In 1946 midterms, Republicans won an astonishing 55 seats in the House. They won 12 Senate seats to sweep back into the majority. For all intents and purposes the election was seen as a referendum on an unpopular President (Truman) whose approval ratings had plummeted to around 35% or less.
In 1948, Truman won the presidential election over Dewey, and Democrats swept back into a majority in the Senate (+9) and House (+75!).
Want to find out what happened?
First of all, let's look at unemployment in the post-World War II economy of 1946. Millions of veterans returned home, the Baby Boom started in earnest, and the transition to a peacetime economy created serious economic turmoil. (The St. Louis Fed wrote an interesting research paper in 1986 that I found useful in my own research.) There was a major struggle between economists and policy-makers in 1945-46, as serious questions were raised about whether government should have a role in planning for full employment. Congressional hearings reflect wrangling between those who saw huge risks in repeating the mistakes of the laissez-faire 1920s, while others felt that such economic engineering was "utterly alien to America and her institutions."
While Democrats tended to see unemployment as a set of wasted economic opportunites caused by poor planning, Republicans tended to see the high unemployment rate as part of the natural economic process. After the crash of 1929, unemployment spiked to nearly 25% in the early part of the Great Depression. It remained elevated until World War II sent millions of American men off to war and put others to work in the factories of the wartime economy. Henry Wallace, a progressive who served as Vice President from 1941-45, was a key sponsor of full employment legislation and an ardent advocate of Keynesian economic theory.
Wallace was not popular, however, among the leadership of the Democratic party, who argued that he was too idealistic to be a good politician, that he did not have a wide following, and that he was in essence too much like Roosevelt to balance the ticket. Many Democrats also found Wallace's Republican roots distasteful, particularly as he had only become an official member of the Democratic party a few years before. Roosevelt would have none of this, however, and when it appeared that Wallace might fail to receive the party's nomination at the Democratic Convention in Chicago, FDR threatened to drop out of the race, preparing a statement that argued that he could not run for a party that was not overwhelming in its support for "social progress and liberalism," and had refused to shake off "all shackles of control fastened upon it by the forces of conservatism, reaction, and appeasement." FDR's threat, coupled with an eloquent plea for party unity at the convention issued by Eleanor Roosevelt, ultimately carried the day and on January 20, 1941, Henry A. Wallace became Vice President of the United States.
As Vice President, Wallace became the leading spokesman for American liberalism and developed a large following among New Dealers. He also became increasingly interested in international affairs and insisted that the war should lead to a new world order that would champion the "Century of the Common Man" and bring independence and self rule to all peoples, a better standard of living for the world's poor, freer trade, and an international organization to keep the peace and govern relations among nations.
Wallace railed against "American Fascism" and warned that, "The American fascist would prefer not to use violence. His method is to poison the channels of public information. With a fascist the problem is never how best to present the truth to the public but how best to use the news to deceive the public into giving the fascist and his group more money or more power." (boldface added by this author) His economic populism was fueled by his Republican roots, his understanding of small business and his stint as Agriculture Secretary from 1933 until he became Roosevelt's VP in 1941. Even before the end of World War II, in 1944, Wallace spoke out about the need to return to a peacetime economy rooted in "an assured world peace," saying, "Such a peace is necessary to a large volume of goods flowing between countries."
(Does anyone see parallels to Obama's long-delayed Asia trip?)
As a champion of full employment policy, Wallace believed that a robust approach was needed to ensure that the 20th century would be "the century of the common man". His concern about the lack of aggregate demand for goods was influenced by Keynes, and could also be seen in part as the rationale behind the Marshall Plan starting in 1947 through 1951. By strengthening the economies of key European trading partners, the United States economy not only helped to restore Europe but also encouraged the continued revitalization of the American peacetime economy.
The vision of the Full Employment Act of 1946 was rooted in the core belief that, "all Americans able to work and desiring to work are entitled to an opportunity for useful, remunerative, regular, and full-time employment." By rooting the policy in the dignity of work and the worker, the new law sought to add government investment to supplement the efforts of the private sector and thereby stimulate economic growth. VP Wallace repeatedly referred to data about unemployment and underemployment, pointing to the amount of slack in the labor market that left too many willing and able Americans out of gainful employment.
(Sound familiar?)
Opponents of the Full Employment Act voiced concerns that business cycles were inevitable and normal, and that government intervention would harm the market by skewing these normal business cycles of growth and contraction. (This information is taken from page 6 of the St. Louis Fed article of 1986.) There were also, of course, complaints in 1946 about the risks of inflation due to government intervention. While the bill's sponsors agreed about the risks, they argued that the risks of disgruntled unemployed people were greater than concerns about inflation.
While the term "Right to Work" today refers to a policy of "at-will employment" that allows employer or employee to end employment for any or no reason, in the Full Employment Act there was a proposal of a fundamental right to work for all able-bodied Americans - i.e., that government has a responsibility to ensure full employment and to protect the dignity of the worker. (Incidentally, the Federal Reserve Bank today has a mandated responsibility to maintain full employment through monetary policy, which in part justifies the reasons behind the Quantitative Easing despite concerns about rising inflation.) The protection of the rights of the labor market and the responsibility of government was a fundamental component of the policy in the Full Employment Act.
In the end, the bill was watered down from its original language regarding a "responsibility to ensure full employment," and changed to say that, "It is the continuing policy and responsibility of the Federal Government ... to promote maximum employment, production, and purchasing power." Work for the sake of work was not the goal. Rather, the purpose of the Act was to make sure that the employment levels were maximized without creating unproductive jobs or diminishing the value of a paycheck.
The Full Employment Act didn't immediately result in success, but from 1950 to 1970, the unemployment rate averaged 4.6% (similar to where it was before the 1929 crash in the years from 1900-29). An aggressive policy of Federal Government intervention, combined with international development and aid, helped to restore the economy and promote a Golden Age of American prosperity.
Wallace, in a January 1945 speech, spoke of the need to keep progressives at the table and to "transform liberal words into concrete action":
We welcome the future joyously. We shall organize an America worthy of our returning heroes. We shall transform our liberal words into concrete action. We shall do something about it when the veterans can't get jobs. Approaching the business, the farm, and the labor problems under the charter of the "Economic Bill of Rights," we shall prove that our idealism is more practical in life than that curious mysticism which is called hard-headed common sense.
Now, Wallace's vision did not result in immediate positive results in 1946. To the contrary, the results in the 1946 election reflected unemployment rates that were slightly elevated (still under 5%), before the policy of the Full Employment Act was fully implemented. Southern Democrats in 1946 suffered no losses (source) while liberals took the brunt of the losses in the midterms, reflecting a desire for new leadership, disappointment with Truman's approach, concerns about inflation, and escalating tensions with Russia and the Eastern Bloc.
While Truman appeared to be dead in the water and destined for defeat in 1948, we all know the outcomes. Truman repeatedly hit a "do-nothing Congress" and voiced frustrations about the lack of action taken by the Republican leadership. (It's worth noting that a significant legislative accomplishment of the 80th Congress from 1947-48 was passage of the Taft-Hartley Act which weakened labor protections and created "right to work" laws that are still in place today, and created the National Labor Relations Board to mediate employer-employee disputes.) Not only did Truman win, but he helped sweep a revitalized Democratic Party back into leadership, gaining 75 net House seats and 9 net Senate seats.
The issues in 2010 are different than in 1946, but there are parallels. Like 1946, we are transitioning from a wartime economy to a peacetime economy, although the surge in Afghanistan has increased the amount of money and troops in that theater even though Iraq combat operations have ended. And unemployment rates in 1946 were just 3.8% compared to 9.6% in 2010, reflecting an even greater need for a robust government intervention to boost employment. The emerging markets in Asia are the real driving force in the world economy today, and while there are serious trade tensions between the US and China in 2010, it is nothing like the growing Soviet bloc in the wake of World War II. It should be noted that, just as in 1945-46, in 2010 it is extremely important for American economic security that we have improved peace and security for our trading partners in Asia, Europe, the Middle East, and Africa.
President Obama is a fairly unpopular President in 2010, but not remotely as unpopular as Truman was in 1946. But like Truman, Obama is at a major crisis in his ability to prove himself as a champion of common American working families (now known as the "middle class", which didn't exist in the same way in 1946 as it does today). If Obama can successfully stand up to the special interests, hedge funds, and secret attack groups, he may be able to position himself as the populist who ran successfully as an outside candidate in 2008. While Truman was a gritty leader in the shadow of FDR, Obama is a fabulous orator and communicator whose rhetoric doesn't always translate into what Henry Wallace called "concrete action".
Like the 1940s, in 2010 we face an onslaught of corporate interests who are using the news and media to "deceive the public into giving them more power". Sarah Palin, Mike Huckabee, Glenn Beck, and others are willing to distort, distract, deceive, and divide working families in order to win votes to their extreme right-wing, elitist, intolerant ideologies. Republican legislators continue to be concern trolls about inflation, "socialism," and deficits while proposing absolutely nothing constructive to solve the real problems facing the economy.
After spending time researching the 1946 and 1948 elections, I have hope that the 2010 elections may not be much more than a blip of backlash in a process of progress. Health reform, Wall Street reform, and other major legislation is on the books and if Republicans fail to deliver constructive solutions on energy policy, job creation, and immigration reform, they will feel the wrath of voters in 2012. Republicans are also likely to frustrate independents if they are willing to cut taxes for the wealthiest Americans without making significant spending cuts. And given the current debate among Republicans about earmarks, military spending, etc., it seems highly unlikely that they will be able to make real progress in cutting the deficits that have independents and Tea Partiers ready for revolt.