Power of Story: About Bathtub Economics

Come go with me on an imaginary trip to the New York Governor’s Mansion in Albany, New York. The year is 1932. By now most of the autumn leaves have fallen and the sky has taken on a crazy, hazy, grey of winter. It is a good time to be heading indoors. So, we will go indoors taking on the appearance of proverbial curious mice and retreating to a place of safety in the northwest corner of the well-appointed library. Franklin Delano Roosevelt is the governor in residence, but he won’t be living here much longer. In November he was elected to the presidency of the United States. He will be sworn in on March 4 of next year in Washington. That sounds farther away than it really is.

The governor was gone from the mansion a lot this past year campaigning for the president’s job. He sometimes says he thinks he was crazy to give up a gouda-cheesy job like governor of New York to take on the massive problems of the U.S. and its up-side-down economic mess. Millions of people are out of work. Some people lost all their money when the stock market crashed, and the banks all had to close because they didn’t have any money, either. It’s been three years of misery and there are no predictions of it ever getting better . . . maybe it never will. They seem to keep most of the beggars out of this part of Albany.

A while back, when I was in here checking if this northwest corner of the library would be a good place to spend the winter, I overheard some odd conversations. I guess the governor has invited some of his university buds, mostly from over at Columbia, to come and discuss some of his new responsibilities as president. They referred to a brain trust, but I don’t know what that means. With old guys like this they may have said brain truss in case some of them were sagging a bit.

A guy by the name of Hoover from Washington said he would like to be part of the meetings, but the truss told him, “no thank you,” and he wasn’t invited.

I wish you could have been here with me about three weeks ago. I was sort of crouched down over here against these drapes. Most of the conversations I could understand. But I really wished you could have been here to shed a little light on what they were discussing. I needed someone else here to sort of compare notes.

At first they started out like they had before, talking about the misery and chaos and stuff. Next, they chatted about political stuff and what they called governance in Europe, Great Britain, Asia, and even South America. Then the talk switched to really philosophical and intellectual, high-brow words – like aggregate expenditure models, push-pull demand, obscene profits, unemployment cycles, and monetary control.One guy even got all excited and pounded that table over there and hollered something about revolutions.

Then something really funny happened. Some university professor started talking about a bathtub. Everybody cracked up and the naughty boys from Columbia started making jokes about committing economics in a bathtub. I’m sure you could have helped explain what all that meant, but I was having a hoot just listening to them laugh and carry on. But the bathtub guy wouldn’t shut off the subject. To get the attention of the others he resorted to drawing some pictures on a paper napkin. Things got pretty serious. He said he had it figured that running an economy was like adjusting the water in a bathtub. If you wanted to increase employment and more spendable wealth in the economy all that was required was to open the spigot and fill up the tub.

The professor then explained by writing a big letter G and another big letter I just above the spigot. That would be the source of the water that would fill the bathtub. The big letter G stood for Government Spending and the big letter I representedInvestment. He then drew in a drain at the bottom of the bathtub with the letters Trepresenting Taxes and S representing Savings next to the drain. He told the other guys that by increasing the G and I faster than the leakage of the T and S you could increase the level of income in an economic system and reduce unemployment. Most of the fellows in the library were stunned.

As the guys with the truss started catching their breath, they started firing questions at the professor about where would all the money for the government spending come from? His answer was nearly always the same, as he would confidently respond that it really didn’t make any difference because it would become a self-fulfilling prophecy. If you spend as if you are rich you will then become rich. Just keep the bathtub full. The government can spend its way into prosperity and lift us out of the deep depression and misery.

Then someone hammered him by asking him how you would balance the budget if you increased government spending and investment and shut off taxes? He was like little Johnny-one-note. “Balanced budgets don’t make any difference if you can keep the bathtub full.” Well, what about deficits? Same answer . . . it really doesn’t matter, just keep the bathtub full!

At the head of the library table the newly elected president sat staring at the cartoonish drawings. He, up to that point, had not entered into the emotional discussions. He just sat there staring.

Now, I have to make a bit of a confession to you. I hope you don’t think less of me because I make this confession. But this is not the first winter I have taken up my residence in this library. Just look around. Nice, warm fixings. People here are allergic to cats . . . as am I. Plenty of fancy crumbs. Recessions, depressions come and go. But while residing here I have seen lots of interesting happenings. The Governor’s Mansion has been a good place to observe the sophisticated behavior of human people. I’ve observed a lot.

For example, each governor has had a different group they call cronies to come over on occasions and play cards here in this secluded library. When they would come over I would try to secure a hidden place, usually over there on that mantle where I could tuck in behind that clock or vase. For the card games I always wanted to pick an elevated place where I was pretty much in direct eyeshot of their facial expressions. Most of those cronies are such sandbaggers!

After the cards were dealt was when the show began. I loved it. As soon as the cards were picked up and turned over, there was always this excruciating hush. The real sandbaggers were good at hiding any outside expression. But with my sharp eyes and clean whiskers I learned to read the best of them. If they had just been dealt a winning hand I would observe the rapid heart rate in the neck veins just below the ears. The adrenalin rush would usually make their eyes dance even if they kept total control over their muscles. If I kept watching carefully I could usually catch an eventual flicker of a smile at the corner of the mouth.

Well, I’ve told you all of this to give you an idea of what was going on inside my mouse head as this bathtub meeting (as I refer to it) was going on. You should have been here.

The newly elected president was just sitting there staring. Then, just as if he had picked up the playing cards that had been dealt to him and slowly turned them over, that same awkward hush fell over the room. The president wasn’t much of a sandbagger at that point. I heard a faint “tee-hee-hee” under his breath. Then the “tee-hee-hee” broke out into a muffled chortle, and eventually a full-fledged grin wrapped his face. I knew he was enjoying the cards he realized had just been dealt to him. It was a New Deal!

My guess was that he had not been hearing or understanding much of anything of the intellectual’s conversations about the economic model of the bathtub and how the boom and bust cycles of an economy could be smoothed out. And for sure he wasn’t taking any time to understand the letter T representing tax cuts. This was the guy who already planned to raise the marginal tax levels to 91% up to $25,000, and 100% of anything you earned over $25,000.

My betting money was on the fact he was solely concentrating on the image of the huge spigot of government spending and investment that could be turned on to fill the bathtub. He was not seeing the bathtub as an economic model, but rather, a political model. What he needed to do as the newly elected president was to somehow guarantee his election for a long, long time, because this much fundamental change was not going to happen overnight. He had a chance to change the very idea of democracy. Was the government to be better off or were the people to be better off . . . or neither . . . or both?

In order to accomplish what needed to happen would require the solid voting blocks of the Italian Americans, the Polish Americans, the African Americans, the Catholics, the Jews, the old, the young, the unemployed, the sick, the crippled, the Union workers, the non-union workers, the farmers, the railroad workers, the Solid South, the existing political machines, the common folks, and the intellectuals. Everybody!

Because of his handicap, the president did not jump to his feet. But he was already standing up on the inside. He was absolutely exuberant, almost giddy. He raised his hand and spoke: “Do you mean to tell me that we can spend our way into prosperity at such a time as this? The intellectual minds of this modern world agree that opening the spigot of national spending will result in a self-fulfilling prophesy of rebuilding our broken economy and lift us out of this Great Depression?

“Right now the people have nothing and have been without anything for three years. Just by their continued voting for me and voting to proceed on such a model as this would guarantee prosperity for them and for their families? What kind of a decision is that?

“Just look at the providential cards that have been dealt to us. Indeed, this is a new deal. These cards dealt to us are the cards Trotsky and Lenin had to take from the Czars by bloodshed. These cards are the ones Uncle Joe had to take by force away from the Bolsheviks. And we can do all this just by spending what we don’t have . . . just by keeping the bathtub full?”

Well, there have been quite a few other high-powered meetings in this library since that bathtub meeting. I hear that now other international intellectuals and politicians want to join in the planning sessions. Some really influential guy from King’s College in Cambridge, England, named Keynes wants to meet the new president. I suppose that there will be lots more meetings here before the March 4th inauguration.

I’ve got plenty of space over here in the northwest corner of the library if you would like to stay until they all go to Washington. As much as I would like to crawl in a packing box and trip along, I think I’ll just settle here in Albany.

As you can see, it would be helpful if I had someone like you to stick around and help me with some of the conversations. It’s a little hard to try to hold all of them in my mouse brain and then re-tell them with absolute accuracy. Oh, by the way, look across the room at where the afternoon sunlight is coming in through the west window. See how the imperfection of the glass gives kind of a rippled effect? In the future that glass will be referred to as “depression era glass” and will be very valuable. You might think about picking up some of it and holding it as an investment!”

© Dr. James W. Jackson  

Permission granted by Winston-Crown Publishing House