believe that's very optimistic.
You believe that people will.
I mean, it's hard for me to believe that Donald Trump actually runs by saying, I'm not going to touch any of the entitlements and has to, essentially.
He could not win if he said he was going to.
Paul Ryan was destroyed by his own party, really, for saying he could reform that stuff.
But nobody wants to touch it.
But you're optimistic that eventually the chickens will come home to roost and we'll just have to do it.
You think about the UK, Margaret Thatcher, she wasn't going to win.
You know, her own party didn't like her.
She was too sharp.
The Tory Party was kind of a, what they say, a wet party, a mushy party.
It was high class and conciliatory.
And then Britain was so buffeted by its own financial troubles that suddenly the appeal of a strong leader emerged.
And then the leaderess emerged, Mrs. Thatcher, and suddenly she was able to say no to the unions.
And that was very important in the UK, able to say no on money, understood about taxes, though she didn't always, you know, understood about taxes and understood about the sanctity of the individual.
And she really changed Britain.
So we can't see who it's going to be because that person isn't currently allowed to be prominent.
You use Paul Ryan as an example, or Rand Paul.
Oh, he's a libertarian.
Rand Paul is a respectable man.
He's a very thoughtful lawmaker.
He's not a joke, even if we aren't all libertarians and we aren't.
The first class leaders aren't given the stage right now.
It's sort of, that's the great tragedy of this election.
I was reading John Maynard Keynes on the Treaty of Versailles.
Why is she bringing the Treaty of Versailles?
But what Keynes said, he wrote a wonderful book called The Economic Consequences of the Peace, because he was at Versailles as a junior treasury person from the United Kingdom.
The people were just awful.
The French leader was kind of pickled, Clemenceau.
Wilson was pickled in his own sanctimony of another kind, right?
And well, the UK people, Lloyd George, was a bit better.
They shut the Germans out.
If the people of Versailles had been better, the outcome wouldn't have been so dire for Germany.
And Germany might not have turned populist and then National Socialist is what Keynes said.
And I think there's much to that.
The personnel, personnel matter, or you think of the presidential debate just now, the vice presidential debate, for all its flaws, had more substance than the president.
I know.
I know, I know.
And some people are sort of all consoled by that.
That sounds more like an election.
But that's wrong.
So, hey, why aren't we advocating to flip it or get yet better candidates for the presidency on both sides?
Because we don't have to.
Okay.
I have to stop there, Amity.
Thank you.
Amity Schley is the author of The Great Society and of The Forgotten Man.
Next time I talk to you, I want to talk to you about Calvin Coolidge, but we don't have time now.
Oh, I hope so.
It's wonderful to see you.
And I thank you very much.
Well, that's the first person we've interviewed who actually said something optimistic that there will be exigencies that come about because of our spending and then we'll have to stop spending so much.
I hope that happens.
I hope we see it soon.
If not, we'll always have the Andrew Clavin Show on Friday and I hope you'll be there.