Between 1877 and 1945 the federal government changed from an institution that did very
little domestically into one that regulated industry, insured bank deposits, paid
pensions, set wages and directed production. The change was not steady. It happened in
three bursts, each driven by a crisis, and what did not change is as revealing as what
did: the expansion consistently arrived with eligibility rules that excluded some of the
people it covered on paper.
The starting position was minimal. In 1877 the federal government collected customs
duties, ran the post office, managed public land and maintained a small army. It did not
regulate wages, hours, food, securities or banking, and it had just abandoned the one
ambitious domestic project it had attempted, which was enforcing the Reconstruction
amendments in the South. The abandonment matters, because it establishes that federal
retreat was possible and had recently occurred.
The first burst was Progressive, driven by the visible failures of industrial scale. The
Pure Food and Drug Act and Meat Inspection Act of 1906, antitrust prosecutions, and the
Sixteenth and Seventeenth Amendments all date from this period. The method is worth
naming because it persists: legislation created a standard and an administrative body to
apply it, rather than specifying outcomes, on the assumption that trained officials would
make correct determinations. The income tax is the most consequential item, since it gave
the federal government a revenue base capable of funding everything that followed.
The second burst was the First World War, and it was larger than usually credited.
Federal agencies directed industrial production, set prices, ran the railroads, and
conducted an official propaganda campaign. Most of this was dismantled afterward, which is
the significant point: the war demonstrated that the federal government could manage an
economy, and then the demonstration was put away for a decade. The precedent survived even
though the agencies did not.
The document marks the third and decisive burst, and the analogy in it is the essay's
hinge. Roosevelt asks for "broad Executive power to wage a war against the emergency, as
great as the power that would be given to me if we were in fact invaded by a foreign
foe". He is explicitly reaching for wartime authority in peacetime, and the earlier
passage makes the same move by proposing to treat unemployment "as we would treat the
emergency of a war".
That framing is the mechanism by which the expansion was made acceptable. War powers had
a precedent from 1917 and carried an implicit promise of temporariness. In practice the
New Deal institutions proved permanent: federal deposit insurance, the Securities and
Exchange Commission and Social Security all survive, and each addressed a specific
mechanism of the collapse rather than its symptoms. Deposit insurance in particular
removed the individual depositor's reason to run, which was the cause of the monetary
contraction.
The Second World War completed the change, with federal direction of production,
rationing, price control, mass conscription and income tax withholding extended to most
workers. By 1945 the federal government was the largest actor in the economy and did not
return to its prior scale afterward, unlike in 1918.
What did not change is the second half of the answer. Every expansion carried
eligibility rules that excluded some of those it nominally covered, and the exclusions
followed a consistent method: no racial term in the governing text, and either a chosen
parameter or delegated administration doing the work. Social Security excluded
agricultural and domestic labor, which removed most Black workers and most working women.
The GI Bill was universal on its face and delivered through local offices, banks and
colleges that could refuse. Executive Order 9066 authorized excluding "any or all
persons" and left the selection to military commanders.
The pattern in the turning points is that each expansion followed a crisis in which the
existing arrangement visibly failed, and each was justified by analogy to war. That
suggests the constraint on federal power in this period was political rather than
constitutional, since the same Constitution permitted both the minimal state of 1877 and
the directive state of 1945. What changed was what the public would accept, and crisis is
what changed it.