330.973 L582p LEWIS 1933 A PRIMER OF THE NEW DEAL; A FRIENDLY BUT NONPARTISAN INTERPRETA- TION OF THE MEASURE? ADOPTED PY THE ROOSE- VELT ADMINISTRATION Digitized by the Internet Archive in 2012 with funding from University of Illinois Urbana-Champaign http://www.archive.org/details/primerofnewdealfOOIewi PRIMER X OF THE XEW DEAL a*t-?.::** I %r- HAT IT MEANS TO YOU -3 n A^^H-*^ N IRA 5^^B ^ P^^P»«git>p| HIGHER WAGES i^^^«^s , ?W5i?? ! ?V &?&i PROSPERITY wtszg^tf^^^^^yn^-: h INFLATION *8?^3£S5*?^*»5^^^Vi^-». , '?*1 * FARM RELIEF * m^m^^^^^m • MR A Kux i? JH Nova MUt? REVISED SCHOOL EDITION • * NK GUARANTEE! MORE JOBS '^F?^^ 1 ^^^^^!?^*^^?! CODES v^-i;ftv?<;r-%->.,ts'\^«T>>T* ir .j-.-.. > -,, V ; THE PEOPLE OF THE UNITED STATES HOUSE - CONGRESS SENATE 1 PRESIDENT OF THE UNITED STATES PLANNING - BRAIN TRUST Bernard Saruch R.G.Tkawll A.R.Berle F. Frankfurter Paul Douqlas Gerard SuJope Wm. C- Bullitt James Warburg Louis M.HouJe James H. Rodqers George Warren Taussig — Pearson - Ezekiel — Feis -* Sprdque and others PLANNING*"* EXECUTION "Super Cabinet" Imcluoinc The 10 Cabinet Members and LW. Douqlas H.L.Hopkins J. B. Eastman. A.E.Morqan Jesse H. Jones F. C. Walker H.MorqenthauJr. Qeoroe Peek Huqh Johnson R.H. Fechner " IREFORMi ISBiM FINANCE1 W///r////////////////////////////A Crime Control Prohibition Reform Economy Bill Balanced Bucjget Dir. -Lewis IV- Doug /as Banking Act Guarantees-Control Reorganization App.-*2,IZ5,000,000 Federal Trade Com Sale oF Securities Registration — Fraud Co/. Frank RMWihch U Currency Control Dollar Inflation Credit Inflation . _ c Gold Standard Ra'ilroed Reorganization 1RELIEF™ m////////////[//////////////A Emergency Taxes I Home Loan Act Help For Home Owner Col. Wm. E Stevenson App-*2.>300, 000,000 Farm Loan Act Help For Farmers App-»40,000,000 •> *l00,000,000 » »2PO,000,OuO Farm Mortcaces Farm Credit Administration^ Dir. H. Morgenthau Jr. App $ i,l 65,000,000 Farm Allotment Agricultural Adjustments Dir.- George Peek Paid by Consumers WMwzwmmn INDUSTRY Tennessee Valley Authority Rower -Fertilizer Valley Development Dir. Arthur E. Morgan A pp.-* 50,000,000 National Recovery Act. Higher Wa§es~Shorter Hours Codes-Control of Business Dir.~ Huqh Johnson App-*3, 300, 000,000 Public WorKs Act. Municipal Water and Light Public Buildings Housing — Roads Waterways - Power Dams Dir Secretary H. L. Iches App-< 148,000,000 I Reconstruction Finance Corp. Jesse E /ones , Chairman. Unemployment Relief Federal Aid of 30# Local Aid of 70-/. Dir. Harry L. Hopkins App - » 500,000,000 Direct Relief-Work Projects Conservation Corps Dir. -Robert H. Fechner ~- App.— * 250,000,000 Direct Relief Iff Til MW HAL * A Primer of the New Deal ^ A Friendly but Nonpartisan Interpretation of the Measures Adopted by the Roosevelt Administration by E. E. LEWIS, Professor of Education Ohio State University, Columbus, Ohio and Others TABLE OF CONTENTS PAGE I. The Heart of the New Deal 3 II. How We Got Into This Mess 6 III. The President Becomes the Big Boss 7 IV. Bird's-eye View of the New Deal 11 V. A Happier Pay Day — National Industrial Recovery Act 14 VI. Work in Place ok Dole- Public Works Program 18 VII. Uncle Sam Helps the Farmer — Farm Credit Administration 20 VIII. Robbing Peter To Pay Paul — Agricultural Adjustment Act 24 IX. Making the Banks Safe — Glass-Steagall Banking Act 28 X. The Rubber Dollar— Inflation 32 XI. The Tennessee Valley Authority — Muscle Shoals 36 XII. Happy Days for 300,000 Men — Civilian Conservation Corps 40 XIII. Saving the Home Owner 43 XIV. The Iron Horse at the Trough — Emergency Railroad Act 45 XV. Uncle Sam, the Friend in Need — Federal Emergency Relief 49 XVI. Finding Jobs for Folks — Federal Employment Service 52 XVII. No More Gold Bricks — Federal Securities Act 55 XVIII. Balancing the National Budget 59 XIX. Who Will Pay the Piper? 60 XX. Who's Who in the New Deai 63 [SECOM) EDITION, REVISED] Published by AMERICAN EDUCATION PRESS, Inc. 40 S. Th.rd St. 580 Fifth Ave. Columbus, Ohio New York, N. Y. Copyrighted, 10:53, l>y \hc Educational Printing House, Inc. P FOREWORD A ▲ ▲ A A7DU are hearing more and more every day about the so-called "New Deal". But what does it mean? I asked a group of men and women that question and one said, "Beer by Christmas"; another, "Roosevelt in place of Hoover"; and another answered, "More work". But none of them seemed to understand what it is all about; how it affects them now or will affect them in the future. This booklet is written to help you in finding out just what the new deal is and wha! it should mean to your future. Here you will find a description of most of the acts of the recent Congress giving to the President unheard-of authority by the exercise of which he is supposed to help restore prosperity. Some of these acts are revolution- ary and constitute extremely important new policies of the Government. You will want to study these acts and watch what is taking place, for you are witnessing perhaps the most significant events of modern history. Also you will find statements from thinking men and women as to what the new deal should be if real prosperity is to be restored on a permanent basis. This pamphlet attempts to describe what a real new deal must do; how the present legis- lation may become part of a permanent program; and what additional laws may be necessary in the immediate future. It is written for you. We hope it may help you to take a more intelligent part in making this a Nation not only of and by the people but also for the people. And, by the people, we mean YOU. What can you do to make a success of this program and thereby make this a better Nation? "WE DO OUR PART" The writing of this booklet has been a delightful bit of cooperative effort in which the author was associated as leader with the following persons in a study group during a six weeks' period in the summer of 1933 at Ohio State University. The motto of the group was the motto of the N. R. A., "We Do Our Part". Naturally some did more and some did less, but all did well and the author is happy to acknowledge the help and inspiration derived from these associations. Arthur J. Amerine Jesse L. Baker William A. Bair Ray Ballou Howard G. Boren Sidney R. Boyd Charles E. Boyer Lou B. Brown John L. Clifton W. C. Coleman John D. Day Vera L. Deckrosh McKinley Dixon Earle C. Duncan Carl E. Edwards Selma F. Gahm Albert J. Griffith Virginia Gunn Carson L. Horton Hazel H. Huston J. W. Irvine Thomas M. Janes Horace G. Johnson Carl S. Kerr Byron 0. Leeper Goldie Lesser Wayne T. Matthews Aaron B. Murray Myra Neunhertz Lynn W. Northup E. R. Pickering G. H. Pittenger H. H. Reighley Lawrence D. Richey Earl R. Seidner Curtis B. Smith Ora E. Smith J. Harley Waldron Rollo D. Webster James T. Williams UNIT \L^<-*MJ^ | , ^^4/W^ •j The "New Deal" Is On . Fifteen m ajor acts of Congress, designed to enable President Roosevelt to put into effect his campaign promises of a "New Deal", have been enacted by the SpecialJSession of the Seventy -third Congress. By these acts the President has been given broader powers than have ever before been conferred upon the head of any free government in times of peace. The program to bring about economic recovery is embodied in a series of laws. The first was passed March 9, 1933, the day that the Seventy-third Con- gress convened in special session, and the last was enacted June 15, 1933, a few hours before its final adjournment. The "New Deal" Challenges Us The fate of the "New Deal" is up to us — as well as to our leaders. Right here is the challenge of these exciting times to every live man or woman, boy or girl. History is being made NOW. There is taking place before our very eyes a more compre- hensive revolution than any we can read about in a history book. If there ever was a time when the average person could learn from personal experi- ence how the world is run, it is now. Do you wish to see a healthier, better balanced, and more secure world ? Then let us take the offen- sive. Leadership cannot work with cowards and slaves. The only safe foundation of the new world is sound thinking, sound planning, and sound action on our part. We must learn to work together. Let us begin by an intelligent and critical study of the "New Deal". Let us measure the "New Deal" by the economic security it will give us. This is the road we should travel. Will it bring us into the new era of abundance and abundant living for which we are ready? Will it guarantee to all of us alike, in the near future, not a bare subsistence, but the nobler and richer life which our vast natural resources and our machine civilization now make possible? UNIT II How We Got Into This Mess To be frank, we are in one big mess. We are floundering around in a condition of insecurity and unhappiness. We are confused and do not know which way to turn. We are bewildered by the com- plexity of social and economic problems, and are anxiously waiting for a new Moses to lead us out of this wilderness. Where Is Moses? Has he come? Has he charted the future? Is the "New Deal" the Magna Carta of modern life? Or is it just another "shot in the arm"? These are the questions everyone is asking and seeking in vain to answer. Perhaps we are at the close of one epoch and at the threshold of another. Or, perhaps this is just another of the series of de- pressions that man has muddled through in the last century. Perhaps he will muddle through this one if nature is left to take its course. Nobody knows the right answer, though each of us may form his own idea. We can only work and plan, plan and hope. How did we get into this mess? Must we go on repeating our mistakes? Or, can we, by an analysis of the past, plan and order the future more to the heart's desire? In any case, we must do something. Let Us Face the Facts First of all, what is this mess we are in? In a nut- shell, it is near-starvation for millions in a land of plenty. It is great wealth in the hands of a few and great poverty in the lap of the masses. It is political freedom for all and economic security for few. It is the mastery of production but not the mastery of distribution. It is the breakdown of capitalism with no assurance that any other system is any better. It is machine power replacing muscle power. It is making man's work largely unnecessary, but failing to provide him with adequate means of living with- ' out work. In short, the problem is : how can man eat without working? Man's Cruelty to Man Early man fought nature. Then he turned to fight- ing other men. He was not satisfied with his con- quest of nature. He was greedy and selfish and wanted the world for himself alone. Man is still fighting man. He is afraid of him. He hasn't learned to live and let live. He is a selfish acquisitive animal that must rule or ruin. Even the softening influences of the lessons of the Great Christ have failed to tame the savage beast in him. Will he never learn to be his brother's keeper? Until he does, the weak shall be stricken down and the strong shall rise in their strength. It is on this rock that democracies and economic systems are wrecked. The system is no better than the people composing it. Democracy is not a fail- ure. In reality it has never yet been tried. We are in this mess because : 1. We are selfish and greedy and do not think of others. 2. The last generation wastef ully exploited many of the natural resources of the country and overworked the idea of competition. Industrial revolution created and substituted billions of man-powers of converted energy for muscle power. It is estimated that 100 man- powers of machine energy are available for every man, woman, and child in America. Scientific technology applied to mass produc- tion not only standardized the articles of pro- duction, the techniques of production, but also enormously reduced use of man power in the production process. For example: In the 30 years preceding 1927 power from all sources multiplied four times. Electrical power multi- plied 61 times and in 1927 did 78% of the work of industry. In the United States, production of electrical machinery and apparatus in- creased 540%. Watt's babies of 80 H.P. have 3. MUSCLE Man with primitive plow scratched the surface of V* acre in 8 hours. Aided by a yoke of oxen he did 1 acre in the same time MECHANICAL POWER This man with tractor pulling three plows will plow 8 acres in 8 hours Photographs by courtesy of S. S. Wyer grown to adult 10,000 H.P. size. Steam and water turbines now boost that power through electrical generators and motors to 300,000 H.P. per unit. One man at a switchboard may control more than 1,000,000 H.P. 5. Corporations were invented and rapidly grew in power until they practically took possession of the instruments of production and distribu- tion and used them for the making of profits for stockholders rather than for wages for more workers. 6. The Great War financially "busted" civiliza- tion. It cost more than 200 billions of dollars and the lives of 37 millions of people. Debts piled up ointil in 1933 the total national and private debt of the United States equalled 212 billion against an estimated national wealth of 251 billion dollars. There are other causes (a few are mentioned later) but these are the main ones. The present generation has surely messed up things for the next. Whatever the causes of all this woe, the outstand- ing fact is that there is at present insufficient work to provide everyone with a job. Most of the fortunate job-holders also see the shadow of the axe that threatens their sense of economic security. This has been our situation for three or four years. It is the same, to a greater or less degree, in England, Germany, Italy, France, and other countries. This is the heart of the problem. The President of the United States, under the direction of Con- gress, has boldly tackled the job. Today finds indus- trial America staggering employment and shorten- Row Upon Row of Automatic Machines Where People Once Were Busy ing the hours of work per week in order to provide jobs for more men. Our present slogan is "Put more men to work". Our future slogan should be "Keep all men at work". How can we do it? That's a hard question to answer and one no government has yet answered satisfactorily. Only one thing is better than security. It is the wit and grit to regain security when lost. unit in The President Becomes the Big Boss Three Greatest Events in American History IN A recent broadcast a prominent journalist declared : "The three greatest events in Ameri- can history are (1) the Revolutionary War which gave us our independence, (2) the Civil War which united us as a people, and (3) the National Indus- trial Recovery Act which put the Federal Govern- ment in direct control of business for a period of two years and possibly longer." Is This the Beginning of a New Era? This is a challenging statement and one, the truth of which many would be unwilling to admit. If it is true, we are living in one of the most eventful periods in our national history. Many observers say that it is the end of one epoch and the beginning of another. But we are so close to it we scarcely recognize what is happening. It is a revolution which we are going through, a warless, bloodless revolution, a silent social revolution no less far- reaching in its effects than any other known revo- lution. However, it is an American revolution in keeping with the traditions of a great democracy. That is, it is a parliamentary revolution, thus far legal, or- derly, cooperative, and consistently democratic. Let us hope it will continue to be so. Walter Lippmann says : "There is no mistaking the conclusion that we are in the midst of one of the great revolutionary periods of history, and that upon our generation and its successors the task is imposed of discovering and establishing a multitude of new relationships among the peoples of this planet." President Nicholas Murray Butler of Co- lumbia University says, "So rapid, so incessant and so cumulative have been the changes going on in the economic, political and social structure of our mod- ern civilization that they find us not only wholly unprepared to deal with the grave emergencies which they so constantly present to us, hut even unable clearly and fully to understand their essen- tial character." In many countries social and political revolutions take place with great suddenness and violence. But in America there are 500,000 governmental and political units, largely independent of each other. Consequently a revolution is always taking place somewhere. Every form of experiment is being tested in this great political laboratory and general violence is thus avoided. The transfer of authority from one man or group to another is by the ballot box rather than the bayonet. Is the President a Dictator? In thejDresent crisis we have not changed our form of government. The Constitution still stands. Congress still sits and makes laws. The Supreme Court continues in session. The people have changed presidents and Congress has conferred upon the new President a grant of authority unprecedented in American history. The authority thus trans- PECOVIRY — Baltimore Sun ferred is permissive and limited for the most part. Congress still retains its constitutional right to pass judgment on how this authority is used and set the limits within which it is used. If the President is a dictator he is in every sense a constitutional dic- tator, unlike Hitler in Germany, Mussolini in Italy, or Stalin in Russia, in that he must answer to the people's freely-elected representatives. United States Is Still a Democracy A democracy is a very flexible form of govern- ment. In one sense it isn't a single government but a long chain of little governments. It changes as these smaller units change. Anything can be done in its name provided the masses of voters in whom sovereignty resides give their consent and coopera- tion. It can't be fixed and remain a democracy. It is not the same today, yesterday, tomorrow and for- ever. A democracy of today may be inadequate for the social and economic needs of tomorrow. Hence, this transfer of power from Congress to the Presi- dent may be good or bad but at least it is constitu- tional and in keeping with the true nature and spirit of democracy. Bryce, in the American Commonwealth says: "The American form of government will go on and live long after most other forms of government have fallen or been changed and the reason is this: In other nations when a new problem comes up it must be tested in a national laboratory, and a solution of the problem must be worked out, and when it is worked out that solution must be applied to the nation as a whole. Sometimes it may be the correct solution and other times it may be the wrong solu- tion. But you in the United States have forty-eight laboratories and when new problems arise you can work out forty-eight different solutions to meet the problem. Out of these forty-eight experimental lab- - oratories some of the solutions may prove unsound - . or unacceptable, but out of this experimentation history shows you have found at least some remedies which can be made so successful that they will become national in their application." Local, State, or National Rights? The old bogies of "Home Rule" and "State Rights" raise their heads immediately at the men- tion of centralization and nationalization. We have forty-nine systems of bank laws, forty-eight sys- tems of law governing life insurance companies, forty-eight types of "blue-sky" laws, forty-eight child labor laws and so on. To this may be added nearly 500,000 county and local political units with their ordinances that have the force of law. We are the greatest lawmakers and lawbreakers inJJie world. While we freely make laws for others we demand the utmost freedom for ourselves. We haven't learned to think and plan nationally. It is just beginning to dawn on us that we can no longer live in isolated and independent communities. Our political, economic, cultural, and social inter- ests are too much alike for so thoroughly decentral- ized a government. We must get together in larger units and plan and work cooperatively for the good of all. We should have the courage and wisdom to create national remedies for the recognized failures and shortcomings of state and local governments. This the New Deal is attempting to do. Looks as if the New Leadership Was Going To Lead —Kansas City Star 8 HOW THE NEW DEAL WORKS* HOME OWNERS | | INDUSTRY \ \ RAILROADS \ FINANCES MORTGAGES ON SMALL HOMES MAKES CASH LOANS FOR TAX ARREARS SETS UP THRIFT ASSOCIATIONS 4&te &» £ INDUSTRY I-! «-* <| 61 8 Ujl et\ -Jl <( 2| H 1 u>| 3, - o PERMITS TRADE AGREEMENTS BUILDS NEW HIGHWAYS REGULATES PRODUCTION .... _ AUTHORIZES SHIPS FOR THE NAVY PERMITS FIXING OF MINIMUM WAGES PROVIDES FOR PUBLIC BUILDINGS SEEKS SHOOTER FINANCES PUBLIC WORK HOURS Zl AND PRIVATE PROJECTS PRDTECT5 RIGHTS IMPOSES NEW OF ALL LA.OOR 0| 5l TAXATION CREATES RAIL COORDINATOR. AVOIDS DUPLICATION OF FACILITIES PROMOTES RAIL REORGANIZATIONS $&, {banking reforms] *b> &r INSURES DEPOSITS SEPARATES BANKS AND AFFILIATES REGULATES LOANS PQR SPECULATION PROHIBITS INTEREST ON DEKIAND DEPOSITS AUTHORIZES BANK CONSERVATORS lCUS$2?t&acau.anp emcroency bank acts l EMERGENCY RELIEF fiHO I ^ssm" §feO .0^ I UNEMPLOYMENT \ ^^SBSfe REDUCES SURPLUS CROP PRODUCTION j STOCKS £r BONDS J REQUIRES F€OERAL REGISTRATION OF ISSUES PENALIZES MISLEADING INFORMATION DEFINES SELLERS RESPONSIBILITY TAXES PROCESSING OF COMMODITIES AIMS AT HIGHER FARM PRICES FINANCES FARM MORTGAGES GIVES RENTAL FOR REOUCED ACREAGE %i **> _ REFORESTATION SEEKS CONTROL OF FLOODS BEGINS PRODUCTION OF FERTILIZER PRODUCES POWER FOR SALE STARTS OPERATION OF MUSCLE SHOALS PLACES 300,000 MEN IN FOREST WORK UTILIZES ARMY AND NAVY PERSONNEL GIVES $500,000,000 FOR RELIEF UFTS REUEF OURPEN FROM STATES CURRENCY 1 ABROGATES GOLD PAYMENT CONTRACTS MAKES ALL MONEY LEGAL TENDER CURRENCY EXPANSION \VETEMNSa)kiP£NSfflOH\ 1 AGRICULTURE ^ !~ | CONSERVATION | The Economic System and the Government Must Get Together Roughly speaking, we have two systems of gov- ernment in the United States, a political system and an economic system. The following cartoon illus- trates this fact. Uncle Sam doesn't do anything about patching the roof before it rains and then when it does rain he can't do it. Will he never learn to patch it as soon as it needs it? That is what planning would do. Two systems of government ex- * Adapted from a chart prepared by the United States News. isting side by side are in constant conflict. One is always trying to dominate the other. That is the cause of much of the present uncertainty, ineffi- ciency, confusion, and insecurity. The t wo systems must be fused into one. This Congress and the Pres- ident are attempting to do. A Large Grant of Authority When things are going well private business tries to keep the government out of business, but when things are going badly it rushes to the government for aid. That is what happened in March, 1933. Business demanded that the national government do something and this demand was echoed by the masses. Congress therefore voted unusual author- ity to the President. In fact, it granted him greater authority than was ever granted any other Presi- dent in times of peace. This authority extended into most of the activities carried on in the United States. Some of it was of an emergency nature limited to a definite period of operation and some of it was designed as permanent legislation for the betterment of the country's economic and social welfare. That's the Way of It! — Philadelphia Record Business, industry, railroads, agriculture, for- estry, power development, the home owner and the processors of foodstuffs are among the outstanding elements in the nation's life affected specifically by the new legislation. The indirect effects touch every individual. The Need of a Strong Executive This great grant of authority recognized the old and proved value of a strong executive. If you want to get something done quickly and effectively get a man of power and integrity to do it and give him full authority. Executive effectiveness in a crisis de- pends upon a full recognition of this principle. The Organization Chart on the inside of the front cover of this booklet shows how this authority was con- ferred by the people to Congress, by Congress to the President, by the President to his official family and advisers, and in turn by them to their associates. Operating the United States politically and eco- nomically in the interests of all men is about the biggest business in the world. The 100 days from March 7 to June 16, 1933, will be recorded as epoch- making days in the history of our country. Congress passed with unprecedented speed and unanimity one law after another at the request of the Presi- dent, thus creating, as one man describes it, "the most amazing legislation this country or any other country has ever seen". The Most Powerful Man on Earth Governing the United States is a big job at any time. But when Uncle Sam is asked to take over the control and direction of the economic system, the task becomes stupendous. The diagram on page nine shows the relation of the President and the Federal Government to the economic system as developed under recent legislation. This, together with the chart on the inside front cover of this booklet, gives you a graphic picture of what is hap- pening to the presidency under the authority of these new acts. The President now has authority, not only over a political system, but over an eco- nomic system as well. Under that authority he can d<^any or all of the following things : 1. He can determine and control the economic pol- icy of the United States. This means that he can regulate trade and commerce between States and between the United States and foreign countries. 2. He can control and regulate all industrial and business concerns. 3. He can regulate' production, distribution, prices, profits, wages, and hours of work. 4. He can inflate or deflate the currency as he deems it necessary. 5. By control of currency inflation he can manip- ulate the markets of the United States, and, to some extent, of the world. 6. By such manipulation he can reapportion pri- vate wealth and income as his judgment dictates, taking from the rich and creditor class and giving to the poor and debtor class. 7. He can distribute nearly $11,000,000,000 of public money for various forms of expenditure and relief, and largely determine the basis upon which such money shall be distributed and repaid. 8. He can appoint thousands of persons to public office at public expense, thus creating a great politi- cal bureaucracy. Surely you will admit that such an unprecedented grant of authority makes the President of the United States a very powerful officer. This is a great trust and responsibility, perhaps the greatest in the world. Let us hope that President Roosevelt will have sufficient wisdom and foresight to use such authority wisely. The eyes of the world are upon him. In a recent speech he said : "Long before inauguration day I became convinced that individ- ual effort and local effort and even disjointed Fed- eral effort had failed and of necessity would fail and, therefore, that a rounded leadership by the Federal Government had become a necessity both of theory and practice. ... I should like to make it abundantly clear to you that all of the proposals and all of the legislations since March 4 have not been just a collection of haphazard schemes but rather component parts of a connected and logical whole." 10 UNIT IV Bird's-eye View of the New Deal - T7IFTEEN major acts of the special session of the A 1 Seventy -third Congress, March 9 to June 16, 1933, constitute the legislation of the "New Deal". Purpose s The broad purposes of the program are to allay fear, restore confidence, give relief and employ- ment, revive agriculture and industry, restore pur- chasing power, institute reforms, effect economies, and establish national and cooperative planning in the political and economic life of the nation. Super-Cabinet The 15 acts of Congress created. 10 brand-new agencies, all of which were put into operation dur- ing the summer of 1933. Over these agencies the President has set up jt super-c abinet_k now ,n as the National Industrial Recovery Executive Council comprising the ten regular members of the Cabi- net and the heads of all of these new agencies to- gether with trre~Bire"ctor of the Budget. (See chart inside" front cover page, also Unit V.) The bank- ing reform acts are under the Secretary of the Treasury, as are also inflationary measures. The sale of securities falls under the Federal Trade Commission, beer and wine under the prohibition forces, and the national employment service under the Department of Commerce. The ten new and different experimental agencies of the Federal Gov- ernment all operating at once are : The National Industry Recovery Administration. The Agricultural Adjustment Administration. The Emergency Public Works Administration. The Office of the Federal Coordinator of Transportation. The Federal Farm Credit Administration. The Home Owners' Loan Corporation under the Federal Home Loan Board. The Federal Emergency Relief Administration. The Civilian Conservation Corps. The Tennessee Valley Authority. The Reorganized Reconstruction FinancS Corporation. The Economy Act This act repealed former laws relating to pen- sions and gave the President power to establish a new system. Four groups are designated for pen- sions : (1) Veterans with service-connected disabilities; (2) Non-service disabilities where they are perma- nent; (3) Widows and children of men who died of serv- ice-connected injuries; (4) Widows and children of ex-service men (except from the World War) . All veterans actually disabled in the World War, and those of the Spanish War who receive pensions because of age, must be paid. The maximum and minimum rates per month were fixed as follows: $6 to $275 a month in case of disability, and $12 to $75 a month in case of death. The Veterans' Administration is given authority to provide homes for veterans suffering permanent non-service disabilities, tuberculosis or nervous diseases. Civil War pensions are cut 10 per cent. Salaries of Federal employees may be reduced 15%. Such cuts are limited to June 30, 1934. The salaries of Senators and Representatives are re- duced from $10,000 to $8,500 a year. This act was amended June 16 to read that no veteran with service-connected disability shall suf- fer a reduction in compensaton in excess of 25 per cent. No widow or orphan of a soldier shall be re- duced or stricken from the roll. Spanish War vet- erans, ages 55 to 62, or 90 days' service and substan- tial disability, are guaranteed a minimum of $15 per month. Emergency Banking Act This act gives the President power to regulate transactions in credit, currency, gold and silver, including foreign exchange, and allows him to place restrictions upon the flow of gold and upon the banking business of members of the Federal Re- serve System. The Comptroller of the Currency may appoint a conservator for any national bank whenever he considers it necessary, adjust Jhe pro rata basis of amounts to be allowed depositors and receive new deposits subject to unrestricted with- drawals. National banks may be reorganized with the con- sent ofthe Comptroller, the owners of 75 per cent of deposits or holders of two-thirds of the stock or both. National and state banks may raise funds by the issuance of preferred stocks. The R. F. C. may purchase same which in turn may be pledged as collateral for loans. The act also authorizes Federal Reserve Banks to issue redeemable notes to the value of 100 per cent of their government obliga- tions held in trust. Tennessee Valley — Muscle Shoals May 18, Congress passed an act creating the Tennessee Valley Authority with a board of three members empowered to maintain and operate all U. S. properties in and near Muscle Shoals, to im- prove and control navigation and flood waters of the Tennessee River, and to develop agriculture and industry in the Tennessee Valley. The authority has all the powers of a private corporation with a guaranteed life of nine years and with a bonding power of $50,000,000. Prohibition — Beer and Wine March 22, Congress passed a law which permits the manufacture and sale of vinous liquors, the alco- holic content of which is not more than 3.2 r ? by weight or 4% by volume; licensing brewers and wine makers ; taxing the manufacturer five dollars 11 per barrel of not more than 31 gallons; protecting States whose laws prohibit liquor of less alcoholic content against interstate traffic, and making valid all provisions and applications of the act not specifi- cally held invalid. The act modifies all sections of the Volstead Act, leaving the separate States free to regulate and control liquor manufacture and sale. Wholesale dealers are required to pay $50 each and retailers $20 each for annual Federal permits. Advertising of fermented liquor is per- mitted. Brewers and wine makers are held respon- sible for legality of alcoholic content. Importations are subject to tariff under the Hawley-Smoot Tariff Act. Reforestation Unemployment Relief On March 31 the Presi- dent was authorized to em- ploy men on reforestation projects covering two years' time, with the sum of $148,- 956,000 made available im- mediately. The President is authorized also to use any unobligated money previ- ously appropriated for pub- lic works. Reforestation includes flood control, forest fire pre- vention, soil erosion, plant pests, and disease control on the public lands. The men thus employed are members of worthy families receiving relief and are furnished subsistence, clothing, medical attention, hospitalization and cash al- lowance of $1 a day. The act also waives the limit of 15 per cent of the $300,000,000 fund which the R. F. C. was authorized to loan to States. (Unem- ployment Relief Act of Julv, 1932.) WHAT PRICE UTOPIA? What will the "New Deal" cost? No one knows exactly. The regular annual Federal budget is approximately $4,500,000,000. The additional and extraordinary budget of the one-hundred-day Congress extends public credit for each of the following purposes and amounts, totaling $10,954,500,00 0. Direct appropriations and authorizations: Grants to states for unemployment relief To expedite certain public works Loans to the Joint Stock Land Banks To the Farm Loan Commissioner for direct loans to farmers For farm relief rentals and benefits.... For Federal Land Banks on account of depleted funds and loss of interest.. To the Farm Credit Administration to make loans for crop production and marketing For capital in the Home Owners' Loan Corporation To buy preferred stock in Federal Loan & Savings Associations For capital in the Federal Bank De- posit Insurance Corporation For U. S. Employment Service For public works, under the National Recovery Act Total direct appropriations and au- thorizations Contingent liabilities: On account of bonds to be issued by the Federal Land Banks Guaran- teed by the Government $2,000,000,000 On account of bonds to be issued by the Tennessee Valley Authority On account of bonds to be issued by the Home Owners' Loan Corpora- tion guaranteed by the Government On account of bonds to be issued by the Federal Deposit Guarantee Corporation 2,000,000,000 Emergency Relief This act creates a Federal Emergency Relief Adminis- tration under a Director to be appointed by the Presi- dent. It authorizes the R. F. C. to grant to the States $500,000,000 available for emergency relief, to be spent under the direction of the newly-created body, and increases by the same amount the notes, bonds and debentures which the R. F. C. is authorized to have outstanding at any one time. The act provides that all other funds made avail- able by the Emergency Relief Act of 1932 be trans- ferred and made available for the purpose of this act and that this Federal Emergency Relief Admin- Total contingent liabilities $6,050,000,000 Add direct appropriations and au- thorizations as above 4,904,500,000 Grand total emergency dispositions istration shall certify to the R. F. C. all payments to be made to the States for relief. Farm Relief and Inflation On May 12, Congress passed an act authorizing the Secretary of Agriculture to increase the prices of farm products either by allocating the production or by leasing and withdrawing farm lands. He is also empowered to license and tax the processors of agricultural products to provide revenue for paying costs of this program. This is known as the Agri- cultural Adjustment Act. The act also authorizes Federal Land Banks to is- sue $2,000,000,000 in four per cent bonds, the interest of which — but not the prin- cipal — is guaranteed, to re- finance farm mortgages at 4 1/2 per cent interest. It provides for cotton owned by the government to be sold on credit to the cotton growers in exchange for acreage reduction, the growers to receive the prof- its that are expected to flow from increased prices due to decreased crops. Attached to the Farm Re- lief Bill was the Inflation of Currency program winch involves the expansion -of Federal Reserve credits by as much as $3,000,000,000 and the issuance of Treas- ury notes secured solely by the credit of the United States Government. The President, by this act, may devaluate the gold dollar as much as 50 per cent and after six months from the passage of the act may ac- cept up to $200,000,000 of silver at a price not exceed- ing 50 cents an ounce in payment of war debts due from any foreign govern- ment to the United States. The President may use these powers or not as he sees fit. $500,000,000 148,000,000 100,000,000 200,000,000 100,000,000 65,000,000 40,000,000 200,000,000 100,000,000 150,000,000 1,500,000 3,300,000,000 $4,904,500,000 50,000,000 2,000,000,000 of public credit $10,954,500,000 Cold Clause Repeal On June 5, a joint resolution was passed by both houses of Congress which cancels the gold payment clause in all Federal and private obligations, mak- ing them payable in legal tender. Legal tender is defined as all coins and currencies of the United States, Federal Reserve notes, circulating notes of the Federal Reserve Banks and national banking associations. Gold coins shall be legal tender only 12 at a valuation in proportion to their actual weight. This act, passed May 27, provides that any corpo- ration or individual offering securities for sale must file with the Federal Trade Commission de- tailed information concerning them. This sworn statement must include all commissions or discounts paid, names of directors and officers of the issuing company, the names of holders of 10 per cent or more of prior securities issued, a detailed descrip- tion of the business and financial condition of the company and the salaries paid to the officers. Evidence of untrue statements may be made the basis of criminal prosecution and of civil suits by the investors. Home Mortgage Refinancing On June 13 Congress approved the act providing a capital of $200,000,000 to be supplied by the R. F. C. and also gives authority to issue $2,000,- 000,000 in bonds to be given in exchange for mort- gages on homes. The maximum aid which may be given a home owner through the exchange of bonds on which the interest is guaranteed at 4 per cent, is 80 per cent of the value of the mortgaged prop- erty, on homes up to $20,000, no loan to exceed $14,000. The corporation will collect from the home owner interest at the rate of 5 per cent, the mort- gage to be paid by the owner within fifteen years. If the person or company who holds the mortgage will not accept bonds, the owner may borrow up to .40 per cent of the value of his property for the purpose of reducing to that extent his indebtedness, these loans to bear interest not exceeding 6 per cent. The bill authorizes loans not to exceed 50 per cent of the value on small home debts, and also provides limited loans to recover homes for original owners who may have lost them through foreclosure or forced sale during the last two years. Railroad Reorganization Congress, June 16, created the office of Federal Railroad Coordinator and provides a system of railroad control to effect economies but not at the expense of wage earners. Three coordinating committees for Eastern, Western and Southern groups of railroads work with the Federal Coordinator. Each committee shall have seven members, five representing major railroads ; one steam railroads ; and one, represent- ing electrical systems not connected with steam. Railroads are to be assessed $1.50 a mile to cover the expense of administration. The act requires the Coordinator to encourage, promote or require carriers to avoid waste and pre- ventable expense, reorganize finance, reduce fixed charges and otherwise improve the credit of the railroads. It also provides for the study of trans- portation problems in general and sets aside anti- trust laws which interfere with this authority. Banking Reform On June 16, the Glass-Steagall Bank Act was passed guaranteeing deposits up to $2,500 in ap- provecTbanks after January 1, 1934, and creating a Federal Deposit Insurance Corporation sup- How It Works — Washington Daily News ported by the banks, aided by $150,000,000 from the Government. After July 1, 1934> deposits are insured 100 per cent up to $10,000; 75 per cent between $10,000 and $50,000, and 50 per cent above $50,000. Licensed member banks and approved non-mem- ber banks are eligible to participate, but state banks must become members of the Federal Reserve Sys- tem by July 1, 1936, or relinquish benefits. The act restrains Federal Reserve Banks from stock-market speculation, forbids dealing in securities, permits branch banking ; and restrains national banks from dealing in securities of foreign governments or enterprises. Industrial Recovery and Public Works The purpose of this act is to provide work for several millions of the unemployed by an extensive program of public works and by Government con- trol of business and industry. The administration is empowered to promote self-regulation in business and industry, curtail overproduction, improve wages, shorten hours of labor, and increase prices. This is to be done by voluntary codes of fair compe- tition, and by a system of licensing to force com- pliance of those who refuse and by subjecting the same to fines. The act authorizes a $3,300,000,000 bond issue and levies a graded tax on corporations. It also increases taxes on gasoline, excise, income, and electric power for the support of this program. A rider reduces local postage to two cents. Authority is given to publish income tax returns, to distribute $100,000,000 to farm relief, to institute proceedings before the tariff commission, and to place an em- bargo or limit imports that interfere with raising wages and increasing prices. This is one of the most significant of all the "New Deal" Acts. 13 UNIT V A Happier Pay Day National Industrial Recovery Act ^T^HE New Deal has two immediate objectives. JL One is to relieve the farmer of his debts and re- store his economic security and purchasing power. The other is to relieve the millions of unemployed and put them back to work. When the farmers are too poor to buy goods and millions of the working class are likewise out of work and too poor to buy goods, busi- ness and industry are in the doldrums. All three are in the same boat and must wiooou»p*«t; g j n k or come t shore together. That is what General Hugh Johnson means when he declares: "There exist two principal disparities that create a barrier to a high level of prosperity. "One is the condition of apiculture which for a variety of reasons has been at a disadvantage for many years. "The other is this terrific condition of unemployment and the lack of adjustment of workers' income to the goods they are supposed to consume. "You have in the Department of Agriculture an earnest attempt to erase one of the barriers that now exist. You have, in the National Recovery Act, an attempt to erase the other. "If you could build up that purchasing and consuming power by the erasure of principal disparities, then we could have an industrial prosperity in this country such as we have never seen or dreamed of." What Is the National Industrial Recovery Act? The last Congress declared a national economic emergency to exist. The plight of the farmers, the millions of unemployed in the cities, the thousands of bank, business, and industrial failures, and the rising tide of revolt against the depression forced Congress to do this. President Roosevelt came forward with the New Deal which Congress enacted into law. Perhaps the most remarkable and significant of all the acts is the N. I. R. A. It puts the Government into busi- ness. It gives unprecedented authority to the Presi- .-yilent to regulate trade industry, hours of labor, fprofits and prices. In this respect it is the most j amazing piece of legislation in the history of our 'country. Codes of Fair Competition The act is in two major parts, the first of which provides for codes of fair competition. If trades and industries do not voluntarily set up codes of THE PROVISIONS OF THE BLANKET CODE The President's Reemployment Agreement provides for a code of fair competition to govern industry from Aug. 1 to Dec. 31, 1933, or any earlier date at which a group code may be approved. Under it the employer agrees: 1. Not to employ any person under sixteen,Cexcept that persons between fourteen and sixteen may be employed, outside of mechanical or manufacturing industries, for not more than three hours a day between 7 a.m. and 7 p.m., in such hours as will not interfere with school workj 2. Not to work employees, other than factory or mechanical workers, for more than forty hours in any one week, and not to reduce operation to below fifty-two hours in any week, unless such hours were less than fifty-two hours before July 1, 1933, and in such case not to reduce hours at all. 3. Not to employ factory or mechanical workers or artisans more than a. maximum week of thirty-five hours ' until Dec. 31, 1933,(but with the right to work a maxi- mum week of forty hours for any six weeks within this period^and not employ any worker more than eight hours in any one day. 4. The maximum hours in the two former paragraphs do not apply to employees in establishments employing not more than two persons, in towns of less than 2,500 popu- lation; nor to registered pharmacists, or other profes- sional persons; nor to employees in a managerial or execu- tive capacity who receive more than $35 a week; nor to employees on emergency maintenance or repair work; nor to special cases where restricted hours of skilled workers on continuous processes would reduce produc- tion, but in such special case, time and one-third shall be paid for hours in excess of the maximum. 5. Not to pay any employee included in Section 2 less than $15 a week in any city of more than 500,000 popula- tion, or in the trade area of such city; nor less than $14.50 a week in any city of between 250,000 and 500,000 popu- lation; nor less than $14 a week in any city between 2,500 and 250,000 ; and in towns of less than 2,500 to increase wages by not less than 20 per cent, provided that this shall not require wages in excess of $12 a week. 6. Not to pay any employee included in Section 3 less than 40 cents an hour, unless the hourly rate on July 15, 1929, was less than 40 cents an hour, in which case not to pay less than the hourly rate on July 15, 1929, and in no event less than 30 cents an hour. This establishes a guar- anteed minimum rate whether figured on time rate or piece work basis. 7. Not to reduce the compensation for employment now in excess of the minimum wages hereby agreed to, even if hours are reduced, and to increase the pay for such employment by readjustment of pay schedules. \ 8. Not to use subterfuge to frustrate the spirit and in- tent of the agreement, which is to increase employment, to remove obstructions to commerce, and to shorten hours and to raise wages for the shorter week to a living basis. 9. Not to increase the price of merchandise sold after the date of the agreement over the price on July 1, 1933, by more than is made necessary by actual increases in production, replacement or invoice costs of merchandise since July 1, 1933, or by taxes or other costs resulting from the Agricultural Readjustment Act, and to refrain from profiteering. 1CT. To patronize establishments which have also signed the agreement. 11. To cooperate in having a code of fair competition submitted by his industry before Sept. 1, 1933. 12. To make an adjustment of price on any goods con- tracted for before June 16, 1933, to meet any increase in cost caused by the seller having signed the agreement. 13. The agreement shall cease upon approval by the President of a code to which the employer is subject. ^> 14. Where great and unavoidable hardship because of peculiar circumstances may be worked by signing the agreement, he may apply for a stay of some particular provision pending investigation. <^___ 14 fair competition and maintain the same, the admin- istrator of the act may prescribe and set up such codes for that particular business or industry and enforce their observation. Here's a new idea, a code ; what's that? A code is merely a set of general rules that everyone con- cerned agrees to observe. The President and Gen- eral Johnson, who was appointed to administer the act, set up the following general code that all trades and industries must observe before Sept. 1, 1933. Read it carefully and note the far-reaching signifi- cance of certain statements in it. Does it sound fair to you? Does it abolish child labor? It may be called a maximum hour, minimum wage covenant. Each J:rad e, industry or subdivision of an indus- try is required to form a code for its particular en- terprise. These codes must not set up a monopoly. They must be representative of a large part of a single industry. The codes cannot discriminate against small enterprises. . The President may re- quire other services, such as reports from an indus- try as a way of protecting the consumer^ The codes when approved as representing a large part of a single industry are standards of fair competition for all companies engaged in that industry. The U. S. District Courts are given authority to prevent and restrain any violation of such a code. For in- dustries which do not voluntarily set up codes of fair competition, the President may prescribe and set up such codes for the industry. Should cer- tain imports compete with domestic production so as to make a code virtually ineffective, the President may impose terms and conditions upon those im- ports so that our industries may operate advan- tageously within the code. Agreements and Licenses A second method of cooperation between the government and industry is by_ agreements and licenses. By this plan the President is authorized to enter into agreements with industry or to ap- prove voluntary agreements between and among persons engaged in trade, industry, labor organiza- tion, trade associations, or groups relating to any trade or industry if such agreements are consistent with the provisions of N. I. R. A. A code of fair competition is binding upon not only those who agree to it, but also all others in that industry. This agreement is like a treaty between two parties — the government and the industry, trade, or organiza- tion making it. Whenever the President, after public hearing, shall determine that price cutting or other activities contrary to the policy of the act are being practiced by any trade or industry, heanay require a license for carrying on that business. If the act is violated thereafter, the license may be withdrawn and the business closed. Should this be violated, a heavy fine and jail sentence is the penalty. What About the Anti-Trust Laws? When Theodore Roosevelt was President he en- forced laws against large business organizations that were controlling the amount of goods produced and the prices of them. Both the Clayton and Sher- UNEMPLOYED NO LONGER Lawrence (Mass.) Textile Mills Reopen After Months of Idleness 15 NRA BOSS BUYS FIRST NRA STAMPS Postmaster General Jim Farley, pinch-hitting as a postal clerk, sells General Hugh Johnson, head of the National Recovery Administration, the nation's first sheet of the famous NRA stamps man Anti-Trust Acts were planned to give every- one a fair opportunity to participate in a particular business. The Industrial Recovery Act states that these codes and agreements can be made and in- dustries will not be held to obey the former anti- trust laws. At one time we tried to prevent the forming of very large industries., whereas now we encourage all business interests of one kind to unite. Our whole plan is changing in keeping with the get-together spirit of the times. We are learning to work with and for each other, rather than against each other. What All Codes Must Contain One interesting provision in the N. I. R. A. is that every code, agreement, and license appro ved must contain the following provisions : 1. That employees shall have the right to organize and bargain collectively through representatives of their own choosing, and shall be free from the interference, restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. 2. That_no employee and no one seeking employment shall be required as a condition of employment to join any com- pany union or to refrain from joining, organizing, or assist- ing a labor organization of his own choosing. 3. That employers shall comply with the maximum hours of labor, minimum rates of pay, and other .conditions of em- ployment, approved or prescribed by the President. The act extends to employers and employees every opportunity mutually to agree upon these matters. This brings up the problem of organized labor about which we have heard, and will hear, much. The Oil Industry Is Regulated The President may prohibit the transportation in interstate or foreign commerce of oil and its prod- ucts, produced or withdrawn from storage in viola- tion of any valid state law, regulation or order. Here is a step that may lead to the preservation of vast oil reserves that are now being wantonly wasted. How Are Provisions To Be Enforced? We have seen that the granting and cancelling of a license to do business is one way of enforcing the act. District attorneys may prevent and restrain violations of the code by injunction. The offender is subject to fine of $500 for eaeh offense, and each day the violation continues is deemed a separate offense. For violation of license provisions there may be a fine of not over $500 or imprisonment not more than six months, or both, and each day the violation continues is a separate offense. For viola- tion of the oil regulation provision there is a fine of not over $1,000, or imprisonment for not more than six months, or both. Violations of any rules or reg- ulations that may later be issued by the President as a part of the act, may be fined not to exceed $500 or imprisonment for not more than six months, or both. Thus the act puts "teeth" behind the pro- visions for enforcing it, yet every effort is being made by the President to get industries, trade groups, and associations to act voluntarily. What Machinery or Organization Is Set Up To Carry Out the Provisions of N. I. R. A.? Section 2 (a) of the act gives the President power to establish agencies, appoint officers and prescribe duties and responsibilities of them, fix their salaries or to accept any voluntary service. Anyone may be appointed without regard to the provisions of the civil service laws, as a Federal, State, or local employee. Of course the President could not carry out such immense tasks, and he is given authority to dele- gate functions and powers under this Act to those he may desig- nate. He has appointed Hugh S. Johnson as National Administra- tor. A National Indus- trial Recovery Board of eight members, con- sisting mainly of the President's Cabinet, has been appointed as the central national di- rectory. (See chart on inside of front cover.) Besides this there are advisory boards, such as the Labor Advisory Board of the Indus- trial Recovery Admin- control chief before planning istration. State chair- committee men Qro annnintpfl in Brigadier General Hugh S. Johnson, Ilieil die dppUillUiU LU v s A (retired)r administrator of CarrV OUt the details Of tfie National Recovery Act, pictured • •,,,, i in Washington, D. C, June 26, as he the WOrk thrOUgh rep- gave his views to the committee com- ... . , -i posed of prominent business leaders reSentatlVeS in the %v ho have volunteered to help pull state and subdivisions, fj^ut o h f e th P e r n S elTon e e mer9encv and The Purpose of N. I. R. A. As stated earlier, the general purpose of N. I. R. A. is to put unemployed persons back to work. By shortening the hours of work without in general reducing the amount of wages paid per week, the — Keystone View Co. 16 # >r-V- Administration hopes to create about 3,000,000 new jobs. Another million jobs are to be created im- mediately by the vast public works program de- scribed in the next unit. Already 300,000 jobless youths have been taken from the cities and given jobs through the Civilian Conservation Corps. By these joint efforts it is hoped to put 4,000,- 000 persons back to~work by the middle of Septem- ber. The President is asking all employers of more than two persons to do the following things: 1. To aboli sh^ child labor under 16 years of age and to replace these children by adult unemployed. This would put to work about 250,000 persons. The cotton and textile industries have accepted and put into operation the President's proposal. Thus, at one stroke, child labor has been largely abolished. This in itself is a remarkable achievement when you recall that a national campaign over many years to pass a constitutional amendment for the abolition of child labor has failed. 2. The act establishes a 14 to 15 dollar per week minimum wage. This should abolish the sweat shop, and should protect women and children over 16 working in factories in slum sections of large cities and elsewhe re. 3. The "white collared" classes are protected by ( a 40- hour week and a minimum wage of from 14 to 15 aonars. It is estimated that this provision will create 1,050,000 additional jobs in trade and clerical occupations. 4. The act establishes a 30 to 40 cent an hour minimum wage and a 35Thour maximum week with an eight-hour maximum day to be set for factory and mechanical labor. This proviso will create about 355,000 jobs in service occupations, such as hotels, laundries, dyeing and cleaning establish- ments, and about 750,000 additional jobs for work- ers in factories. From past experiences, it is estimated that these various measures will increase the weekly pay roll for workers by $34,000,000. The workers will then have more money to spend and thus buy more goods and create a market for further labor required to replace these goods. In other words, the whole measure is designed to increase the purchasing power of the masses, and restimulate trade and industry. Under the Blue Eagle An intensive drive has been waged in all parts of the country to put this program into operation immediately. The President broadcast an appeal on July 26 that was well received and the administra- tor of the act, General Hugh Johnson, has created a special publicity campaign of education. Service clubs, women's clubs, newspapers and magazines, and many other official and unofficial channels for publicity have been utilized, and the campaign waged on a scale rivaling Liberty Loan drives dur- ing the World War. The Administration does not approve of boycott but makes its appeal to the common sense and patri- otism of the people. A bulletin issued in connection with the President's Reemployment Agreement forms declares : This is a test of patriotism. It is the time to demonstrate the faith of our fathers and our belief in ourselves. We are a people of disciplined democracy to a self-control — sufficient to unite our purchasing power — our labor power — our man- agement power to carry out this great national covenant with vigor, with determination but with the calm composure and fair play which should always mark the American way. Watching Progress in N. I. R. A The next few months will prove a fascinating study of government integrated with business. Can greed and selfishness of competitive business be supplanted by mutual helpfulness, the protection of children, the worker, the farmer, the consumer and the small business man? It is estimated that 21/2 million persons have gone to work since Mar ch, one million due to the N. I. R. A. Will General John- son's objective to triple that number be achieved, and when ? Can the codes be enforced ? If enforced - for long, will they bankrupt business, or will the business cycle once begun gain momentum and thus normal prosperity be achieved ? The Basic Idea The basic idea behind the N. R. A. plans is not only to put people back to work but to put them to work at fair wages and to keep^them steadily em- ployed at such wages. This would mean abundant and constant purchasing power. The idea is novel and one that has never been tried on any large scale, although economists and theorists have advocated it for years. President Roosevelt and his advisers seem to think it plausible. They contend that the fundamental flaw in the economic scheme is that too much wealth is concentrated in the hands of a few^who invest it in ways which increase produc- tion, while too little is distributed in wages and salaries so as to enable consumption to balance production. This embarks us upon a policy of economic nationalism, in which we very largely ignore foreign markets and spend our time and energy developing more substantial and perma- nent home markets. The world's economic recovery will be largely determined by the degree of success that crowns the American efforts. The direction and scope of national policies everywhere will be decisively in- fluenced by our success or failure. Will national planning on so large a scale succeed? Once having started it, can we withdraw and let it run on its own momentum, or is national economic planning a per- manent necessity? If so, shall the Constitution be amended in recognition of this fact? Shall a national planning board be provided by the Constitution ? Here is a movement of major meaning and sig- nificance. It is the very heart of the New Deal. As was stated earlier, the masses want greater eco- nomic security. There is only one way to achieve it and that is by providing the common worker with regular employment and a continuous flow of pur- chasing power in the form of liberal wages. \ 17 UNIT VI -Drawing by courtesy Liberty Magazine Work in Place of Dole Public Works Program THE second part of the National Industrial Re- covery Act shows that "Uncle Sam" is not expecting industries and trades to put all the men back to work, but that he is going to start some action on his own account. The President, by the N. I. R. A., is authorized to create a Federal Emer- gency Administration of Public Works. The Presi- dent may appoint, without regard to civil service laws, such officers and experts as he deems advis- able and fix salaries for them. All expenses are to be paid out of funds provided for in the act itself. The provisions of this act are in effect for two years, or less if the President or Congress shall declare the emergency over. The Public Works Administrator is to prepare a program of public works to be launched immedi- ately. He will be assisted by State and local officials. The plan is to build ships, bridges, highways, park- ways, public buildings, and other facilities, and to cooperate with State and local political subdivisions in doing the same. A large program of conserva- tion of natural resources, development of water power, river and harbor improvements, drainage projects, and sanitary districts, is to be launched. The construction of low-cost housing, slum clear- ance, completion of hospitals, building of reservoirs, dry docks, naval vessels, aircraft, and army housing projects, are included. To speed up employment, the President has em- powered the Public Works Administrator to con- struct, finance or aid any public body for such projects, not to exceed thirty per cent of the cost of labor and materials. For example, if your dis- trict needs a new schoolhouse and can prove its need, the U. S. Government will pay thirty per cent of the cost. Maximum legal indebtedness that a state, city, or county unit may incur under state laws, shall not prevent the extension of the benefits of these grants. By paying thirty per cent the Federal Government hopes to stimulate states and localities to expend the seventy per cent, thus every Federal dollar calls into service two more. How Some of the Money Shall Be Spent Sec. 204 of the N. I. R. A. grants to the states $400,000,000 for emergency construction of public highways and related projects. Minimum wages paid to labor by contractors must be in accordance with regulation of the state highway department, must be stated in contractors' bids and must con- form to codes. Not less than $50,000,000 is appro- priated for national forest highways, roads, bridges and trails, national park roads and trails, roads in Indian reservations, and roads through public lands. For none of this work can convict labor be em- ployed and, except for supervisory and adminis- trative positions, no one shall be permitted to work more than thirty hours in any one week. Preference of employment is given to ex-service men with dependents. Another $25,000,000 is appropriated to aid people to return to farms. This money is for making loans, and to aid in the purchase of homesteads. The money collected in repayment of loans is to be put in a revolving fund to be used as the President may direct. This means putting thousands of fac- tory workers and ex-farmers back on the soil, not as general producers but in order to get them out of congested city districts where they are being supported in idleness, and back to the land where they may become independent again. This move- ment has just started and promises to grow rapidly. Where Does Uncle Sam Get the Money? Sec. 210 gives the Secretary of the Treasury the power to borrow to meet the expenditures of this act, and to issue bonds, notes, certificates of indebt- edness, or Treasury bills of the United States. The act provides for taxes merely to pay the interest on 18 the massive appropriation of $3,300,000,000 to carry out the public works program. Interest will be approximately $227,000,000 annually, to be met by a tax of one-tenth of one per cent on the capital value of all corporation stocks and a five per cent corporation excess profits tax on all companies earn- ing over twelve and one-half per cent profit. The estimated yield from these two sources is $80,- 000,000 annually. A five per cent tax is levied on dividends paid by the company declaring them, and to be deducted from payment to stockholders. Esti- mated yield is $73,000,000 annually. A one and one- half cent gasoline tax is levied to yield $62,000,000 annually. From other sources the government hopes to collect $15,000,000 annually. It is expected that each billion dollars spent by the Federal Government will put a million men back to work. Thus the total program will care for 3,300,000 men. If that be true, the Public Works Program will reduce unemployment by better than twenty -five per cent. If the States and cities spend two dollars for every one they get from Uncle Sam, a total of about ten billion dollars will be spent, em- ploying ten million men. These projects are sup- posed to be largely self -liquidating, but the prob- abilities are that this expense will be paid with inflation currency. Building Better Homes for Folks AMERICAN housing facilities are inadequate and poor in quality according to many competent observers. Slums should be done away with as un- healthy places in which to live. At a recent confer- ence of more than 400 representatives of cities and towns throughout the country the following reso- lutions were approved : 1. Any housing scheme should be a part of a city plan. 2. Any projects approved should be designed for the low- est income groups, where the individuals would be able to pay from $3 to $5 per month per room; other projects would not be turned down, but those mentioned above would be given preference. 3. There should be continuous management of these projects throughout the life of the bonds (25 and 35 years). 4. In cases where red tape may delay projects, the public opinion should be marshaled to further and speed the work. 5. The needs and wants of those in the particular areas should be of first consideration. 6. When private corporations are not organized, public housing authorities should be created under state law. Only six states, including Massachusetts, New Jersey, Michigan, Washington, California and Wisconsin, allow creation of public housing officials. Consequently state legislation would be necessary. 7. Social consciousness of the community should be awakened and the housing projects should be looked upon from the standpoint of social betterment rather than merely as work projects. 8. Indorsement of subsistence homestead units, such as at Dayton, where the individual may get two or three days' work per week and be self-supporting. 9. All housing projects should be based upon social, eco- nomic and financial data regarding the areas which they aim to help. 10. Every project should be designed to be self-support- ing, as to operation and amortization of the 25 and 35-year life of the federal loan. Many cities are applying to the Federal Govern- ment for money for slum eradication. Thus Cleve- land is asking for $25,000,000 and Cincinnati has completed plans for the spending of $40,000,000. Toledo has 65 unemployed engineers and architects working under the direction of a city planning com- mission, completing a program which will entail an expenditure of several millions. Milwaukee is conducting an extensive study of vice, crime and disease, as well as the housing in 70 blocks, with a plan to build multiple family dwellings to rent at KS^ Headed for the King-pin — St. Louis Star and Times not more than $4 per room per month. St. Louis has drawn up housing plans entailing approxi- mately $12,000,000. Back to the Farm — Subsistence Farms IT IS evident to many that five to ten million people now living in cities in idleness and unemploy- ment will need to return to the soil w T here at least they can earn a living by their labor. Already it is estimated that approximately two million have gone back. To further accelerate this movement, the Government has set aside a revolving fund of $25,000,000 for "aiding the redistribution of over- balanced population in industrial centers." "It is the purpose of the President," explains the Washington correspondent of the Chicago Tribune, "to finance the voluntary transfer of families from industrial centers to small farms or garden plots, where they may gain from the soil the necessities of existence and still be near enough to mine or factory to work at a paying job during a portion of the year." "The back-to-the-land movement is one of the most attractive features of the domestic-recovery program," says the Cleveland Plain Dealer. "It has been probably the worst feature of direct relief that the millions which have gone into it have been spent without placing the beneficiaries in a position better to support themselves." By these various means, millions of men will be put to work, better homes will be built and millions may have a better chance. 19 UNIT VII Uncle Sam Helps the Farmer Farm Credit Administration THE notion that the farmer has economic secu- rity if he owns his own land is very common. He has shelter without fear of the rent collector. His cows provide milk and butter. Hogs and cattle are easily converted into meat. The poultry flock sup- plies meat and e^gs. The garden produces veg- etables in abundance. The orchard furnishes fruit of various kinds. Wells and springs on the farm afford pure water as free as the air he breathes. Thus he is assured of a place to live and plenty to 0\ it if a i v y V'/-y * mm* Slashing Down the Weeds — St. Louis Star and Times eat. The surplus from the larger crops he raises he hopes to exchange to advantage for clothing, tools, and other necessities of life. In the early days of our country, the farmer even manufactured many of the things he needed. Flour and meal were ground by hand. Bread and pastries were baked at home. Hides were tanned; shoes made. Cotton, wool, and linen cloth were woven and made into garments. Tools and implements were sometimes made at home. The forest supplied fuel and provided lumber for buildings. The farmer depended upon few other people. In fact, for hun- dreds of years man has felt more secure when he owned land and was self-sustaining and self-sup- porting on that land. Perhaps many still do. But, alas ! What a difference today. Changes in agriculture in the United States have been taking place at a rapid pace. What are some of these changes? New lands have opened up. Different methods of farming have been used. New, different and better products have been demanded. Hand labor has been replaced in many instances by agri- cultural machinery. The home industries and their products have been replaced by factory products. The tractor, truck, and automobile have replaced horses on the farm and in the transportation of food products to the city. All of these changes affect the economic security of the farmer. Does the Farmer MAKE His Living Or Does He BUY It? Farming as an occupation is no longer the simple undertaking it once was. The days of the pioneer are past. For the farmer without money, there are few opportunities "with strong arms and a stout heart to hew a farm from the forests or plow it out of the prairie sod". Try it, if you think it can be done. The great work of the world is directed toward production. Things are produced to satisfy men's needs and wants. A reasonable satisfaction of these needs and wants calls for efficiency in production. This is one aim of the present machine age. With its division of labor and specialization it has penetrated our entire social order. The farmer shares in this specialization. He is no longer a "Jack of all trades". With his limited skill and experience, he cannot compete with the city worker and his machine. His crude energy is supplanted by the skill of the factory worker, who, in his way, is a specialist. So the modern farmer specializes in a few things and with the surplus buys the products of the factory instead of making them for himself. The emphasis America has placed on scientific education has finally reached him through bulletins, magazines, and the State Agricultural Colleges. His farm and domestic wants have speeded up until to- day we have the modern efficient, scientific, ma- chine-using farmer. If he supplies his wants freely, he is as dependent on others as they are dependent upon him. One Farmer Feeds Eighteen People. Why? A man's life is governed by the way he uses his time. A person's work determines largely not only his living conditions and the amount of his leisure time, but his place of residence as well. In general, where a man's work is, there will his home be also. Many hundreds of men are needed to tend the many machines in a single factory. Naturally these people settled close to the factories. As factories grew in number and size, towns grew up around them. This brought the youths of the farms to the factories; thus cities grew at the expense of the country. In 1850 three-fourths of the population lived on farms. In 1930, three-fourths lived in towns and cities. This means there are three families living in the city to each family on the farm. The average num- 20 ber of persons in a family is four. Besides raising sufficient food for himself and the other three mem- bers of his family, one farmer provides for three city families of four members each. Also, enough of his products are exported from the United States so that one farmer, on the average, supplies two persons in foreign countries. This makes a total of eighteen persons supplied by the average farmer. Fifty years ago he supplied himself and family and at best one or two other persons. How Is This Possible? Farming is now a machine industry. How much work a farmer can do with his hands, animals, tools, and machines, roughly determines the amount of his production. Many a farmer today uses a great deal of machinery. With a stable of iron horses he has from five to thirty times as much power as his pred- ecessor used fifty years ago. But this power costs money and can be used to advantage only in large scale production. The farmer likes to use machin- ery in place of muscle just as you and I do. There- fore, he expands and intensifies his production. The demands of the Great War for food to feed the fight- ing nations encouraged the farmer to expand be- yond peace-time needs. The end of the war found him able to feed many more than the eighteen he could ordinarily care for. Thus when the war ended he was caught with a surplus of grain, stocks, cattle and machinery. The farmer had overstepped himself. His market fell from under him and left him with his high-priced machinery and land but partly paid for. His credit was exhausted. He could buy no more nor pay for what he had. His intentions were as good as ever but good intentions don't pay debts. The Farmer Has Little Purchasing Power In a complex civilization, wealth assumes many forms. Land is not the chief kind of wealth, as for- merly. In times past the farmer was protected by his own independence and ingenuity against adver- sity and insecurity in old age. This is not uni- versally true today. The economic welfare of each occupational group depends upon the welfare of all other groups. Need for production depends upon consumption, which in turn is determined by buy- ing power. Buying power is obtained to a large extent by wages paid in factory production. The purchasing power of one class of .society very greatly affects the welfare of other classes. It is estimated by economists that four million city people are out of work because of low farm income. Another two and a half million are unem- ployed because they lost the market of the other unemployed. When the farmer has money to spend the city worker has a market for his products. This gives him money to spend for farm products. Thus we see farm-factory tie-up is a close one. They go up and down together. Wages are usually low when food prices are low. What would happen if industry stopped in France and the French people bought all their goods from American factories? Industry would flourish with PER CENT 200 175 150 125 100 75 1 II 1 1 1 1 1910-1914 = 100 PER CENT 1 II 1 1 910 jr*' ft 1 t -1932 1 Price'. received by farmers, V 1 Prices paid by farmers / / * / 1 1 1 1 t l\ for commodities bought i i i ^ V » i % % <: 1 7 « % 1910 1915 1920 1925 1930 Showing prices received by farmers for products sold, and prices paid by them for products bought. Note the growing spread between the two lines since 1920 the new demand and financial conditions would be improved. If the present farm income in the United States could be improved the farmers alone would have the purchasing power of all of France. The prosperity of the farmer is the barometer of the nation's prosperity. Is the Farmer's Dollar Always a Dollar? Prices of all things fluctuate from time to time. The prices of commodities do not change at the same rate as raw materials, including agricultural products which usually change in advance of other materials. During the Great War the farmers of our country experienced a flood of prosperity. Food prices advanced faster than the things the farmer bought. Here was the farmer's opportunity. There followed the expansion, mentioned above. After 1920 the world witnessed a general decline in price levels. The price of farm products again took the lead by dropping faster than the price of commodi- ties which the farmer purchased. So by January 1, 1933, the prices of the things which the farmer had to buy were much higher in proportion to what he got for his farm products. In fact, his purchase prices were 5 per cent higher than during the period 1909-14, while the prices of his agricultural prod- ucts were 48 % lower. This discrepancy in prices is one of the economic problems of the farmer today and has been referred to as the "agricultural de- pression". The Farmer's Plight Thousands of farmers have been unable to meet the actual needs of the farm, in fact have been un- able to hold their own against the ever-decreasing prices for corn and wheat. They have strained themselves to larger production, with less help, in order to increase dwindling incomes. Farm labor had to be contented with little more than bed and board. Many farmers could not buy seed, fertilizer, or needed extra labor. Machinery and transporta- tion facilities wore out and rusted out, fences and buildings needed repairs. They could not replace their livestock losses and sales. They borrowed to the limit of credit at local banks and through friends to keep going and to pay taxes and back interest. 21 mei A Big Job — Philadelphia Inquirer Finally their resources were exhausted. It was nec- essary to mortgage farms, stock and even crops. Get-rich-quick farmers who foolishly added acreage in the days of boom farm prices, either sold and took immense losses or let the mortgage holders take everything to satisfy their claims. Quicksands of Debt The farmer has fewer dollars with which to buy today than at any time since 1910, and this low pur- chasing power is the unrelenting quicksand that has nearly dragged him under. It makes his plight still more difficult because he is badly in debt. Forty per cent of the farms are now mortgaged and the total farm debt in the United States is between eight and nine billion dollars. How did it happen? Help! Uncle Sam, Help! The need of a new deal for the farmer is evident. What does the new plan propose to do for him? One thing the government has been doing since 1916 is to give the farmer additional credit. It lends him money on very easy terms until his finan- cial conditions are improved. These loans are pro- vided by twelve Federal Land Banks located throughout the United States. These banks are co- operative institutions controlled jointly by the United States Government and by their farmer- borrowers. The loans made by these Federal Land Banks are secured by mortgages on the land. By January 1, 1933, their loans had amounted to more than $1,000,000,000. Other fiscal departments of the national govern- ment were created to make and supervise loans to farmers. They include the Federal Farm Board, the Federal Farm Loan Board, the Crop Production Loan Office and the Feed and Seed Loan Office of the Department of Agriculture, and the Agricul- tural Credit Division of the Reconstruction Finance Corporation. These agencies have come into being one at a time as need arose. But they worked inde- pendent of each other, and often at cross-purposes. Their results overlapped. The work of all of these agencies needed to be unified and made more effi- cient. So President Roosevelt by executive order set up the Farm Credit Administration, effective May 27, 1933. By this order the work of making and supervising loans to farmers by the United States Government was all combined under this one agency. What Is the Farm Credit Administration? The work of the Farm Credit Administration is to supervise farm credit. It has no responsibility for loans on city property nor for the work of con- trolling farm prices and surpluses of farm products. The man at the head of the Farm Credit Admin- istration is called a Governor. Its first Governor is Henry Morgenthau, Jr. He is im- mediately responsible to the Pres- ident of the United States. The Governor is assisted by the Fed- eral Farm Loan Commission, a group of five men, in direct charge of loans. Each has charge of one division of the work. The Farm Credit Administra- tion is centralized at Washington with branch offices in the twelve regions of the United States cor- responding to the twelve Federal Land Bank dis- tricts. All work of making loans to farmers in each of these districts is housed in one location in the city where the Federal Land Bank is located. How To Get a Loan When a farmer wants a loan it is presumed that (1) his need is sufficient to warrant consideration by the Federal Farm Loan Commission, and that (2) he has sufficient unpledged collateral to warrant the commission to grant the loan if it finds that help is justified. The farmer should proceed as follows : 1. Locate his State in the following list/ 2. Note the district number of the Federal Land Bank for his group of States. 3. Note the city and State where the Federal Land Bank for his district is located. 4. Make a written application to Federal Farm Loan Commission, Federal Land Bank; District No (City) (State) Morgenthau Location of Federal Land Banks and the States They Serve Distinct No. 1 : Federal Land Bank of Springfield, Mass. Maine Massachusetts New York New Hampshire Rhode Island New Jersey Vermont Connecticut District No. 2 : Federal Land Bank of Baltimore, Md. Pennsylvania Maryland West Virginia Delaware Virginia Dist. of Columbia District No. 3 : Federal Land Bank of Columbia, S. C. North Carolina Georgia South Carolina Florida District No. 4 : Federal Land Bank of Louisville, Ky. Ohio Kentucky Indiana Tennessee 22 District No. 5 : Federal Land Bank of New Orleans, La. Alabama Mississippi Louisiana District No. 6: Federal Land Bank of St. Louis, Mo. Illinois Missouri Arkansas District No. 7 : Federal Land Bank of St. Paul, Minn. Michigan Wisconsin Minnesota North Dakota District No. 8: Federal Land Bank of Omaha, Nebr. Iowa Nebraska South Dakota Wyoming- District No. 9 : Federal Land Bank of Wichita, Kans. Oklahoma Kansas Colorado New Mexico District No. 10: Federal Land Bank of Houston, Texas Texas District No. 11: Federal Land Bank of Berkeley, Calif. California Nevada Utah Arizona District No. 12 : Federal Land Bank of Spokane, Wash. Washington Oregon Montana Idaho Is This a New Form of Credit to the Farmer? The Farm Credit Administration does not offer a new kind of credit to the farmer. The types of loans which the farmer can get are the same as before the new plan went into effect. What it does is to establish a more efficient service. What kinds of loans has the Federal Government been making to farmers ? They are as follows : 1. Long-time loans on the security of land mort- gages. 2. Loans designed to be of comparatively short duration for operating purposes, to be repaid from the proceeds of current production. 3. Loans to cooperative marketing organizations of farmers to permit them to market the crops of their members in an orderly and efficient way. Although no new credit services were provided for the farmer by the New Deal, it did hasten action, and it did make more money available. What New Funds Are Available? The Federal Land Banks were authorized to issue $2,000,000,000 of a special type of bond. The pro- ceeds from these bonds were to be used in making additional new loans to farmers. In certain in- stances farmers were permitted to exchange their mortgages for these bonds. A fund of $200,000,000 was appropriated to be used in making loans to farmers for redeeming land already sold by foreclosure, or to pay debts other than mortgages, and for operating expenses. The loaning fund of the Reconstruction Finance Corporation was increased by $300,000,000. The greater part of this may be loaned to farmers in special improvement districts, such as irrigation, drainage, and levee districts. The Joint-Stock Land Banks are required to liqui- date their loans to farmers. These Joint-Stock Land Banks are private corporations under inspection by the Federal Government. They are no longer permitted to make new loans and the old loans to farmers must be liquidated as soon as possible. In order to accomplish this a fund of $100,000,000 was appropriated. A fund of $50,000,000 was also set aside for the use of the Federal Land Banks to permit postpone- ment of payment of principal and in some cases of interest on loans already in existence. Is a New National Domain in the Offing? Our discussion of The Iron Horse will remind you that about a century ago the Federal Government owned a vast domain in the central and western parts of the U. S. This was opened up to settlers from the East and sold at low prices or granted to railroads and disposed of at private sale in the same way. Most of this land has been bought by private individuals. By lending vast sums to the farmers as provided in the New Deal, Uncle Sam is again a potential landowner. If economic conditions do not permit farmers to repay the loans, these farms may revert to the government through foreclosure pro- ceedings. The Federal Government may thus have direct ownership of thousands of acres. If the New Deal is to be of genuine assistance it should help the farmer get out of debt instead of into debt. It does not encourage borrowing but provides more liberal terms when borrowing has been done and where it is necessary. This it is attempting to do by (1) encouraging a low rate of interest, (2) postponing immediate payments on the principal, and (3) providing for reduction of the principal of old mortgages where they seem to be excessive. Interest on all Federal loans is reduced to 5 per cent. Loans by Federal Land Banks are further reduced to 4!/2 Per cent for the next five years. This applies to old loans as well as new ones. It is hoped th 1 ' . will encourage private loaning agencies to re- duce their rates of interest for farm loans. Payment Is Deferred Payments on the principal of Federal Land Bank loans, both old and new, are also postponed for a period of five years. In certain cases interest pay- ments are deferred if the loan is in good standing. Loans from the $200,000,000 fund mentioned above which are secured by mortgages extend over a period of thirteen years. Payments on the principal are postponed during the first three years. Land values have so rapidly declined that in many cases the amount of the mortgage held by private individuals and banks is greater than the value of the farm. The new plan encourages the refinancing of such mortgages by the government through the Federal Land Banks, so that the mortgage values may be reduced in proportion to the losses in real values. This evidently means another dead loss to the government — dole — this time to the farmer. The Farm Loan Commission faces one very seri- ous problem when it attempts to judge and deter- mine what mortgages to reduce or redeem. It can scarcely be expected that banks and private home loan agencies will offer their sound interest-paying mortgages for redemption, unless they themselves are near bankruptcy. Each transaction made by the Farm Loan Commission may be a questionable deal for Uncle Sam. Precautions will need to be taken that unprincipled money lenders and mortgage holders do not take advantage of the Commission and dump their worthless holdings on Uncle Sam. So this new commission has on its hands a keen business man's job if grafters are to be kept out and the real benefits preserved for the deserving farmer. 23 UNIT VIII Robbing Peter to Pay Pau Agricultural Adjustment Act Looking Backward A LARGE measure of the responsibility for the ^*- prevailing economic set-back can be charged to two accounts: (1) the conditions which grew out of the World War, and (2) the uncontrolled greed of unregulated and non-cooperating individual farmers, manufacturers and business men. The previous pages told the story of the present great economic disaster as it relates to agriculture. We have shown how the farmers unwittingly piled up immense stores of farm products in huge ware- houses filled with manufactured food products, and tons and tons of refrigerated meat, butter and eggs. The story could go on and on. Farm production had experienced years of falling prices, to new low limits. The farmer lost his purchasing power. As a result the manufacturer, with his warehouses filled to the roof, curtailed his production by letting off his help and shutting down many of his facto- ries. This only made things worse by cutting off the purchasing power of the factory workers. This in turn affected business men and storekeepers. The vicious circle expanded until it took in a large part of industry and stopped 10 to 15 million workers in their tracks. There they have been ever since. With their families calling for bread they peer through the gloom for the light of a new day. Will the New Deal bring back the old smile to their faces? Looking Forward The American farmer went "broke" about 1920, and still is broke. As a result, strange to say, most of the rest of us are broke, too. That fact only emphasizes how closely to its stomach the world lives; that the prosperity of all the rest of us de- pends upon the prosperity of the farmer. Look to the immediate cause of the slowing-down processes that have been at work. There you see in large letters: THE FARMER LOSES HIS BUY- ING POWER. Finally realizing this, the scientist- agriculturist-economist deduced the idea that the farmer must be given a larger proportion of the national income. But, how to do it! That was the big problem. Could that dream be realized? Since 1919 several legislative attempts have been made to take care of the farmer's surplus. The most noted of these was the agricultural football known as the McNary-Haugen Bill. After its collapse, the most favored idea was the domestic allotment plan which was fast growing in favor before the close of the Hoover administration. Evolution of the Dream What is this dream? It is to put more of the national income in the farmer's pockets in order to increase his purchasing power. How can that be done? What income would satisfy him? And what line of reasoning may be followed to come to any fair adjustment of what he should get for his goods? Here is the way. Suppose we say that in the five-year period from HIS IS A BIG JOB Rexford C. Tugwell, "Brain Trust" member and Assistant Secretary of Agriculture, has the job of making the Farm Control plans really operate 1909 to 1914 the farmer was contented. The fact is, he should have been. The average prices of that period would be a sound basis for planning what he should receive now for his produce. Where do we go from this point? First, the farmer's buying power must be restored to what it was in his more contented days, that is, in the five-year period men- tioned above. Second, it must be kept there. But, since 1914, prices have not only reached their all-time peak but also their all-time low rec- ords. Somehow, present prices must be raised to that former average level. How can we find out what the prices of various commodities should be, so that farmers may have a satisfactory buying power? That is, a buying power about equal to what they had in those better days. This is where a little figuring should help. Try this exercise : 1. How many bushels of corn or wheat, pounds of tobacco, or what-not, did it take at that time to buy a suit of clothes, of certain make and standard of value? Or, to buy an automobile of standard make and value? Or, any other given quantity of merchandise of standard quality and value? 2. Now, raise the selling price of those same farm products until a like quantity of each will buy today the same quantity of the same manufactured articles as in those more prosperous days. That's the plan. Manipulate prices. Compel par- ity prices as they are called. That is, when the 24 prices of manufactured goods go up, for any reason at all, foodstuffs and other farm products must take a corresponding hike, to maintain parity. In other words, the things the farmer buys and sells must both fluctuate in price, up and down, alike. This is all based on the principle that if the farmer pros- pers and is satisfied, we shall all prosper and be happy, at least, so far as our common necessities go. So much for the dream. And now to begin its realization. The Thinkers Think Prices are the important thing, so what about them? The thinkers think : 1. That the low and ruinous prices of the farm- er's products are caused partly by overproduction and partly by the general lack of purchasing power or under-consumption. 2. That prices cannot be raised by a simple edict or law if nothing else is done about it. The reason is that every grower would get busy and increase production all out of reason. That would cause another tumble of prices in spite of the attempted control. 3. That the only way to sustain high prices for produce is to limit production by government regulation. 4. That farmers do not and will not cooperate on a large scale voluntarily. 5. That those farmers who voluntarily agree to limit the number of acres planted to certain crops must be encouraged. They must be paid by Uncle Sam, in some way, for the use, or rather the non- use, of those unplanted acres. 6. That everything else has been tried ; that the plan seems reasonable; that the emergency de- mands action ; and that, therefore, the plan should be given a chance to prove itself, although it is ad- mittedly experimental. The Latest Agricultural Panacea One of the big things of first concern to the new administration was the plight of the farmer and the cotton grower. All the preliminaries recited above were immediately considered and it was decided that farmer-growers must have a larger share of the national income. Congress provided the Agri- culture Adjustment Act to do the work and the President appointed George Nelson Peek, former head of the Moline Plow Co., as Administrator. Let us stop here for a brief study of the man and his peculiar fitness for the huge job he has tackled. George Nelson Peek When George N. Peek, Administrator of the Agri- culture Adjustment Act, manufactured farming implements he was much interested in the financial status of the farmer. Of that day he now says : "I have found that busted farmers do not make good customers. We could carry them on the books for two years, but if the third year crop failed, we had to cross them off." That sort of "safety first" con- sideration of the farmer's welfare led Mr. Peek to a serious study of the problems of the farmer and the general let-down of agriculture. Feeling that the slump was an important cause of national troubles he set himself the personal task of investigating its shortcomings and devising ways to stabilize this key industry. In the meantime his manufacturing experience led to his appointment on the War Industries Board. From his ideas was born the McNary-Haugen Bill which was discarded by two Republican admin- FIRST TO SIGN ON THE DOTTED LINE Thomas Peterson, North Dakota farmer, was first to sign the wheat con- trol production plan. He will receive a bonus for the wheat he doesn't grow this year. The County Agent looks on. istrations. Defeated, he enlisted under the banner of Al Smith, and later supported Roosevelt. During this long struggle other plans for dealing with the farmer's surplus were proposed. One of these, the domestic allotment idea, attracted him and he became one of its staunchest advocates. His is not exactly a simple job. George N. Peek is dealing with two particularly individualistic groups: the farmer, with whom he sympathizes most ; and the laborer or worker who consumes most of the farmer's products. Patience, tact, insight, and wisdom in good, horse-sense doses, are his weapons. So far, he seems to be using them with effect. As for the success of the venture he pilots, only time will tell. Here We Co! After the Dough! Now we are off on a new quest for high prices to provide more money for the farmer. How much money must the farmer add to his income to meet the 1909-1914 average? His income in 1932 was $5,143,000,000 and the five-year average was some- thing over $10,000,000,000. Therefore, he must double his income. He would still be almost $7,000,- 000,000 below the 1919 figure. How much would 25 Uncle Sam be willing to spend to help the farmer get this increase '.' When Uncle Sam finally launched a program he appropriated $100,000,000 for administration, that is, to carry out its provisions. Then Congress voted THEY DON'T LOOK WORRIED George N. Peek (left) and Secretary of Agriculture Wallace Head Up Uncle Sam's Work for the Farmers another $100,000,000 to control production by re- ducing the number of acres to be planted. The re- maining amount, variously estimated at from 45 million to a theoretical 800 million, the consumers of certain farm products will pay in taxes that are collected from them as they buy. They will donate the parity-price boost in order to raise that $5,000,- 000,000 extra the farmer is to rattle awhile in his pockets and then spend to help the rest of us. On Three Legs The sponsors of the A. A. A. convinced Congress of its workability. Congress passed it along to the people feeling pretty certain it would provide a more stable income for the farmer, an income with much less wabble in it. The same men who fathered the idea now have the job of making it work. It rests on three supports : I. Cash subsidies, from the government. II. Processing taxes, from all consumers. III. Inflation, at the discretion of the President. I — The Way to Uncle's Pocketbook Secretary Wallace in a recent private conference said: "We have batted at this question of farm relief for twelve years and haven't got to first base, and the reason we didn't get anywhere was because we refused to face one overwhelming reality. That reality is this : The best way to handle a surplus is not to grow it. That is what the new law recognizes. Previous farm relief measures didn't. We may not be able to accomplish that goal in a year, and per- haps not in two or three years, but we are definitely on the march." "Not to grow it!" That's the story in a nutshell. The farmer's whole trouble is from excessive pro- duction and the low prices that have resulted. The big job is to make farming more profitable and at the same time to keep production under control. How can it be done ? Easy Money It can be done by reducing the acreage planted to cotton, wheat, tobacco, rice, and corn, and cutting down the number of hogs and the quantity of milk produced. This reduction is to stop when the supply sells at a fair price on the domestic market. The reduction will vary with the different crops. Cotton planters will abandon an already planted acreage that will produce at least 2,000,000 bales, the yield of about 10,000,000 acres. Wheat growers will cut their acreage to a maximum of 20 per cent of their average for the last three years. Tobacco growers will plant but 50 per cent of the acreage planted in 1932, or 40 per cent of the average acreage of 1931-32. The limitations on other farm crops and products have not been announced to date. What does the farmer get out of this? It is esti- mated at from $7 to $26 per acre for cotton land, and around $3 per acre for wheat land. The farmer contracts with Uncle Sam to rent him this reduced acreage at or about the prices mentioned. It will bring the cotton farmers $150,000,000 this year. Fifty million dollars of this the government loses in selling the planter 2,375,000 bales of cotton now on hand at 6 cents a pound when the market price is 9!/2 cents a pound. But that is not all the southern planter gets. He expects to average at least $5 an acre from other crops taken from the unplanted cotton acreage. He also may take that 2,375,000 bales and sell them at the market price of 9 1 /;) cents a pound, making the tidy sum of $41,500,000 plus his growing profit, if that was less than 6 cents a pound. There goes half of the allotted $100,000,000 in a dole to cotton farmers because they had piled up a big surplus. Who will get the other $50,000,000? This fall, about September 15, wheat farmers will get $10,000,000. Later they will get another $5,000,- 000 when they prove their reduced acreage. Besides being paid for the non-use of their land, the farm- ers are permitted to use the reduced acreage for other crops not banned by this act. Two classes of subsidies for the farmer : cash in rentals and a promise of a crop on the land if he uses it for other purposes. The processing taxes de- scribed below will also provide money to pay these rentals. II — The Farmer Is Favored The farmer's purchasing power is to be returned to 1909-14 levels. He will sell the crop raised on the reduced acreage, at the market price, and Uncle Sam will pay him the difference between that price and the parity price for that crop. Where will Uncle Sam get the enormous sum needed to pay this difference? Taxes, as usual. Ordinarily he has no other way. But who will pay these taxes? All who wear cotton clothes, smoke cigars, drink milk, eat pork, butter and cheese, and any form of corn, wheat, and rice products. A regime avoiding these things will save you from being taxed right and left to increase the farmer's purchasing power. But remember, the idea goes further. When the farmer spends, others work; and then they spend, and others work and spend, and — so the cycle goes. Power! Power! Wonder Working Power! All these puzzling provisions are but the prelude to the song. Manufacturers, wholesalers, retailers, consumers, and anyone else having anything to do with the farm products mentioned above are only 26 just beginning to realize what they are up against. Read now what extraordinary powers and authority Congress has given to the Secretary of Agriculture. The act says that the Secretary of Agriculture shall have power "To enter into marketing agreements with processors, associations of producers, and others engaged in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, after due notice and opportunity of hearing to interested parties. The making of any such agreement shall not be held in violation of any of the anti-trust laws of the United States, and any such agreement shall be deemed lawful." And also that he shall have power "To issue licenses permitting processors, associations of producers, and others, to engage in the handling, in the cur- rent of interstate and foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof. Any such person engaged in such handling without a license shall be subject to a fine of not more than $1,000 for each day during which the violation continues." The last sentence in the above quotation names the club that will drive all the herd into the same pen. No Wonder the Little Fellow Doesn't Grow! — Philadelphia Inquirer Do You Sell Noodles? Get Your License Thus the fun begins with (1) power to make agreements with all industries engaged in buying, processing, and marketing of farm products of any kind and (2) power to license persons handling these agricultural commodities, compelling them to observe the agreement made. Refusal or failure to conform will bring about the loss of their license and their business will be ruined. It is estimated that one-third of all the business done in this country is thus subject to license by Uncle Sam on terms laid down by the Department of Agriculture. This Department is only 44 years old and until very recently has been only a minor Cabinet office. What a world of authoritative power it now has! Will farmer-editor-politician, Henry Wallace, Jr., find the way to rob Peter to pay Paul to put Peter back to work, and, at the same time, to satisfy 90,000,000 consumers, 70,000,000 of whom are not dependent on the farm for their livelihood? The Coat Is Milked The flour consumer has already felt the sting of the processing taxes amounting to 30 cents a bushel on wheat. Other taxes are soon to follow. The Bureau of Internal Revenue has issued the follow- ing statement : "Under the Agricultural Adjustment Act by proclamation of the Secretary of Agriculture and regulations issued by him and approved by the President, a processing tax on the first domestic processing of wheat becomes effective at the first moment of July 9, 1933. Effective at the same time, compensating taxes are imposed upon all importations made on and after that date of articles processed wholly or in chief value from wheat. "Taxes are also imposed on floor stocks of articles proc- essed wholly or in chief value from wheat, held for sale or other disposition on July 9, 1933, except separate retail stocks. Articles processed wholly or in chief value from wheat include flour, cereal preparations made chiefly from wheat, bread, crackers, pretzels, macaroni and spaghetti, and noodles." Such provisions have some direct effect upon every inhabitant of the United States. They will also affect all exported farm products, and if such exports keep up any very great volume the farmers themselves will be surprised. The immediate in- crease of retail prices is estimated by Secretary Wallace at 3 per cent of the food bill of the Ameri- can people. However, there is already said to be plenty of evidence that the consumer will, in many cases, pay an increase up to 10 per cent. Unless that is stopped he will indeed be the goat even if he has been put back to work. Gouging the Consumer The consumer is to be protected. A new division has been created for that purpose. Its counsel says : "It is a new thing in politics to think definitely of the consumer. . . . For centuries we had thought of society in terms of a producers' society. Legislation has been passed for the benefit of the manufacturer, the railroads, the banks, the farmers, and the work- ers. But now, out of our distress a new motive has emerged, which is, the protection of the consumer." He will need all the protection he can get. Already there are rumblings because of increased living costs. Ill— The Elastic Dollar If cash subsidies and processing taxes do not avail to raise the purchasing power of the farmer, it may be necessary for the President to use the third weapon Congress has given him — inflation — as a means of relieving the farmer, in common with all debtor classes. Results to Date There has been a noticeable increase in farm prices since the day the act went into effect. Wheat had doubled its price before that date. The very fact that control of some sort would be practiced had its influence. The weather-man also helped by lopping off millions of bushels from the wheat crop. The vegetable and fruit growers have hiked their prices. The retailer and middle man have found excuse for adding a few cents here and there. The process taxes will be added as rapidly as they can be determined. The consumer will pay what he fs asked, and grin and bear it. 27 UNIT IX Making the Banks Safe Glass-Steagall Banking Act Money! Money! Who's Cot the Money? SATURDAY, March 4, 1933. Shall we ever forget that date? By governors' decrees the banks of every state in the Union were closed! A few big banks had toppled and threatened to take all the little ones down with them like a house of cards. What an inaugural gift to the new President of the United States ! What a compliment to the banking system of America! What a slam on the intelli- gence of the American people ! Worst of all, what an injustice to the millions of citizens left with- out a leg of security to stand on ! A MOST REMARKABLE SCENE! The president of the Mayfair State Savings Bank of Chicago (left) told his depositors to come get their money, 100 cents on the dollar. He wound up the affairs of the bank voluntarily, in 1931, when he saw the bank was making no money. State Auditor Nelson says this is the only case of its kind he knows of. Business was practically at a standstill. The Joneses were caught without food and the Smiths without fuel. But the inconvenience of the moment was not our chief concern. We were struck by a thunderbolt ! Thoroughly frightened, our sense of security was destroyed at a blow. Instead of cus- tomary ways of thinking and acting, there was only a blur, a "where-do-we-go-from-here" feeling that punctured the very heart. Realizing that a national emergency was at hand, President Roosevelt had scarcely taken the oath of office before he acted. Using the war powers of the Trading with the Enemy Act of 1917, he issued a proclamation closing all banks of the United States for four days until a special session of Congress might convene. This froze $60,000,000,000 in bank deposits. Think of it ! How France and England must have smiled at such a spectacle ! For there were no bank failures in France, England, and most of the British Em- pire. Those countries have few banks and rarely a bank failure. In those countries banks are con- trolled by the Federal Government. In our country we have private banks, state, and federal banks. There are 49 sets of laws governing banking in the United States while one set of laws, only, operates in France and in England. Which is better? A House Cleaning Badly Needed During the four-day banking holiday, March 5-9, 1933, Herculean efforts were made to allay fear and restore confidence. The President stopped gold withdrawals, permitted limited banking operations for the purchase of necessities, allowed new full- demand deposits and permitted clearing house scrip in some cities and states. In those four days the Senate started an investigation of banking, while the "brain trust" and other experts drew up an Emergency Banking Law designed to hold the situation in check and partially restore confidence until the situation could be thoroughly studied and a law prepared for a more permanent settlement of the problem. This was the Emergency Banking Law providing for: 1. Confirmation of all acts of the President in the banking emergency. 2. Stiff penalties against hoarding or export of gold. . 3. Granting of power to reorganize non-liquid banks and to appoint "conservators". 4. Authorizing the Reconstruction Finance Cor- poration to subscribe to capital stock of national or state banks if necessary. 5. Authorizing Federal Reserve Banks to issue new national currency backed by government bonds at 100 per cent of their face value, or by commercial paper at 90 per cent. Immediately the sound banks began to reopen as fast as they received licenses from the Treasury : first, those in Federal Reserve cities, then those in clearing house cities, and, finally, those in the rest of the country. Within two weeks most of the sound banks throughout the country were doing business again. On March 4 there were 5,938 operating national banks in the United States. Of this number 4,509 were licensed to resume normal banking functions on March 13, 14, and 15, leaving 1,429 national banks unlicensed by the 16th. These unlicensed banks had to be thoroughly examined before the Treasury would allow them to reopen. Of course, that took time. From March 15 to August 1, 1933, 28 over 50 per cent of the unlicensed national banks were examined and licensed or plans approved for their reorganization and reopening at an early date. Of the closed banks, 364 did not submit plans for reorganization. All but $2,000,000,000 of bank deposits are now unfrozen, half of which is in non- national banks. Mutual savings banks have about $14,000,000,000 on deposit, of which more than three-fourths is in liquid condition. Thus did the national government meet the emer- gency and by its speedy and efficient action overhaul the banks and restore at least a semblance of con- fidence again. But what a slaughter! Billions of dollars were lost to millions of patrons and stock- holders as the following figures show. Number of Bank Failures in the United States It is reported that approximately 7,000 banks failed during the decade ending 1930 with a loss to the depositors totalling 2VL> billion dollars. But this was nothing compared with the failures during the last three years, Jan. 1, 1930, to Jan. 1, 1933. The total number of banks in the United States, Jan. 1, 1930, was 25,110, but three years later only 19,046. This means a loss of 6,064 banks in a three-year period. The failures between January, 1933, and April 1 have been estimated at 2,000 banks. The losses to investors exceed four billions of dollars. Of course, some of this money will be returned when the banks are liquidated, but still the losses are serious. Should Banks Be Allowed To Fail? Why do so many banks fail in the United States and so few in England and Canada? Didn't the depression hit those countries as hard as it hit us? well as with the government. They encourage the sale of securities for the sake of business, without intensively "selling" their customers. Since the World War they have made loans to customers and to Stock Exchange members, but the loans are dis- And No "Soft Soap", Either — Pittsburgh Post-Gazette Yes, they suffered even worse, but their banking system is nationally controlled and operated and it is almost impossible for one of their banks to fail, so strict are the regulations and inspections. British banks cooperate with their customers as It Just Can't EVER Be Done! — New York World-Telegram tributed widely and wisely in order to prevent sud- den wild fluctuations. A unique plan of cooperation with the government enables a manufacturer's bank to recommend export transactions to the export credit branch of the government. The Bank of England then guarantees up to sixty per cent of all bills of exchange against such transactions. To aid the farmer, also, the Bank of England has organized the Agricultural Mortgage Association which sells bonds jointly with the government. But nothing in England's banking system has con- tributed so largely to its success as the policy of trying to help the customer rather than to mislead him. This policy is general throughout the British Empire and accounts largely for the envious superi- ority in soundness which Canadian banks enjoy over their American brothers in the business. Why Canadian Banks Don't Fail Within the last year people in the States ha\e become "Canadian bank conscious". Previously we seemed unconcerned whether Canada had any banks at all. But when we are told that no Canadian banks have failed, in the last few years, we want to know why. Here are the chief reasons : 1. Canada has few banks — no unneeded banks. A bank is chartered by an act of Parliament only when the applicant proves to the Canadian Bankers Association that it is needed, that no other existing bank answers the need. We wonder whether Amer- ica could prove a need for almost 20,000 banks ! 2. With ten Canadian banks and their branches serving every community in the Dominion, a great 29 degree of uniformity is possible. Competitive prac- tices are abolished. 3. Dive rs it n spells safety for Canadian banks. A small local bank serving a one-industry town fails when that industry suffers. Canada's few big banks have their investments in all parts of the Dominion, thus giving stability to their business. 4. In Canada a bank must have a paid-in capital of half a million dollars before it may start in busi- ness. Losses are chargeable first to the bank's profits, then to its capital, and last of all to its de- positors. 5. Specidation is wisely controlled by Canadian bank laws which prohibit loans to stockholders ; real estate loans are confined to insurance and special mortgage companies not obligated to pay out assets on demand and thereby cause banking holidays; taboos are placed on loans to officers on security of bank shares; frequent liquidation is encouraged, and in many other ways depositors are protected from haphazard and loosely controlled ballyhoo sort of banking business. 6. Canadian banks undergo rigid government in- spection by the Minister of Finance and his techni- cal assistants. 7. Deposits of Canadian banks are guaranteed by the Dominion Government. 8. Canadian bankers serve a long apprenticeship and are carefully trained. They regard their trust highly and think of themselves as public servants. Which Way Out? The preceding contrast between American and British banking systems suggests that the heart of our problem is to create a system that permits flexibility within stability. That's a neat problem. Nevertheless, any plan which looks toward perma- nent reconstruction must provide this feature. The Banking Act of 1933 may be a necessary compro- mise, but let us hope that there will be a Banking Act of 1934, or even 1944, which will have the con- fidence of the American people and the respect of the world's financiers. We may suggest, then, that these are the gen- eral features which any satisfactory banking pro- gram must embody: 1. A national pooling of interests among all banks so as to provide protection to themselves and their depositors. This means one strong national banking law with which all banks must comply. 2. Thorough inspection and supervision of these united banking interests by the Federal Govern- ment. 3. Insistence on adequate financial resources be- fore a bank is allowed to open. Cut down the num- ber of banks. 4. Provision for a maximum turnover of the dol- lar within the bounds of safety. 5. Trained bank management that places a premium upon intelligence and integrity. 6. Primary consideration for the individual and joint welfare of the bank's customers. If only government control of our banks can put these principles into operation, then by all means let's ride on Uncle Sam's shoulders. But if he can make the banks support their own weight, should he not be relieved of any extra burden ? The Glass- Steagall Act was passed just before adjournment by the special session. Does it get us out of the woods ? Demand for Insurance of Deposits All of us want economic security. To obtain security against sickness, old age, death, injury, fire, tornado, theft, liability, accident, loss, earth- quake, and even rain, we can buy insurance pro- tection. Why not have some form of insurance against bank failures? The idea of insurance, or guarantee of deposits, to protect depositors from loss due to bank failures was first suggested in this country in the second half of the nineteenth century. The Populist Party led by William Jennings Bryan first proposed a guarantee system during the epidemic of bank failures following the panic of 1893. With the return of prosperity the idea was forgotten. The same idea appeared again later, but the larger banks balked at helping to support THE BANK IS CLOSED! But depositors by hundreds line the sidewalks to learn the sad story personally 30 weaker ones. However, several states did enact compulsory guarantee laws. The chief lesson we have learned from past ex- perience with bank deposit guarantees is that pool- ing of resources within single states is inadequate. Probably any scheme of national coordination will also prove inadequate without a thorough system of supervision, development of trained and competent bank management, and insistence on sound security backing. What Has the New Deal Done About Banking? The Glass-Steagall Act is a two-headed measure covering both insurance of bank deposits and con- trol of speculation. The chief provisions regarding the first of these features are : 1. The establishment of a Federal Deposit Insur- ance Corporation to be presided over by a board of three members — the Comptroller of the Cur- rency, J. F. T. O'Connor, and two appointees of the President. 2. Beginning Jan. 1, 1934, unless the President sets an earlier date, this corporation by means of a "Temporary Federal Deposit Insurance Fund" will fully insure deposits up to $2,500 each, in all Federal Reserve banks, and in all other banks that meet the requirements set by the corporation. Nearly ninety-seven per cent of the bank deposits in the United States are less than $2,500. Participating banks must pay into the temporary fund one-half of one per cent of the total amount of their certified deposits. 3. Beginning July 1, 1934, the corporation will put into effect a sliding scale of deposit insurance. Deposits up to $10,000 in approved banks will be insured one hundred per cent; deposits ranging from $10,000 to $50,000 will be insured seventy-five per cent ; and deposits of $50,000 and over will be insured fifty per cent. 4. Funds of the corporation for permanent insur- ance will come from three sources: 1. A capital stock subscription of $150,000,- 000 by the government, paying six per cent dividends annually. 2. Each participating bank must buy Class A stock equal to one-half of one per cent of all its deposits eligible for guarantee. State banks forbidden by law to purchase such stock may deposit an equivalent amount of money with the fund. On this stock six per cent dividends are payable up to thirty per cent of the corpo- ration's earnings. 3. Federal Reserve banks are required to purchase Class B stock up to one-half their surplus. 5. The corporation may lend upon or acquire as- sets of closed member banks. 6. After July 1, 1936, a bank must be a member of the Federal Reserve in order to participate. Provisions of the Glass-Steagall Act which would control bank speculation with depositors' money are: 1. Member banks are forbidden to pay interest on demand deposits except for public monies or other exceptions. The Federal Reserve Board may set the rate of interest in time deposits. Postal Sav- ings depositors must forfeit accrued interest unless 60 days' notice of withdrawal is given. This cartoon shows how Uncle Sam*s Federal Reserve Notes rest upon a backing (under the Glass-Steagall Act) of iO% gold, the balance being made up of eligible commercial paper and government bonds. If the props were taken out altogether and cur- rency issued without such securit we should have the extreme kind of inflation known as fiat money. 4Qo/o 60% 2. Within a year after signing the act, com- mercial and private banks must go out of the securi- ties business. 3. All banks which continue to receive deposits must submit to examination and inspection of all their activities. 4. A member bank may not loan to any corpora- tion, subsidiary, or affiliate more than ten per cent of its capital stock and surplus. 5. The Federal Reserve Board may limit the per- centage of a bank's capital and surplus which any bank may invest in loans secured by stocks and bonds. 6. Member banks may not accept funds loaned to brokers. Interlocking directorates with security firms or brokers are forbidden. 7. Federal Reserve banks must keep advised on the investments of member banks and report to the Board. 8. A member bank is forbidden to make loans to its own officers. 9. One other significant provision of the Bank- ing Act of 1933 is that it authorizes branch bank- ing by national banks in states which permit it. But until we can have a thoroughly safe and re- sponsible banking organization such as the Bank of England maintains for its members, we need not hope for greater personal or social economic se- curity. A sound banking system is the first essen- tial. The panics of this country are partly due to a wide-open banking system that permits and in- directly if not directly encourages these wild sprees of excessive speculation which have characterized American history for the past century. Even recently there was talk of secession from the Federal Reserve system by banks which self- ishly object to helping other banks in the new Fed- eral Deposit Insurance Corporation. We shall find that insurance is no substitute for sound banking. Our bankers seem to have missed the one great essential of any successful and lasting business — that their first interest is the individual and joint welfare of their customers. 31 UNIT X The Rubber Dollar—Inflation 'M ONEY is the root of all evil." Whether or not you agree with this oft-repeated statement, you readily admit that it is the root over which we most often stumble in our attempts to maintain economic stability. As long as the barter system of exchange served the needs of a simple society, the words inflation and deflation were unborn. How finished and settled was a transaction in which furs were traded for corn or beans ! It is obviously impossible to pay electric light bills with potatoes or carry two hundred bushels of corn to the store when one wishes to purchase a fur coat. It has become necessary for us to set up some unit of exchange, such as a certain weight of metal, or a piece of paper representing that unit. Money — gold, silver, copper, paper, or other mediums of exchange — has been adopted as that representa- tive. And a stern judge it has proved to be ! How Does Money Affect Economic Security? Since a unit of weight is at best a bulky and inconvenient form of exchange, hard money has fallen into disuse and coins and paper money have acquired general acceptability for most trans- actions. Paper notes and checks are a great con- venience. Theoretically, a complete paper standard would be desirable because of its adjustability, but human nature is not willing to be divorced com- pletely from some scarce and solid base metal. We have kept one foot on terra firma. We believe that all forms of money should be ultimately con- vertible into gold. That is, we are "on the gold standard". But sudden upheavals in our economic structure, such as depressions following booms, I WW. GRAWPMA , DONT I V*U V/OWRY, I CAM I CONtROU' *TmEM! . ^; FKANKUM, PO BE I CAREFUL!! It Is All Up To the Driver — Columbus Dispatch cause us to go back on promises to pay in gold — to "go off the gold standard". With the "sky as the limit" in creating paper money, our economic bal- ance is further upset with serious damage to prices, wages, and business investment. At the same time the balance is disturbed in our international barometer. We notice from the circle graphs below, decided changes in the distribution of From America Weighs Her Gold, by J. H. Rogers (Yale U. Press) DECEMBER 31. 1913 JUNE 30. 1931 Who Has the World's Cold? the world's gold supply for monetary uses. France and the United States have come to hold two-thirds of the world's gold. Serious difficulties may be caused by abrupt changes in the distribution of gold among nations. When India, for example, adopted the gold standard in 1926 and glutted the silver market with her dis- carded metal, she badly hurt the purchasing power of China, a country which has long held to a silver standard. What Kinds of Money Does Uncle Sam Use Most? Federal Reserve notes, backed forty per cent by gold and sixty per cent by commercial paper and bonds, constitute over half of our money. These notes are issued by the Federal Reserve System, a series of twelve regional banks established in 1913 in important cities, with 7,000 national and state banks as members of the system. In a sense this system is the central bank of the United States that cooperates with national banks of other countries. Recent congressional measures tend to increase the strength of the Federal Reserve, making it Uncle Sam's right-hand man in the guaranty of bank de- posits and in the control of inflation, which is our chief consideration in a discussion of the "rubber dollar". Why Did Our Dollar Expand? Let us go back for a minute and take a look at the United States through the stereoscope of 1929. Since the post-war depression of 1920-1921, our credit system had taken wings and flown high. Each person was using, on the average, five and one-half times as much cash and sixty-eight times as much money in the bank as had been used a century ago. Each inhabitant owed $1,290, on an average, and the total debt in the country was something like 155 billions of dollars. 32 STONE MONEY FROM THE ISLAND OF YAP This "coin", weighing 120 pounds, once had the value of an 18-foot canoe, Va acre of land or about 10,000 coconuts. (From collection of the Chase National Bank, New York City) Merrily we continued, getting bolder and bolder in issuing long-term loans on the basis of quick- demand money, investing and re-investing until a man in New York became creditor to a man in the South Sea Islands, building around ourselves a high tariff wall against foreign goods — and then came the crash! The stock market collapsed in October of 1929. This was, indeed, the "shot heard 'round the world". Prices came tumbling down and our falling tower of debts threatened to destroy us. The farmer had to raise three times as much wheat or cotton as in 1920 to pay the same rate of interest on his mort- gage; the factory worker had to pay almost twice as large a per cent of his earnings on his debt. The "depression was on". Some economists pre- ferred the term deflation to depression, to indicate the general shrinkage in purchasing power as com- pared with the supply of goods. The corresponding reduction in prices enabled us to buy more for our dollar ; hence, our dollar expanded. After the beginning of the deflation, secondary factors, such as the fear psychology and unemploy- ment, began to operate. Runs on banks, forced fore- closures, hoarding, and withdrawal of gold resulted. In March, 1933, our banking systeih practically collapsed. Roosevelt Takes the Reins For all practical purposes, the President's bank holiday proclamation of March 6 meant the aban- donment of the gold standard. The Treasury would no longer redeem its currency in gold. On the con- trary, gold hoarders were compelled, under threat of fine or imprisonment, to return the precious metal that their fears had led them to withdraw from the banks. Shipments of gold abroad were practically prohibited, but the price of the dollar on the foreign exchange remained at first steady because the government was supporting it by heavy purchases in Europe's money markets. Later, when President Roosevelt placed a com- plete embargo on gold export, Europe was stunned. A trick ! It seemed as if the United States was play- ing for the advantage in the approaching World Economic Conference! But Roosevelt was taking a bird's-eye view of the economic situation at home. The gold embargo was to serve as the first step in raising prices in the home market, thus stimulating industry and increasing purchasing power of our people. The dollar quickly sank about 111/2 per cent on the foreign exchange, commodity prices jumped in the world market and farm prices rose at home. Thus a mild form of reflation was begun. The President was given the greatest authority our nation ever granted any President — the authority to inflate or deflate as he thought conditions demanded. Let us get clearly in mind what is meant by price level, since that, we are told, is the lever which we must control in order to produce stability. Reflation must be accomplished. Perhaps the figure of a scales would make the relationship clearer. A desirable price level is attained when there is a continuous balance between purchasing power and production — the price level may be high or low. If we were to place any one of the accompanying weights upon the scales, both sides of the balance would be altered. There are four factors which affect prices — demand for goods, supply of goods, volume of money, and "velocity" or speed of circulation of money. Which of these "weights" should we employ in our effort to control the price level ? Actually human desire for goods is insatiable. Some goods are overproduced, but general overpro- duction means under-consumption — lack of buying power. Demand, then, is desire backed by purchas- ing power. The total world output of goods and of services for sale increases about three per cent per year. As long as ability to buy keeps step, there is no change in price level. If purchasing power lags, then it must receive attention, rather than supply of goods. It is very difficult, moreover, to control the supply of various commodities. How shall purchasing power be increased more rapidly than production of goods and services? It must be if the price level is to be raised. The annual increase of gold output since 1924 has been only about 1.2 per cent. Produce more gold, you say. There are just two good answers to that request — first, that the world's supply of gold is becoming more and more limited and, second, that increased money is merely an idle toy unless placed in the 33 ADVISER TO TWO GREAT NATIONS 0. M. W. Sprague, ex-Harvard professor, was called to London to be adviser to the Bank of England when that country went off the gold standard — and called home by Roosevelt when we followed suit. His judgment may decide the American inflation question hands of people who will use it. May we be deliv- ered from frozen assets and hoarding ! There has been much confusion of terms in the discussion of attempts to increase purchasing power and to raise prices. Reflation means controlled infla- tion. That is, by various means, purchasing power is to be increased and prices raised from their pres- ent low level until they reach a higher level, say the price level of 1926. In that year production and con- sumption seemed to be in balance. Reflation to that level would assist greatly the liquidation of debts contracted at higher prices. Inflation, on the other hand, usually refers to rapidly rising prices pro- duced by the issuance of irredeemable paper money without any definite price level as a goal. Have There Been Other Periods of Deflation? Though the deflation of 1929 and following was the worst in our history, be not misled into thinking that it was the only one. Almost every war has been accompanied by a tremendous boom and followed by lean, hard years. Real estate bubbles have burst and caused other depressions. Always the same story has been told. Widespread disaster, especially among debtors. Recently we have heard distressed persons expressing themselves in favor of wholesale aboli- tion of debts. In 91 B. c. Lucius Drusus advocated the same practice — and received a patrician's sword through his middle. A business holiday — the proto- type of our modern banking holiday — was necessi- tated as early as 100 B. c. and the Emperor Dio- cletian inaugurated a system of "planned economy" when he decreed a list of maximum prices in 300 a. D. Then, of course, all difficulties of deflation were thought to be settled by a revolution. It was a bank- rupt treasury which led Louis XVI to establish the tactless Estates-General that fed the flame of revo- lutionary fire. After attempting to finance the war in a variety of ways, including the issue of "assign- ats" upon the rich lands of the church, in 1797, a wild siege of inflation was finally ended by burning all government currency. Increased deposits of gold discovered in the Klon- dike region and South African Rand saved the silver situation in the late 90's. Occasionally, too, techni- cal improvements in the methods of producing gold have been sufficient to offset declining prices. How Has the Balance Been Restored in Other Crises? Deliberate attempts to control currency provide about an equal number of failures and successes in outstanding experiences of economic history. The failures are always recalled more easily because of the human tragedies and comedies associated with them. "Not worth a Continental" brings to mind the ridiculous prices — butter at $12 a pound, tea at $90 a pound, corn at $150 a bushel, etc. — which followed the issuance of printing paper promises by our Continental Congress in 1775. Issuing 450,000,000 "greenbacks" — in addition to large amounts of state bank currency — sent prices soaring again after the election of Lincoln in 1860. After the Civil War, by having national banks issue notes with government bonds as security, levying a prohibitory tax on state bank notes, and authorizing partial retirement of "greenbacks", the inflation was halted. A gold reserve was accumulated and in 1879 specie payment was resumed. A well-managed inflation, on the whole, in spite of the jeers at this new kind of currency ! For extremes of success in inflation it is interest- ing to compare the post-war experience of America and Germany. Many factors, of course, make the two illustrations differ, but we may note results. When prices doubled during the World War, the United States raised a superstructure of credit through the Federal Reserve Banks, without offi- cially leaving the gold standard. Inflation was dis- guised through the sale of bonds to the public, which borrowed at banks on the security of these bonds. Then the banks discounted the bonds with the Fed- eral Reserve, which aided the government in grad- ual deflation after the war. In Germany, the great debt burden led to the creation of "fiat" (Latin, "let it be made") money — that is, "printing press" money — till the mark fell from parity of 23 cents before the war to ultimate worthlessness. Prices for even inexpensive articles began to take on the appearance of long lines of zeros in children's copybooks, and a matured life insurance policy for $100,000 would scarcely pur- chase a sandwich. In general, countries of conservative policies, like Great Britain, whose resources are large, have had fewer growing pains and suffer less from inflation. Has the New Deal Adopted a Policy of Inflation? In his inaugural address, President Roosevelt called for "a sound but adequate currency". It remains to be seen exactly how that phrase will be interpreted, but we may review briefly the recent measures dealing with management of currency. 34 Last winter the retiring Congress defeated by an overwhelming majority Senator Wheeler's proposal for bi-metallism, but the sentiment in favor of some form of inflation grew until in April a test vote on a free silver amendment of the old Bryan formula of 16 to 1 showed President Roosevelt that he would have to make a quick inflation compromise in order to prevent a rabid silver bill from sweeping the Sen- ate off its feet. The result was a kind of omnibus bill empowering the President to make use of almost any kind of inflation he thinks wise. The bill gives him the following powers, though he need not use them : 1. He may ask the Federal Reserve Banks to buy and hold $3,000,000,000 worth of Government bonds, the proceeds to reach the public either through loans of member banks, or through pay- ment of Government expenses. Credit expansion through the banks was used by President Hoover but proved unsatisfactory, for there was not sufficient confidence to make the plan operate well. The currency and credit made avail- able were not used because banks hesitated to make large loans, and business men were unwilling to borrow when no profits were in sight. 2. The Secretary of the Treasury may issue as legal tender up to $3,000,000,000 worth of United States notes to use in payment of Federal obli- gations. These notes, like the "greenbacks" of Civil War days, would not be backed by gold at present, but the Treasury would be required to cancel 4 per cent of the notes each year. Thus, it is hoped, a continu- ous flow of "printing-press money" might be checked. 3. The President may cut the gold content of the dollar by any amount up to 50 per cent. This process of devaluating the dollar is one form of reflation intended to create a price rise sufficient to adjust the relationship between money and com- modities. Since 1837 in the United States the gold dollar has been defined as 23.22 grains of pure gold. If the content were reduced to fewer grains, more currency and bank-deposit dollars could be issued on the gold reserve now held, and the purchasing power of each dollar would be less — as in 1926. A commodity dollar has been proposed. Such a plan would vary the gold content of the dollar as the index of commodity value varies. Thus a dollar would always purchase about the same quantity of commodities. The gold value of the dollar would fluctuate but its purchasing power would always remain constant. 4. The President is authorized to provide for un- limited coinage of silver at a ratio of gold to be fixed by him. This provision would probably benefit no one except the silver interests, but it prevents Congress from passing a silver bill at a ratio of 16 to 1, which would flood the country with silver. 5. The President is authorized to accept up to $200,000,000 in silver at a price not to exceed 50 cents an ounce (nearly twice its recent price) in payment of foreign debts within the next year. The silver received would be used as a basis for issu- ance of $1.00 silver certificates, which are the most common form of dollar bill in use today. Can Currency Be Controlled? The April currency issue of two billion dollars is not generally considered as inflation but merely as replacement of credit, in the form of certain bank deposits, with currency which is another kind of money. The question is as to what extent the Presi- dent will use the unprecedented powers granted him by the Seventy-third Congress. Can the boat be stopped when once we find ourselves in mid-cur- rent? Already the process of reflation is evident. Wheat, corn, and other commodities have risen rap- idly. It is hoped that the restoration of the price level will gradually bring about equilibrium in wage rates and employment. If our dollar can be stretched — that is, reduced in value — just enough to raise prices to the level at which adjustment of debts, taxes, and other charges is most nearly ef- fected, we shall be fortunate indeed. Whatever the outcome of the processes of defla- tion and inflation, we have learned from past expe- rience that balance will depend largely upon these principles : 1. Keeping the supply of money and credit in line with the production of goods. 2. Spreading benefits evenly among the people. 3. Maintaining sufficient confidence to create "velocity" or free circulation of money and credit. 4. Self-control on the part of inflation man- agement. 5. Avoiding practices that violently disturb international monetary relations. By such methods economic stability may be main- The Emergency Man — Chicago Daily News tained. Have we the patience and wisdom to go through with a planned and controlled program of inflation ? Only time can answer that question. Let us hope and work for such a program. 35 UNIT XI The Tennessee Valley Authority Muscle Shoals T?OR many years public work projects have been ■*■ political plums, the so-called "pork barrel" of politics. But recently Congress has been hit with a brand-new idea — public work projects for the relief of economic distress due to unemployment. Even this worthy aim does not justify wasteful expenditures of public money. Only such projects should be undertaken as are in themselves worth while. The development of the water power re- sources of the Nation comes within this classifica- tion. Hence, a greatly renewed interest is now shown in the St. Lawrence Waterway, the Missis- sippi Flood Control Area, the Inland Waterway of the Gulf states, the Grand-Coulee Dam on the Columbia River, the Boulder Dam on the Colorado already under way, the Casper-Alcove Dam in Wy- oming, the Tennessee Valley project and scores of other national, state, and local projects. Why shouldn't Uncle Sam develop some of these projects with the surplus labor of the country and use them for the betterment of all citizens? This was the idea that finally hit Congress. The Government Goes Into Business Once again the government, acting on this high- minded impulse, goes into business. It did a good job on the Panama Canal. Why not try to do a similar job on the Tennessee Valley and on many of these other projects? But how can the govern- ment conduct a great business and keep out spoils, graft, and politics? That is the crux of the problem. It is what makes the Tennessee Valley Authority even more significant. The government has created a board, or authority, and endowed that authority with all the power it needs to do business free from petty politics and graft. Do you understand why that is a great achievement? Can a democracv teach itself how to conduct great public enterprises as economically and effi- ciently as they can be conducted by private con- cerns ? The Tennessee Valley Authority may prove to be a convincing answer to that momentous question. What Is the Tennessee Valley Project? An act of Congress, May 18, 1933, created a Tennessee Valley Authority, composed of a board of three members, authorized to maintain and operate the properties owned by the United States near Muscle Shoals in Alabama. This must be done in the interests of national defense and for the development of agriculture and industry in the Tennessee Valley, to improve navigation on the Tennessee River, and to control the flood waters of the Tennessee and Mississippi Rivers. The passing of this act brought to a close a long bitter chapter in the history of this project with which you are more or less familiar. What Is the Story of Muscle Shoals? In 1916, during the World War, Uncle Sam could no longer depend upon other countries for the mate- rials used in making explosives and fertilizers. A few countries were obtaining nitrogen from the air and manufacturing their own nitrates. Where could we produce electricity, on a large scale, to provide the energy for that work? Government engineers decided that the Tennessee Valley was the logical place and Congress ordered construction work be- gun there. Why Was the Tennessee Valley Selected? From the standpoint of power production in the southeastern part of our country, the Tennessee is probably the most important stream. Its head- waters are high in the Appalachian Mountains of Virginia but its real beginning is the union of the 30 French Broad and Holston rivers about four miles above Knoxville. Its fall is 660 feet in its length of 700 miles. At Muscle Shoals the fall is 134 feet in 37 miles. This downward rush of water gives the river an immense amount of potential energy. A dam at Muscle Shoals would provide "head" or power for the production of electricity on a large scale; therefore that site was chosen. Is the Valley Important Otherwise? The Tennessee basin covers an area the size of the State of Ohio. The region is largely mountain- ous supplying ample water flow and offering dozens of opportunities for further flood control and power sites. The potential power possibilities of the entire basin would be rated in millions of horse power. There are also millions of tons of coal, high-grade iron ore, and many other basic and important indus- trial minerals here. The region is well supplied with transportation facilities and is within easy reach of large and important centers of population. There is every reason to believe that this valley, if it be developed, will be one of nature's self-contained sources of human happiness. When the World War Was Over In 1918, nitrate plant No. 2 at Muscle Shoals was completed at a total cost of $130,000,000. It has been idle since. Plant No. 1 was never completed and has been a worthless investment. The great Wilson Dam begun in 1918 was finished sporadi- cally after two years of bickerings in Congress. And then the whole outlay was only a white ele- phant on our hands. What could we do with it? For fifteen years Muscle Shoals was the Congres- sional football of both political parties and of the various utility, fertilizer, and public power groups. Emphasis at first was on national defense. After the Great War it shifted to improvement of naviga- tion on the river. Later came the idea of flood con- trol and the cheap production of fertilizers. The latter idea dwindled down to the notion of using this $150,000,000 plant for experimental work in the production of new and better fertilizers. Any small but good laboratory would serve that purpose. In the meantime great electric power companies sprang up all over the country. In Congress storms were frequent over the granting of power rights on important streams. Finally, the people became in- terested in the cost of producing electricity, as well as its selling price, and the battle began. Senator George Norris, and his associates in 1922, began the fight for government operation of the plant. They were still battling away in March, 1933, when the extent of the depression and its effect on the people finally gave Congress a new idea. Why not complete the project as a means of unemployment relief? What Can Be Done at Muscle Shoals? The basic unit at Muscle Shoals is the Wilson Dam. This dam was built for the possible installa- tion of 18 electric generators with claimed capacity of 610,000 horse power. That is enough to take care of 18 cities of 100,000 population each. When com- pleted the project could enrich the vast territory illustrated on the map. The transmission radius is estimated at 350 miles. Muscle Shoals could reach all the territory from Cincinnati to New Orleans, approximately 700 miles. All or parts of 16 states would be affected by this power plant. At present there are eight generators, four with i \ ILLINOIS [INDIANA | OHIO \ V \ \ _ i The 700-Mile Circle To Be Reached by the Tennessee Project a capacity of 30,000 horse power each, and four with a capacity of 35,000 horse power each. The above total capacity may also be vastly increased by the construction of the authorized Cove Creek Dam on the Clinch River near Knoxville, Tennessee. Further additions may be made where flood control dams are later located on the smaller rivers, and by the absorption of the holdings of present private power companies. The figures on power capacity are disputed by engineers who claim that the primary power (power that is available practically continuously) of the completed project is only 242,000 k. w., or 322,000 h. p., which is sufficient to furnish less than one-eighth of the total electrical power now used within a radius of 350 miles. Cincinnati alone requires 270,000 k. w. Therefore, as a power plant, Muscle Shoals will be a wasteful public expenditure. (See report of M. C. Tyler, U. S. Army, August 27, 1931, on "Lease Value of Muscle Shoals", and report of October 29, 1931, on "Cost of Transmitting and Selling Muscle Shoals Power".) How Will This Big Job Be Administered? In order to complete this gigantic project and put it into production some administrative set-up is necessary. It must be efficient and at the same time, safe from graft and corruption. To secure this, the enabling legislation provided for the organization of a corporation called "The Tennessee Valley Authority" with a board of three directors chosen by the President and confirmed by the Senate. The chairman of the board has been named in the person of Arthur E. Morgan, President of Anti- och College. His two associates are Harcourt A. Morgan, President of the University of Tennessee, 37 and David E. Lilienthal, lately Public Service Com- missioner of Wisconsin. Lilienthal, only 34 years of age, has made a fine record as a fearless, able, pub- lic official. The two Morgans are experienced ad- ministrators with unique preparation for this par- ticular job. Arthur E. is an engineer, first and fore- THE GREAT WILSON DAM With the navigation lock in the foreground most, rather than a college president; he planned and superintended 75 water control projects (in- cluding the one on the Miami River, to prevent a recurrence of the Dayton flood), and drew up the drainage codes which have been adopted by six states. Harcourt Morgan has for twenty years gone up and down the Tennessee Valley advocating the very plan which President Roosevelt has now adopted, and which we shall shortly explain. If the government goes into business it must make sure, as in the digging of the Panama Canal, that political management does not ruin the project. To do this a great corporation is created by the gov- ernment and clothed with authority independent of further political control. This takes it out of poli- tics. The Tennessee Valley Authority is significant because it shows how the government may enter the field of business on a strictly non-political basis. The board is to have wide powers in the develop- ment of this mammoth enterprise. With the Presi- dent's consent the board may build all the dams, power houses, reservoirs, and transmission lines it pleases. It may buy and sell real estate; exercise the right of eminent domain; dig canals; engage in navigation projects and flood control; and pro- duce, sell, and distribute electric power. It may con- tract for the sale of fertilizers and power at what- ever rates it pleases, and may even discriminate in serving different localities, but it must manufac- ture and sell explosives to the government at cost. In the development of fertilizers, nitrates, and power on an experimental basis the board has free access to the patents filed in the United States Pat- ent Office. It shall sell the $50,000,000 worth of fifty-year bonds at S 1 /? per cent to finance the busi- ness. In fact, the only limit to their activity in the Tennessee Valley is the amount of money appropri- ated for the work. Can It Be Kept Out of Politics? The directors of the Tennessee Valley Authority are appointed for a term of nine years at a salary of $10,000 a year, together with the use of one of the government houses at Muscle Shoals. The long term, to which they are appointed, is designed to keep the project entirely out of politics. This board of three may appoint all other em- ployees "without regard to the Civil Service laws." The salary of any employee may not exceed that of a member of the board. This means that the sole power of construction and operation is placed in the hands of the board of directors. With officers vested with so wide authority, it is but natural and necessary that definite safeguards be placed around their appointment in order to pro- tect the government against possible scandal. This has been done by stipulating that no director can have any financial interest in a public utility corpo- ration nor in a corporation making fertilizer. "Nor shall any member have any interest in any business that may be adversely affected by the success of the corporation." Evidently this provision removes from appointment to the board a list of men who by training and experience are well qualified to sit on the board, but Congress has not seen fit to risk the prejudice of one who is financially affected by the project. The Act further says that "All members of the board shall be persons who profess a belief in the feasibility and wisdom of this Act." This is a new demand made upon candidates. At least, it is inter- esting. Is This Project Worth While? Will the construction of such an independent sys- tem, as that at Muscle Shoals and Cove Creek, dupli- cate transmission facilities now ample to serve the region? In the Tyler report made to the Muscle Shoals Commission sponsored by President Hoover, it was shown that it would. Eight companies and thousands of investors would be adversely affected by the competition created. Stock and bond values have already declined, due to an announcement of the project. The whole outcome, whether it results in wholesome competition for the purpose of regula- A BATTERY OF GIANTS A view in the power house at Muscle Shoals 38 MOUNTAINEERS HOME IN THE TENNESSEE VALLEY IN With few exceptions, everything in sight could date from 1733 1933 tion, or whether it results in cutthroat competition depends on the Tennessee Valley Authority. Power generated at Muscle Shoals will do for industry and agriculture in the South what simi- larly developed power from Niagara Falls has done for certain Canadian communities. Why Is This a Great Social Experiment? Six million men, women, and children live in the area affected by this project. They include what are probably the most neglected people in America — the mountain whites of Kentucky, Tennessee, West Virginia, and Virginia. They are a rugged pioneer people, of pure stock and high natural ability, who have lived outside the circle of modern progress. "Backward" they have been called. They live in the past century — in arts and crafts, speech, home com- forts, tools, education, and medical care. To reach these people and give them the benefits of modern progress without the curse of sweatshops or slums is the aim of the New Deal for the Tennes- see Valley. That is why this project can be called a Great Social Experiment. Even from the start, Dr. Morgan plans to pro- mote rural life along with his construction work. Twice as many men will be hired as needed for the actual labor of construction. Each man will work three days a week as a paid laborer, leaving three days in which to till and tend a two-acre farm which will be provided by the government. Dr. Morgan's plan calls for the industrialization of the Tennessee Valley, not by rearing great crowded cities, but by encouraging the building of countless small industries, near enough to the people to permit part-time industrial work, along with their farming. Schools for adults as well as children are part of the project. Better roads, bridges, med- ical centers, dental clinics, abundant power for lighting, and pumps, and common 20th century com- forts for a hundred thousand neglected homes. Cheap power for hundreds or thousands of small shops and factories will give full- or part-time labor to a million workers, swinging them into the stream of American standards of living for the first time in a hundred years. Such is the vision of the New Deal — an experiment in Social Planning, and a pos- sible forerunner to national planning, which Presi- dent Roosevelt has intrusted to the Tennessee Valley Authority for fulfillment. 39 UNIT XII Happy Days for 300,000 Men Civilian Conservation Corps JUST think of it ! An army of 300,000 men in our country in times of peace! It is, indeed, an un- usual occurrence, and all planned and mobilized in less than three months ! It is but one division of the Neiv Deal about which we are hearing so much. Our Forest Army Encamped The members of this army, mostly young men, live in tents in 1,433 camps spread over the United States. Most of the camps are located in our Na- tional Forests where 161,000,000 acres of timber land and water projects invite them to work. GOOD, CLEAN, WHOLESOME CAMP LIFE C. C. C. camp scene in Texas, May, 1933 This is a curious army fighting a curious war. They carry, not guns and hand grenades, but spades and mattocks, axes and saws. They wear overalls instead of uniforms. They do not destroy. They construct. Regular U. S. Army officers are in charge of these camps. Again, we see a curious condition. There is no rigid military discipline. This type of warfare does not require it. This is a battle with nature, where physical fitness and mental alertness are the principal weapons, and where the enemy may be a forest fire, a flood, a scourge of insects, or a barren tract. This army is known as the Civilian Conservation Corps * the C. C. C. It is working for Uncle Sam, who provides food, clothing, medical services ; and wages, most of which are sent back to poverty- stricken families at home. Although the Act as passed by Congress does not specify the wages to be paid, the amount now is $30 per month, of which $25 is sent to the family of the worker. For practi- cally every man enrolled, a family is removed from the relief rolls of a city or town, somewhere. These boys range from 18 to 25 years of age in eastern camps, and from 16 to 69 years in Camp * Created by an Act for the relief of unemployment through the per- formance of useful public work, and for other purposes. Seventy-third Congress. Approved March 31, 1933. Radford in California. These men, coming from every state and almost every city in the country, are from all walks of life. In one camp was found one or more of each of the following: physician, electrician, locomotive fireman, roofer, toolmaker, radio operator, civil engineer, logger, miner, sailor, bookkeeper, salesman, restaurateur, and teacher. What Is Its Purpose? As a part of the New Deal proposed by President Roosevelt, the Civilian Conservation Corps was cre- ated for the purpose of giving profitable work to a portion of the unemployed younger men of our country. This is a big job. It involves the building of 13,000 miles of forest telephone lines ; 900 miles of firebreaks; 11,700 miles of range fences; 3,600 miles of forest highways; 54,500 miles of minor roads and trails; 2,600 fire protection structures, and the clearing of 1,465,000 acres of fire hazards. The U. S. Forest Service has 1,000,000 man-months of work waiting to be done by the C. C. C. To aid the U. S. Forest Service Department in carrying out this vast project, a new volunteer army, ready and willing to do the work, was formed and sent into the government reserves. The work was begun in the spring of 1933. Although the purpose of these forest work camps is primarily unemployment relief, this relief is nei- ther charity nor a dole. It takes the form of useful work, hard work, with very distinct advantages both to the Government, in conserving its natural resources, and to the worker and his dependents in providing a healthy livelihood. Of the two, the latter advantage is by far the more important. Off to the Day's Work 40 Besides relief in the form of "keep" for the worker and a small monthly income to his depend- ents, certain other advantages accrue to both. New associations and a new environment effect an almost immediate change. Not so threatening is the struggle for existence ! Not so deadening and ener- vating is the threat of prolonged idleness with its consequent loss of energy and zeal ! Not so ruinous to morale is the feeling of a lack of confidence by Others, and a loss of confidence in self ! The plan itself has certain other practical advan- tages that cannot be ignored. Here is a partial list of them. Can you think of others ? 1. It provides work in great quantity. 2. It is work that can be done by untrained men. 3. It will be both directly and indirectly valuable. 4. It does not interfere or compete with any other industry. 5. It conserves our natural resources. How Was This Mobilization Accomplished? The Department of Labor selected and will con- tinue to select the workers. The Interior and Agri- cultural Departments have picked camp sites, planned work, and are supervising working hours. The War Department has had the job of enrolling the men, giving medical examinations, giving pre- liminary training in regular army camps, building and equipping the forest camps, transporting the workers to their destination, and supervising camp life. Each large city has its examining officers who, at regular stated times, examine recruits for this working army. If those accepted for the camps are not too far away, they are transported in regular army trucks, otherwise they are sent by train. Where Are the Camps Located? These camps are scattered over the whole coun- try. The United States is divided into four great sections with 300 camps in the Eastern States, 300 in the Central States, 325 in the South, and 450 in the West. Each section is divided in corps areas. For in- stance, the Fifth Corps Area takes in most of Ohio, TRANSPLANTING YOUNC FIR TREES A STRANGE ARMY BEARING STRANGE WEAPONS Note the sack of seedling trees carried by each man Kentucky, Indiana, and West Virginia. In this area there are 71 camps and 13,500 men. In Ohio alone there are 18 camps accommodating 3,800 men. The 1,433 C. C. C. camps in the United States are located as follows: 591 in U. S. National Forests; 62 in U. S. national parks ; 18 on other federal lands ; 321 in state forests ; 100 in state parks ; 219 in pri- vate land forests, 122 in erosion and flood control areas. On July 1, 1933, these camps enrolled 274,375 unemployed men and 25,000 war veterans, a total of 299,375. Who Controls the Camps? Camp life is under the supervision of regular army officers assigned from the various army head- quarters located in the different corps areas. Gen- eral orders come, of course, from the War Depart- ment at Washington. The Director of Emergency Conservation Work (salary, $10,200) is Robert Fechner, 57, of Massa- chusetts, a vice president of the International Asso- ciation of Machinists. Would You Like To Visit This Camp? Let's look in upon a typical C. C. C. camp and see what it is like. Here is a fine camp site with good drainage, where the land has been cleared and leveled. There are rows upon rows of regular army tents. Some are sixteen by fifty feet and contain sixteen army cots, eight on a side, with foot toward a center aisle and head toward the side of the tent which is raised in good weather. Other tents are 41 smaller. For summer the army furnishes each man with a mattress, four sheets, two blankets, and a pillow. Everything about the camp is orderly. There is an extra tent used as a storeroom. Another is used as a cook tent in which we see two field ovens and grills set in a concrete foundation. The men work eight hours a day and are at leisure sixteen hours for eating, sleeping, and recreation. Suppose we go with them today : Reveille is at six o'clock. Beds are made and tents are put in order by breakfast time at six-thirty. The men file by the cook tent with their regular army mess kits and receive fruit, cereal, meat, and coffee. A rest period follows ; then roll call with instructions for the day and away to work. The men return at twelve o'clock for lunch, unless working too far from camp, in which case they Forestry Work Makes the Cook a Popular Man carry their food. Dinner, usually at five-thirty, con- sists of the following : meat, two vegetables, salad, bread or hardtack, and a pastry dessert. From five to nine p.m. the men are free to spend the time as they choose. After nine o'clock there is general quiet as work in the forest causes most men to go to bed early. How Is Leisure Time Spent? The general welfare of the men is considered very important. At the head of each Corps Area is a Wel- fare Officer who reports to the Commander the con- ditions in the various camps. He is assisted by a Corps Area Chaplain and local ministers, when they are available. It is their task to hold religious serv- ices, to create a wholesome atmosphere, and to en- courage morale, and good order. At the close of a day the men may enjoy motion pictures, if camp facilities permit, the Forestry Service furnishing them. From one hundred to one hundred-fifty books circulate monthly in each camp. Daily papers, both sectional and national, are sup- plied in reasonable quantities. Finally, a radio brings the outside world to these public benefactors as they rest and read. For those who enjoy sports, group athletics are provided and most men take some part in them. In addition to these many services, instruction in Forestry by members of the Forestry Service is provided, and for those who desire it, general or vocational educa- tional courses are given. The great outdoors is a wonderful workshop for youth. What Does This Army Do? Groups of twenty usually work together under the direction of one man from either the Depart- ment of the Interior or the Department of Agri- culture, together with one experienced local woods- man. The army officers always remain in camp. The men may plant trees, pines and spruce mostly, in areas that have had forest fires or they may plant entirely new areas. Of course the planting is done in season. One of the most important jobs is fire prevention. The men build strong high watch- towers from which rangers are always on the look- out for fires. They construct telephone lines by which the rangers can summon help or notify their neighbors. They cut fire trails through the forest so that fire fighters can travel quickly to a starting blaze. Others clear underbrush and chop out dead trees so that fires cannot make rapid headway. Back in camp there are always some who cook, prepare food, chop wood, and do clerical work. Occasionally K. P. duty is done as a punishment for misconduct. Serious misconduct is punishable by deducting from the thirty dollars per month allowed for each worker. This fine is not taken from the approximately twenty-five dollars sent from head- quarters directly to the worker's family, but from the remaining five dollars which he receives for spending money. How Long Will They Serve? The first quota of men enlisted for six months only. At first it was ruled that no re-enlistments would be permitted. But this rule may be changed. Reports from the 1,433 camps are so encouraging that many camps will be maintained throughout the winter of 1933-34 and perhaps longer. Originally it was planned to keep these camps open for a period of two years. The Forest Service predicts that its recent ten-year program will be completed by 1935. A worker is free to seek his discharge from the C. C. C. whenever he has another job awaiting him. Is It All Worth While? The estimated cost for the first year, according to Budget Director Douglas, will be $250,000,000. A half-million to a million workers will share in this amount depending upon re-enlistment plans. Reg- ular Army officers who would otherwise have been discharged are being kept for this project. Surplus army material is being used. About one per cent of the men have deserted. Some are dissatisfied with the food and some com- plain of lack of recreation. But for every one who "skips out" ninety-nine stay and work. Robert Y. Stewart, Chief of the United States Forestry Serv- ice, says: "This great project is relieving hunger and distress, restoring hope and self-respect. It is giving a clearer eye, a stouter heart, and a faith in the future." 48 UNIT XIII Saving the Home Owner i Is Your Home Free from Debt? T is terrible to lose your home. You probably know of some families who have lost their homes through fire, floods, earthquakes, and tornadoes. Recently you have been reading in the papers about people losing their homes through foreclosures. Foreclosure is the forced selling of a house to pay off a debt (mortgage) which the home owner is unable to pay when due. There are 21 billion dollars' worth of mortgages against homes in the United States. Can You Save Your Home? The United States Government is going to help home owners who are threatened with foreclosure. Help will be given to two classes of home owners. First, those who are unable to pay off their mort- gages. Second, those who are about to lose their homes because they have failed to keep their taxes paid up (i.e., their taxes are delinquent) and those who need to refinance immediately to prevent fore- closure. This help will come through loans from the United States Home Owners' Loan Corporation. Where Does the Corporation Get Its Money? The Corporation has $200,000,000 capital stock subscribed for by the United States Treasury. It also has authority to issue $2,000,000,000 in bonds running eighteen years at four per cent interest. The interest on the bonds is guaranteed by the United States Government, but not the principal. The government is extending its credit to help re- store prosperity. It expects to be paid back during the eighteen-year period. Homes Eligible for Loans No loan will be made upon a home having an appraised value of $20,000. No loan will be made for more than $14,000. The mortgage must have been in effect or the taxes delinquent on or before June 13, 1933. How Does This Benefit the Home Owner? The Corporation will take up the existing mort- gage and make out a new one. The new mortgage will run for fifteen years, at five per cent interest, when bonds are used to redeem the mortgage. If it becomes necessary to redeem the mortgage in cash, six per cent interest will be charged, instead of five per cent. Loans made to homes for delinquent taxes are made upon the same basis as those loans to take up mortgages. If the home owner is unable to make payments of the interest or on the principal, both may be de- ferred for a period of three years. But the home owner must pay the mortgage and he is given 18 years in which to do this. Who Administers This New Law? The provisions of this law will be carried out through the Federal Home Loan Bank Board. There will be a general manager and assistants appointed for each State. The States are to be subdivided into districts and assistant managers placed in charge of each district. Thus, for the next Can He Put Out the Fire? — Columbus Citizen fifteen to eighteen years Uncle Sam will have his paid agents in the counties and cities of each state for this purpose. This may mean a large number of new jobs. One man estimates it as high as 25,000 jobs at an annual expense of about $75,000,000. How Can You Secure a Loan? Get the name of the Assistant Manager in your district from the local newspaper. Go to this man or write to him for an application blank. Get him to help you fill out the blank, then send it to the Gen- eral Manager. If he approves the application, the title to property will be investigated. If the title to the property proves to be clear, the property will then be appraised. The loan will be made upon the basis of the appraised value. In case you want to learn more about this law ask some friend who knows, or who knows some one who knows. Do not pay anyone to do anything except for the legal transactions that may be necessary. 43 ■ ■Mjat Another Life Preserver Needed — Brooklyn Eagle How Much Will the Corporation Lend? The Corporation will lend up to 80% of the ap- praised value of the property. But the loan must not be greater than $14,000. If the holder of the mortgage refuses to accept bonds, the Corporation will lend in cash up to 40%- of the appraised value of the property. Building and Loan Associations Established In communities where no Building and Loan Associations exist, Congress provided for the estab- lishment of Building and Loan Associations under national charter and supervision. To encourage such Associations the Corporation will subscribe for fifty per cent of the stock. This money will become available as fast as the local incorporators pay in their subscriptions. This law makes available easier credit facilities. It gives opportunity for all communities to have federal money to lend to the people to build, to buy, or to improve their homes. It is to encourage thrift, and to build up a great cooperative financial structure, dealing strictly with homes. Do you think Uncle Sam will get his money back? Is this a self -liquidating business proposition? How the Plan Works Mr. A owns a home and lives in it. Unfortunately it is mortgaged. The house is valued at $10,000. The mortgage is for $7,500 and is past due. His neighbor who holds the mortgage needs cash or its equivalent, and yet he does not like to sell out Mr. A. Now Mr. A applies to the assistant manager in his district who furnishes him with a blank. This assistant manager also helps to fill out the blank so it will cost nothing extra. The mortgage was on record on or before June 13, 1933. Now Mr. A makes an agreement with his neighbor who holds the mortgage to accept $7,500 of the bonds of the Corporation. The mortgage is made out to the Cor- poration and Mr. A has fifteen years to pay it off at 5 ' r interest. He must begin to pay on the mortgage at the end of three years. The payments may be monthly, quarterly, semi-annually, or annually, depending upon the agreement. Mr. A must still pay his debt. Suppose the neighbor will not take the bonds but demands cash. In this case if the debt is more than ^ 40% of the appraised value of the property, nothing can be done about it. But suppose the debt was for $3,500. The Corporation will lend cash for that amount and the owner will sign a new mortgage running fifteen years at 6% interest. The criticism has been raised that bonds like these, the principal of which is not guaranteed, will not sell readily. Also, the cost of administration will be so great that the interest money will be used up largely in the administration of the act. Finally, this aids at best only 2 out of 21 persons needing it. Watch the newspapers and magazines to see how well this idea works. It is an experiment that Uncle Sam has never before tried. Drawing by Hendrik Willem Van Loon ; Courtesy Survey Graphic "Do you mind my smoking?" "No. Go ahead. I'll be smoking myself in a moment.' 44 UNIT XIV The Iron Horse at the Trough Emergency Railroad Transportation Act THE railroads of the United States annually carry more than a half-billion passengers, and nearly two billion tons of freight. They represent a total investment of more than 26 billion dollars. That much money in one-dollar bills placed end to end would go around the world one hundred times. The railroads employ more than a million and a quarter people whose annual wages and salaries amount to nearly 2*4 billion dollars. The average yearly wage of an employee is about $1,600. Com- pare this with the average annual wage of truck drivers which is less than $750, or with that of school teachers, which is about the same. Also note that the new railroad code limits the decrease in the number of employees and says there shall be no drop in wages. It is clearly evident that the prosperity of our country is tied up with the prosperity of the railroads and that their prosperity means a lot of bread and butter spread well over the whole United States. It is also evident that this is a "big" busi- ness — one that will challenge government manage- ment in no small way — if it be attempted. Spreading the Gospel of Opportunity In a great many ways the trunk line railroads and their branches have carried the nation's life stream. By the promotion of travel and settlement they have helped our nation grow westward. They have tied the most progressive sections of our country to- gether and have linked end to end the great cities they helped to build. They have brought the pro- ducer and his goods to larger and better markets. With all their faults and failures the railroads are the Gibraltar of American business. A state- ment of the Interstate Commerce Commission says : "The railroads now furnish the backbone and most of the other vital bones of the transportation sys- tem of the country, and we believe this will be the situation for a long time to come. We are not im- pressed with the thought that they are doomed, in anything like the near future, to go the way of the stagecoach and the canal." There is the promise of still greater opportunity when the railroads get up steam again and the country rolls along in greater economic security. Toot! Toot! Who Paid the Bills? When railroads were first being built, govern- ment aid was generously extended. By the year 1932, the Federal Government had given the roads 128,000,000 acres of land. This is an area 3 times larger than the New England States combined and but little less than the total acreage of Ohio, Indi- ana, Illinois, Michigan, and Wisconsin. It is about 9/10 of the area of Texas. More than half of the land of the States bordering on Canada from Lake Michigan to the Pacific Coast was given to private concerns in aid of railways and wagon roads. "The Union Pacific Company alone secured a free right ofway through the public domain, twenty -sections of land with each mile of railway and a loan up to $50,000,000 secured by a second mortgage on the company's property." About half of New Mexico, Arizona, and California was given outright to rail- Courtesy Pennsylvania Railroad The Modern Iron Horse Pulls a Long Load way corporations. These lands were then almost vacant and sold at an average of only 94 cents an acre. In return the Government drove a good bar- gain by securing in perpetuity reduced rates for governmental troops, supplies, and special rates on mail transportation which to date amount to several times more than the then value of the land grants. The loans to railroads were mostly repaid at a fair rate of interest. Greed Runs Rampant The first railroads were short lines chartered by the States in which they were built. Often these charters placed no limits upon passenger or freight rates, and offered few sound restrictions of any kind. Some of their "shall nots" now sound very simple and foolish. For example, the New Jersey Legislature passed a law attempting to regulate traffic which read : "When two trains meet neither shall go forward until the other has passed by!" The charters were frequently unlimited in time. Soon the railroads were extended into other States. The corporations controlling them became very big and influential. They fixed their own rates, often favoring one part of the country and causing losses to other parts. They could extend favors to big shippers at the expense of the little ones. If there was only one railroad in a district, it could charge very high rates. Often competing lines were built parallel to each other between cities. In many cases, goods were then carried at a loss. The more powerful railroad could thus "freeze out" the smaller one by rate-cutting procedures. Occasion- ally the competing lines agreed to pool their traffic and proportionally share the money received. They would then raise their rates to exorbitant heights. Congress received many complaints about these and other similar practices, and finally decided that interstate railroads should be regulated by the gov- ernment. The Interstate Commerce Act of 1887 was passed for this purpose. From that time to this, the government, by a succession of acts, has at- tempted to regulate the activities of railroads. Under Uncle Sam's Watchful Eye From 1887, when the Interstate Commerce Com- mission was created, down to the present day, the steady tendency has been to regulate more and more of the activities of the railroads. The rates for What Are We Going To Do About It? — Columbus Dispatch freight and passenger traffic, the hours and condi- tions for labor, the wages of workmen — even the bookkeeping systems which the railroads must fol- low — are the subject of governmental scrutiny and may not be changed without the approval of gov- ernmental commissions. In 1917, by Presidential proclamation, railroads were taken under the wing of the Federal Govern- ment for the duration of the World War. They were turned back in bad financial condition at the close of the war. Return to Private Control In 1920, the Transportation Act gave the commis- sion authority to fix rates and supervise mergers. Persons were prohibited from being officials or directors in more than one company unless so authorized by the commission. One-half the earn- ings of any carrier in excess of six per cent on the value of its property was to be returned to the com- mission. Here it was held as a contingent fund. The other half was held by the companies to be used for specified purposes. This was known as the Recapture Clause. The commission was also given power to authorize construction or discontinuance of lines. This brings us down to March, 1933. The Iron Horse at the Trough In the past, railroads have had large incomes. In 1916 the annual net income was 28.9 cents of each dollar received from the public. From 1911 to 1924, only twice was the annual net income under 10 cents of each dollar taken in. In 1924 it was 16.4 cents. Although the railroads still hold 85 per cent of the business, new kinds of transportation reduced their net income noticeably. The present depres- sion has in most cases wiped it out completely. In- efficiencies within the systems and reckless com- petition have drained them white. Here are some of the reasons for our great national concern : The earnings, last year, of 131 carriers did not meet their fixed charges. The Class One carriers, 162 in number, as a group, were more than $217,- 000,000 short of meeting their fixed charges. Many of them did not even make their operating expenses. Besides this, there are current obligations and deficits of $350,000,000. Loans of $105,000,000 from the Railroad Credit Corporation and $381,- 000,000 from the Reconstruction Finance Corpora- tion have about used up the resources of most roads. There are also $370,000,000 worth of outstanding notes to be paid in 1934. Then, too, they owe the banks large loans. It is interesting to know how fast these debts are being paid. The R.F.C. life saver thrown to the rail- roads in 1932 totaled more than $381,000,000. Up to July 1, 1933, only about $50,000,000 had been re- paid. Of the 67 different railroads borrowing from Uncle Sam through the R.F.C. only five have fully repaid. But the record in the past indicates that most if not all of these loans will be repaid and at a fair rate of interest. In addition there is obsolescence of equipment and deterioration. Obsolete equipment will not produce ton-miles and passenger-miles economi- cally. Engines and cars of all kinds must be scrapped or service will suffer and life be en- dangered. Here is an example of the effects of deterioration. Seventy-five million ties, more than a year's need, should be replaced at once. It takes six months to season ties. By that time 125,000,000, or more, will be needed. What a job for the individual woodsman — the farmer who cuts, shapes, seasons, and hauls the millions of ties. What a job for labor! Let's hope they find the money to do it. But remember the financial picture : $2,077,000,000 approximately, for maintenance only, in 1929; $978,000,000, or less than half that much, in 1932. You can easily see 46 how obsolescence and deterioration are bound to disturb all concerned. And now the most important thing of all. The reduction of the income of railroads has affected the wages of more than a million railway employees. Many of them have been permanently laid off and others have had only part-time work. Nearly all have had reductions in wages. Many stockholders, too, are not receiving dividends on their stock. It is evident that the economic security of a very great number of persons has been endangered by the re- duced income of railroads. What will be done to bring back the health of our Iron Horse? It must not die ! Uncle Sam Takes Hold of the Halter With these things in mind, Congress passed the Emergency Railroad Act of 1933. The Emergency Railroad Transportation Act is a part of the New Deal's program to restore normal economic conditions to the railroads and the public. The act is divided into two parts. The first part creates a Federal Coordinator of Railroads for one year. The President may extend the time another year by proclamation. The Co- ordinator is to be appointed by the President with the consent of the Senate. It is the duty of the Coordinator to divide the rail- roads of the United States into three groups — Eastern, Western, and Southern. These groups are to have regional coordinating committees of seven members. Five members of each committee shall be appointed by railroads composing a particular group. One railroad may not have more than one member on any committee. The Coordinator is to select the other two members. One is to represent railroads whose operating revenue in 1932 was less than $1,000,000; the other is to represent electric railways. The Coordinator is to operate through these regional committees. If the committees refuse to act, the Coordinator may make and enforce orders consistent with public interest, which is the only measure of fairness in any business act or practice. The new Coordinator is not a dictator. The Govern- ment is only saying to the railroads, "Make your- selves efficient. Instead of hindering, we stand ready to help. Get together without fear of the anti- trust laws, and work out your own salvation. Co- operate, coordinate, and economize. You are going to have the fairest sort of field." Any complaints may be appealed to the I.C.C. for a decision. A de- cision of the I.C.C. may be appealed to the courts for a final hearing. Labor Is Protected The act provides that the number of employees shall not be reduced below the number employed in May, 1933, except that an annual reduction up to five per cent of that number may be made through deaths, normal retirements, or resignations. The act further provides that the pay of employees is not to be reduced. Thus economic security is as- sured to a million and a half workers and their families. The railroads are to pay the expenses of the ad- ministration of the act. An assessment of $1.50 for each mile of railroad operated on Dec. 31, 1932, is to be used for this purpose. The second part of the act repeals the "recap - Ups and Downs -Dallas News ture clause" of the Act of 1920. It eliminates the requirement that the commission is to consider the effect of rates upon traffic, public needs for ade- quate service, and the needs of the railroads for enough revenue to provide such service. The Interstate Commerce Act is amended to give the commission authority over railroad hold- ing companies. The commission's control of merg- ers and consolidations is broadened. The Valua- tion Act is amended to provide for the maintenance of current valuation information. Purposes of the Emergency Railroad Transportation Act The purposes of the Emergency Railroad Trans- portation Act may be divided into three classes as follows : 1. To encourage and promote or require action on the part of railroads to avoid unnecessary dupli- cation of services; to permit the joint use of tracks and terminals; to eliminate routes only with the consent of railroads having these routes, or upon order of the Coordinator ; to control allowances and accessorial services and the charges made for them; and to prevent all wastes and preventable expenses possible. 2. To promote the financial reorganization of the railroads so that their credit will be improved. 3. To provide for study in ways and means of improving transportation in all its forms. 4. To provide all these protections for the time being, in order to serve the present situation while a new and more adequate railroad bill is being formulated. This act is only temporary and is intended to strengthen the present condition of railroads. When Congress meets in January, 1934, the Presi- dent will have a complete plan to present to it. This plan will provide for the regulation of all kinds of transportation. President Roosevelt has asked a 47 number of railroad experts to help him get his plan ready. More will be said about the plan in connec- tion with the section on the "Research Staff". Who Is at the Throttle? It was a hard task to select someone to be the railroad Coordinator. He had to have keen busi- ness qualities. He also had to have the ability to work with and through people. Then, too, he had to be someone desirable to the railroad people as well as the Federal Government. Mr. Joseph B. Eastman was selected for the post. Mr. Eastman had been a competent member of the Interstate Commerce Commission for many years. The Coordinator Organizes for Work The railroad activities will center in three Re- gional Coordination Committees. You have been told what these committees are like. It is the duty of the Federal Coordinator to work with these com- mittees, although he may act independently of them. The Coordinator's own organization will be lo- cated at Washington. The work will be divided in units. One section will deal with the modernization of freight service to meet changed conditions brought about by other transportation agencies. Passenger service will be the problem of another section. Another unit will be called the Section of Pur- chases. It will attempt to standardize materials, supplies, and equipment. Purchasing practices in general are to be simplified. A fourth unit will be called the Section of Car Pooling. It will consider how extensive the pooling of equipment should be. It will also consider means of reducing empty-car mileage, improving car repair practices, and the question of car rentals. More Brains In addition to the central and regional organiza- tions, the Coordinator is to have help of a different kind. This help is to come from a group of experts known as a "Research Staff", another "Brain Trust". With the help of the Research Staff, the Coordinator is to make certain recommendations for the improvement of railroads to the Interstate Commerce Commission. The I.C.C. will then pre- sent the recommendations to the President and Congress, as a basis for possible legislation. Among the problems of the Research Staff are railroad unification, future credit of railroads, and the regulation of other transportation agencies. Still other studies will include the relation of the government to railroads, proper relations between all transportation agencies, and the control and im- provement of their labor conditions and relations. Of course, many other studies will be made by the Research Staff, and the results of these and similar studies are to become a part of the proposed legis- lation the President plans to present to Congress in January, 1934. Coordinating All Transportation Lines The railroads have always been in competition with other types of transportation — highways, waterways and the like. The development of avia- tion and invention of the gas motor added motor vehicle traffic and airway traffic to the list. These are very important rivals. The administration at Washington has promised to support legislation that will help to regulate this competition. This will be done at the regular session of Congress in Jan- uary, 1934. Many railroad men believe that the regulation of all transportation will increase the incomes of the railroads. The Railroads of the Future The railroads are planning many changes in methods and equipment. These changes will be of interest to many people. They will offer opportuni- ties for alert-minded men. Some of the changes contemplated are as follows : 1. A change in the collection and handling of freight so that service may be from door to door. 2. New designs in passenger cars, Pullman cars and equipment that will increase the speed and economy of railroads in competition with motor vehicles and airways. 3. Better handling of less than car-load freight to put it on a paying basis. 4. A greater degree of consolidation so that obso- lete services may be done away with. 5. Pooling of services for the saving of money. 6. New devices in signaling. 7. Means of putting passenger business on a pay- ing basis by speeding up the service. 8. Research in merchandising and purchasing. 9. How competitive commercial sales methods may be applied to railroads. It looks as though railroading has entered one of its most interesting periods. The near future will probably offer more opportunities for intelligent and hard working railroad employees than have existed for many years. SPEED AND ECONOMY MAY SOLVE SOME OF THE RAILROAD'S PROBLEMS This streamlined, aluminum train built for the Union Pacific, may make 150 miles an hour 48 UNIT XV Uncle Sam, the Friend in Need Federal Emergency Relief Planning Is Needed To Prevent Poverty and Pauperism TT7ERE you ever really hungry? Did you ever * * tramp the streets begging for food with little success? Probably you could endure it for a day or two. But what if it stretched into weeks and the weeks into months and the months into years! If you were an habitual loafer, able but unwilling to work, you wouldn't deserve much sympathy. But suppose you, like most men and women, were able, honest, and willing to work but couldn't find work. What then? Read the following quotations from James Stephens' Etched in Moonlight in which he describes Hunger. Better yet, get the book and read the entire essay aloud. . . . "And her husband had no work ! Almost he had even given up looking for work. He would go out of the house and come into the house and go out of the house again ; and he and she would look at each other in a dumb questioning." . . . . . . "To what a food-getting fervor was she com- pelled ! She put the world of rubbish that was about her through a sieve ; and winnowed nourishment for her family where a rat would have unearthed dis- appointment." . . . . . . "The children called to her for bread, clam- orously, unceasingly, like little dogs that yap and whine and cannot be made to stop." . . . . . . "She went into the streets to beg. She was frightened, for one can be arrested for begging. And she was afraid not to beg for one can die of hunger." . . . In the winter_of 1932-3^ther e were nearly fifteen mi llion capable men and women in Am erica, on the verge of~hunger. They had no jobs and their re- served resources were nearly exhausted. What shall we do in such a situation? Shall we let our neighbors starve ? Shall we let them become thieves and beggars or be pauperized by doles and charities? Or shall we reorganize our economic system in such a way as to provide a reasonable standard of living for all persons who are willing to work? Is there any other answer to this question except the last? What are governments and eco- nomic systems for, if not to provide a decent living for the people who are willing to work? Does not this show the necessity for a new deal, and a real new deal that will prevent the recurrence of such suffering in the future? Can Poverty Be Abolished? Turn the question around. Should starvation threaten in a land of surplus wheat, corn, potatoes, vegetables, sheep, hogs, cattle, and other food- stuffs ; in a land sparsely settled and rich enough to support the present population generously? In such a land a life of abundance should be possible for all who are willing and able to work. Again, we see where the trouble lies. It is not the lack of production. We have mastered production. We are able to produce an almost unlimited supply of any commodity. No, it is an antiquated and faulty_system of distribution that has us in its grip and keeps us in economic chaos. The only solution A Modern "Flop" House is^Jiigh purchasing power for the masses. Not a dole. We don't want to be pauperized. We hate the name "pauper". Our national sentiment is expressed in the old jingle: "Rattle his bones over the stones It's only a pauper whom nobody owns." It is wages, high wages that we want and we are willing to work and earn. "God, give us work!" This is the prayer of the masses. Our government responds with a dole of half a billion and exten- sive relief projects like Muscle Shoals, new post office~i)uildings, new roads, and reforestation, the National Recovery Act, and other federal under- takings. But these things are temporary. Some- thing more is needed. We should go to the bottom of this problem and abolish the conditions that keep us in this mess. This means planning — local, state, and national planning on a large scale. That is why we are inter- ested in the New Deal. But as you read and study these problems ask yourself continuously, is this permanent, or just "a shot in the arm?" What must be done if poverty and pauperism are to be abol- ished? Can we do it? These are your problems. They challenge the best that is in you. Who Needs Help and Why? To begin with, what kind of people need help? There are three groups. 49 Shanty Town First, there are those who are generally unable to provide for themselves. This group includes chil- dren, many women, aged persons, and those inca- pacitated by lack of ability or training or both, and those habitually unemployable. The second group is composed of persons nor- mally able to support themselves and their depend- ents, but economically dislocated by the depression. They do not have a high standard of living at any time and have little or no reserve resources to tide them across a lean year or two. They are, for the most part, common laborers, and constitute the largest problem. They want and need work con- tinuously. The third group does not appear as subjects of charity except in times of severe and prolonged periods of economic distress. They are the ones who are caught by bank failures, building and loan clos- ures, stock market losses and other losses due to the breakdown of banking and credit facilities and loss of employment. Their number is small ordinarily but is unusually large in the present depression. Why We Are Asking for Uncle Sam's Help Different methods have been devised to deal with all these problems of relief. Many private and semi- public relief agencies are in existence. These include such organizations as Red Cross, the Salvation Army, the churches, the Associated Charities, and the Community Chest. The latter organization included from ten to a hundred different organiza- tions and prospered quite successfully in most cities until 1933. "By 1933, the lessened incomes of those who gave to these various funds, together with the greatly increased demands made upon them, ren- dered them unable to contribute enough to care for the tremendous demands from the huge army of hungry and needy citizens. Even in 1932, pri- vate charity of that sort was sufficient to meet less than one-fourth of the demand. Tax-sup ported relief was doing IS^of the relief work. What is the situation as it exists in your community? The use of taxes for local public relief is not new. It has been prevalent for many years. In rural dis- tricts, township trustees have been providing sup- port to the needy. Counties have provided homes for their old people without means of support, and for children who had no homes. Villages and cities have used public funds to help those in need. With the financial collapse of many local govern- ments, it soon became apparent that other sources of relief would have to be secured. Hence, requests were made upon the forty-eight state governments. States have always cared for a portion of those physically unable to care for them- selves. Most states have homes for the blind, the deaf, the insane, the feeble-minded, and for veterans and their orphaned children or support such per- sons locally. Some states were able to raise funds for the relief of the unemployed. State relief admin- istrations were set up with county committees in addition. State public works such as the improve- ment of roads, streets, and parks have been carried on to enable men in need to earn a wage instead of receiving a dole. Even this was insufficient. Tax delinquencies have prevented cities and counties from taking care of all the people who needed assistance. Work relief projects were inadequate and slow in developing. So the problem was put up to the Federal Government. Nationalizing Relief Heretofore it has been only in times of war, hurri- canes, cyclones, earthquakes, prolonged droughts and other unusual calamities that the Federal Gov- ernment has made a direct contribution for relief. Usually the Red Cross has served as the agency. There has been no nationalization of public relief agencies except the Red Cross and it is not owned, supported, or operated by the government. In 1932 the Federal Government created the Reconstruction Finance Corporation (R. F. C. ). Among other actions, the R. F. C. loaned to the states $300,000,000 for relief purposes. This was soon used up, but the emergency continued and became even greater. Private, local, and state agen- cies were partially exhausted and increasingly un- able to cope with the situation. So they turned to the Federal Government. Uncle Sam responded in the spring of 1933 by enacting a whole series of relief measures which constitute no small part of the total legislation of the New Deal thus far. Relief was extended to banks, to farmers, to farm and home mortgage holders, to veterans, and to the unemployed on a scale unprecedented in American history. In fact, it is hard to separate relief meas- ures from recovery measures in the legislation of the New Deal, they are so inextricably interwoven. In a sense, the entire program thus far is a relief program. This is one of its recognized limitations. It is a heroic act to plunge in and rescue a drown- ing swimmer, but if you allow him to slip back into the stream again your efforts are fruitless. This the present administration recognizes and the National Industrial Recovery Act and other work projects are steps in the right direction. 50 Federal Emergency Relief Administration The emergency demanded the nationalization of relief agencies. Congress, recognizing this fact, passed the Lewis-Wagner Relie f Act creating a Federal Emergency Reliei*~A"dministration with large authority under a director to be appointed by the President. Harry L. Hopkins, of New York, was appointed to the position at a salary of $10,000, plus necessary traveling and living expenses as provided for other civilian em- ployees in the executive branch of the government. The F. E. R. A., like the C. C. C. and the N. I. R. A., is an emergency measure and ceases to exist in two years. )r has the power to appoint and Hopkins The Administj fix.the salary (not to exceed $8,000) of such experts as he may need without regard to the civil service laws. Such expenditures, however (including per- sonal services and rent at the seat of government and elsewhere and for printing and binding), shall not exceed $350,000. Thus the Federal Government is trying to eliminate the possibility of graft or exploitation, conserving the greatest possible amount of the fund for direct relief. The person executing the provisions of this Act may conductanjL investigation, or make any studies, pertinent to the furtherance of the purposes of the Act or that the President may deem necessary. The Administrator s hall print a. mo nthly report of his activities and expenditures (to submit to the President and both houses of Congress) and these shall be printed as public documents. The Act defines relief as r elief and work relief designed to lessen the hardship and suffering caused by unemployment. It may furnish relief in the form of money, service, materials, or commodities to pro- vide the necessities of life to persons in need as a result of the present emergency, or to their depend- ents, whether resident, transient, or homeless, or in the form of work on projects deemed essential by the Federal Government. The latter provision is designed to put the unemployed back to work ai remove the curse of the dole. The sum of $500,- 000,000 is appropriated for those two purposes. Duties of the Federal Relief Administrator The first duty of the administrato r is to invest i- gate the_needs of the states and cities to see if they are doing as much as they can to help themselves. The second duty is to distribute the fund to those who are qualified to receive it. The various gover- nors are to appoint state relief administrators and committees similar'to the federal plan. County and city committees are to be formed for handling their share of the funds. The main purpose of these sub- administrations is to check the local relief demands carefully. The state's duty is- to investigate the claim of a county or city to see if the local unit is doing all it can to help the needy. If it is, and the state cannot help further, the state applies to the federal administrator. His Organization then inves- tigates the state's demands, and if the state has been able to match two dollars for one of the federal money, the state may receive the help. It can't get federal help except by raising two dollars in the state for each dollar of federal money. In case it is impossible for the state to raise the matching funds, the federal administrator may give the state money from the second half of the appropriation. A half billion dollars seems like a large sum of money for such a purpose. Perhaps the federal administration is going to a lot of trouble in investi- gating each grant, but states are like people in try- ing to get all they can whether they deserve it or not. Local relief agencies have found that many people who do not really need help will apply for it. Also, some are not satisfied with what they get, but want the best of everything. It must be remembered that this fund is to be used to supply reasonable demands. This means that care must be exercised so that none of this money will be misused or wasted. Some people expect the Federal Government to grow money on trees. We must remember that the taxpayers of the United States will have to pay the bill. No matter whether the states or the Federal i: - ~ If',: ■ / t-^j*^ *L 7 ROAD-BUILDINC HAS MADE WORK FOR THOUSANDS 51 Government grants the money, the source of that money goes back to the citizens of our country. The Government cannot raise a single dollar without asking its citizens to give that dollar in taxes. What Do People Want? Would you want to be supported by the govern- ment permanently? American citizens want to be able to make their own living, and provide for those dependent upon them. Most people would much rather work for what they get. Whether this charity — the giving of means of securing the neces- sities of life — will kill the independence of millions of our citizens remains to be seen. Relief at best is only a stop-gap. It should be regarded only as the means of tiding over a number of people until they are again able to make their own living. Young men and young women should look forward to being able to make a living adequate to give them economic security. An adequate and a steady income well managed is the sole means of permanent economic security. This calls for a coordinated effort of local, state, and federal agencies on a scale much larger than now planned. UNIT XVI Finding Jobs for Folks Federal Employment Service YOU have heard many stories told by the unem- ployed about their efforts to find work. What "leads" or sources of information did they follow ! How often did they try to "hawk" their services from door to door ! Sometimes a newspaper adver- tisement sounded promising. Fifty persons had an- swered the ad. and one was lucky ! A friend offered a "tip" about a new building project in another part of town, but the employer was hiring only men from his list of former recruits. After many disappoint- ments of this kind, the seeker returns home at night exhausted and discouraged to the point of losing faith in himself and all mankind. What little energy he recovers by the next morning is largely spent in a yawn and half -hopeful query, "Well, which direc- tion today? Did you ever think of the effect this has on a person's spirit? Unemployment thus leads not only to economic insecurity but also to great increase in crime. The aftermath of the present depression may last for years. Young folks brought up in idleness are not readily cured of all the questionable habits thus developed. Society pays the bill later and pays it with compound interest. Why not prevent this con- dition? Why not avoid conditioning children into idleness and harmful ways of living? The Employers' Labor Reservoir The employer also finds his task difficult. He must spend entire days interviewing long lines of applicants who have no other qualification for many jobs than the desire to make a little money. Very often, if he permits his sympathy to overrule his better judgment, the employer hires a man just to help out. The next day, or week, he has to "fire" him and hire another in order to get a more capable worker. Someone has said this is keeping three gangs busy, one coming, one working, and one going. A great amount of time and money is wasted by this process. Often public opinion compels the employer to accept local labor which is less efficient than his needs demand. Typical Employment Exchanges of the Past But, you ask, what of the present employment agencies and placement bureaus? Are there not such establishments for bringing employers and workers together? Aren't there enough of these? Yes, about one-third of the two thousand counties in the United States have maintained free employment offices, and a great number of local or private agen- cies have operated more or less effectively. But these offices have seldom attempted to provide em- ployment service for all classes of workers. A street cleaner or "Jack-of -all-trades" would have a better chance in the average local employment bureau than a first-class skilled engineer. Furthermore, such agencies often use dingy quarters which visitors come to dread most heartily. Again, their services are apt to be inefficient and * for private profit. An employer who requests a good carpenter and gets a ditch digger is not apt to call again, especially if he has to pay for the service of the employment agency. Thus we see that there is a definite need for some form of systematic up-to-date exchange between supply and demand of labor. In times of widespread unemployment when there is great competition for jobs, a free system of exchanges is most essential. If there is a wolf at every neighbor's door, it is not so easy to "slip out the back way" and get food to satisfy the howling at our own front door. How Will the New Deal Find Jobs for Folks? "The government ought to do something about it." That is the assertion we have often heard as one after another of our economic foundations — employment, banks, trade, even our homes — has fallen out from under us. Recently the government has been "doing something about it". In other parts of this book you read of Uncle Sam's efforts to create jobs through an extensive program of public works and through partial control of industry. In this chapter we are more interested in federal efforts to help us find jobs. 52 During the last days of its historic special session from March 9 to June 15, 1933, the Seventy-third Congress passed the Wagner Fed- eral-State -Employment Service Act which was recommended through the Department of Labor. Miss Frances Perkins (Mrs. Paul Wilson) , secretary of this depart- ment, had shown decided interest in placement bureaus during her previous associations with the Industrial Board of New York. An outstanding demonstration Perkins center of employment had been established at Rochester.in 1932. When the Wagner bill was proposed, the stage was already set for quick action. The new act authorized the appropriation of $1,500,000 for the first year and $4,000,000 annu- ally thereafter, three-fourths of this sum to be dis- tributed to the States to assist in maintaining em- ployment bureaus on the condition that the States appropriate an equal amou nt, and one-fourth to be used to cover the cost of administration. A bureau known as the United States Employment Service was created witnTnTThe" Department of Labor. It is the duty of this Bureau to coordinate local, county, state and federal employment bureaus of the entire United States. The first director, appointed by the President and confirmed by the Senate^is Mr. W. Frank Persons, a social worker prominently con- nected in the past with the Red Cross. Why National Employment Service Is Justified Why should the Federal Government be asked to maintain free employment service? What right has the government to tax all its people for the support of this service? These questions lead us to a con- sideration of the principles which underlie such action : First, it is assumed that the finding of work for workers is a public obligation. Campaign cries of the pasf7 such as "two cars in every garage" and "a full dinner pail", emphasize the feeling of public responsibility for finding jobs for workers. Second, the unemployment of great numbers of people at the present time is n ot the _ fault of the individual worker, employer, or industry. It is due to an accumulation of , the evils of our economic sys- tem, such as overproduction and cutthroat methods of competition. Therefore, if we assume that gov- ernment policies of regulating trade and currency are, in the last analysis, responsible for our eco- nomic downfall, we may also assume that the government should bear the burden of unemploy- ment control, just as surely as the man who mis- handles his car must pay for repairs. Third, a constant and steadily increasing income is necessary^to maintain the people's purchasing power which in turn moves the wheels oTindustry. This means that labor must know where the jobs are to be found, and employers in turn must know where to find quickly the best qualified labor. Fourth, opportunities for employment on federal aid projects should be distributed among qualified workers as fairly and as widely as possil graphically. This requires a bureau for tl of supply and for the regulation of the flow between cities. Fifth, the rights of qualified workers entitled to preference "under the law — e.g., unemployed ex- service men with dependents-^can be better safe- guarded under a plan of federal control. In fact, many ex-service men and others need counsel and advice as to how best to shift from a glutted trade to a more promising prospect in a new trade. Sixth, the waste and personal disappointments due_to excessive moving of laborers to the vicinities of work projects should be avoided. There may be many jobs at "Boulder Dam, for example, or there may be a great oversupply of labor. There should be an agency for the use of labor and capital that would collect and distribute information on the sup- ply and demand of labor. AND ONE MAN COT A JOB! An Actual Scene in New York Finally, the national organization of employment services eliminates the evils of competitive profit among private agencies. In short, the establish- ment of a United States Employment Service seems to be one of the most practical measures undertaken in the recent program of national planning. It is more than an emergency measure. It is an effective instrument for reconstruction. It looks forward to increasing its services to employer and laborer as well as supplying immediate needs. Is National Employment Service a New Idea? At the time of one other emergency in our coun- try's history, a national employment service was established. Can you guess what was the occasion, if you are told that the chief demand at that time was for workers rather than for work ? Yes, it was the World War. In order to supply workers for ammu- nftxorTpTants and other war-time industries, a tem- porary national employment service of about 800 offices was set up in 1918. However, it was after- ward allowed to close, largely because of the opposition of the members of the National Manu- facturers Association who preferred an uncon- trolled labor surplus for their own interests. The only other widespread attempt of our gov- ernment to establish national employment iservice was in 1907 when the Bureau of Immigration and 53 Naturalization opened a number of offices in eight- een zones throughout the country, but this service was later restricted to the larger ports of entry. Private fee-charging agencies have flourished in the United States to the extent of about 4,000 in 1930, while at the same time there were only about 200 public employment agencies of city, state, or federal governments. The latter were not ade- quately coordinated and served the country's needs poorly. During the depression of 1929-193r an effort to establish national organization of employ- ment service was made by the Kenyon-Nolan Bill, later known as_the~Wagner Bill, which was passed by Congress in 1 931, but President Hoover vetoed it. Do Other Countries Have National Employment Service? In foreign countries, chiefly in Germany and England, the idea of "labour exchanges" is far from new. A labor exchange is a central market place where labor may be bought or sold. Through the registration of employers and unemployed with this central agency, demands may be more quickly satisfied than under the system of "hawking" or wandering the streets in search of work, or adver- tising on the part of the employer. As early as 1883 a voluntary society in Berlin opened a labor ex- change "'which was a registry for unskilled workers of both sexes and for a limited number of skilled trades. By 1910 about 500 public and general labor exchanges had been established among the various German states. The present turmoil in Germany has upset many things and we are unable to say what the situation is today with reference to em- ployment exchanges. The Labor Exchange in Great Britain, called the Employment Exchange since 1916, has been inti- mately connected with the national history ^of that country during the 20th century. Since 1909 Tt has operated for the purpose of putting~empToyers and laborers into easier and more effective communica- tion. There are a bout 1200 local offices in Gr eat Britain today. The English "Dole" Along with this service, sigce l9H>ft system of unemployment insurance has been operative in England. That is, during times of employment the worker has paid a certain sum into a fund to which his employ^rr'and the government contributed an equal amount. Then in times of unemployment, reg- ular amounts of this money are returned to the worker to "tide him over" until he becomes reem- ployed. Today this insurance has become practi- cally synonymous with what is called the "dole" system, in England, at which Americans commonly scoff because it has been allowed to fall into an extensive program of public relief. Instead of giv- ing limited aid as was originally intended, it was forced to "borrow" from the government until, after 13 years it is a dole and nothing more. However, the British plan of combining employment service and unemployment insurance aid, even within the , / same building v _iswise. A worker with any degree ~ of pride would~rather be seen standing in line for employment than in the "dole" line. As for unem- ployment insurance, the United States will do well to establish similar security in the near future if we are to avoid another period of national catastro- phe. Economic security depends upon steady work; or insurance when -not at work. By the end of_1928^ twenty-three countries had ratified the national employment service sugges- A FREE EMPLOYMENT OFFICE IN NEW YORK An efficient, nation-wide chain of employment offices is part of the New Deal's program 54. tions of the International Labor Conference of the League of Nations held at Washington in 1919,. but the United States at that time took no steps to establish such service. What Has Uncle Sam's Employment Service Done? After the United States Employment Service was established as one step in the New Deal, the first great problem with which it was confronted was the necessity of supplying qualified workers to : engage in the three billion and three hundred mil- lion dollars' worth of public works projects pro- vided for in Title II of the National Industrial Recovery Act. To aid in satisfactory employment for these projects, the government, in July, 1933, organized the National Reemployment Service. The Reemployment Service, as one of its state directors says, aims at "orderly and complete regis- tration and placement service for the unemployed, and a dignified and proper place available to the employer in securing workers." It tries to find employment, first, for qualified' unemployed ex- service men with dependents ; second, for qualified bona fide residents (citizens of United States or persons who have declared intention of b( citizens) of the county sponsoring the worK ject; third bona fide residents of the state spons. ing the project. If qualified workers in the_commu- nity.are not available, then the administrators are authorized to search elsewhere for labor. Also, the administrators are expected to ride a middle road between the relief roll and other applicants. That is, neither group should be excessively favored so- as to avoid discouraging either the "down-and- outer" or the border line "pride" applicant. Contractors who take federal aid projects must, in their contract, agree to secure workers through the National Reemployment Service. It is expected, however, that other employers will also use the service freely. While administrators of the service receive advance information regarding the ap- proval of local projects under the National Recov- ery Act, they are busy at the same time soliciting employment on state, county, or municipal projects, and jobs with private companies. They use personal contacts, visits to employers, telephone calls, corre- spondence, and follow-up tactics in order to secure prospective jobs. UNIT XVII No More Gold Bricks Federal Securities Act Under the New Deal there is being made an honest and practical attempt to stop, or at least to reduce to a negligible volume, the sales of false securities. Too many people have lost hundreds, thousands, and in the aggregate, billions and bil- lions of dollars on apparently innocent transactions in gold mines, oil wells, rubber plantations and other "get rich quick" schemes. High-powered salesmanship at the hands of Mr. Babbitt did the trick. Mr. Babbitt's advertisement and sales talk sounded so good ! And there you are. It sounded so good ! The Bab- bitt sort of advertisement today is known vulgarly but pointedly as "ballyhoo" advertising. It appeals to the emotions, the feelings. It gets you excited. And before you know it, you are head over heels into the thing. What is the United States Government doing to improve this situation? First, let us listen to the practical, personal advice one business authority gives the average small investor. He lists certain rules headed, "How to Spot False Stocks". 1 Among the very sensible rules are these: (1) Never deal in an unknown issue; (2) never deal with an unknown 1 Forbes — June 1 pp. 811-812. 1933 : Schabacher, R. W., How to Spot False Stocks, house; (3) never act hastily; (4) never deal with a stranger; (5) never trust a sure thing; (6) never trust high-pressure methods; (7) never trust un- solicited telephone or telegraph advice; (8) before you invest, investigate. The last mentioned is prob- ably the most important one of all. Plainly enough, if you are thoroughly acquainted with a proposition before you invest your money in it, you will, in most instances, have only yourself to blame if you are swindled. If the Audience Only Knew 55 Drawings by courtesy of Collier's Magazine and F. G. Cooper Speculating "On Margin" The commonest form of looses in the stock market arises from what is known as "speculating on mar- gin". Let us suppose that John Investor has a little money to spare — a surplus that he does not need, say $500. Suppose he buys with it, outright, $500 worth of stock in some company he has faith in. The only way he can lose all his savings is for the company to fail. In better times, the company may make good. He can wait. Suppose, instead, that the broker persuades John to buy not $500 worth of stock, but $5,000 worth. If the stock doubles in value, he will then have made thousands of dollars, instead of five hundred. But how can he do it on his five hundred dollars? That is the magic of speculating "on margin". John, through his broker, borrows from some bank the other $4,500 needed to purchase the stock. But the trouble is, now, that as soon as that stock falls in value so much as ten per cent (which may happen in a single day), John's entire savings are wiped out. That is what happened to thousands and thou- sands of investors during the crash of 1929. We do not want to see the spectacle repeated. Short of educating the public on the perils of that kind of gambling, the only way to control it is by checking the lending of funds for such purposes, on the part of the banks and brokers. That is what the government is now seeking to do, through coopera- tion with the banks and the stock exchanges. Bucket Shop Speculating Another common form of gambling in which the public has lost heavily is known as "Bucket Shop" trading. To the passer-by, a Bucket Shop looks just like another broker's office. Even the customer who trades in it usually does not notice a difference. But the bucket shop dealer, instead of buying securities or grain for his customer, merely takes John Pub- lic's money and leads him to believe that he has bought securities with it, on margin. If the stock goes down, John has lost his money just as he would have lost it through another broker, but the bucket shop trader has all of John's money. If the stock goes up, John may think that he has made a fortune ; but he may find, instead, that the bucket shop dealer has closed his office and flown to parts unknown. "Cold Bricks" Another form of false-securities selling is the pro- motion of "wildcat" schemes and projects such as gold mines in Arizona, oil wells in Mexico or Tim- buctoo, nitrate mines in Chile or Kamchatka — usu- ally distant places, you will notice! Distance does lend enchantment, doesn't it? Your neighbor, Mr. Smith, receives through the mail a colorfully-illustrated, imaginatively-worded circular describing a big gold mine in Arizona that is certain to yield, for every single dollar invested in it, an extra twenty-five cents. Sounds good ! Then a smiling salesman with a remarkable vocabulary calls on Mr. Smith and persuades him to invest in the Arizona gold mine the two hundred dol- lars he has left from Uncle Egbert's insurance. At the above-mentioned 25 % profit on every dollar, Mr. Smith will presumably make fifty dollars clear. If he wishes to sell out, he will receive, according to the agreement, his original two hundred dollars plus his fifty dollars' profit. Perhaps Mr. Smith does receive two hundred and fifty dollars from the gold mine! It was a good thing, apparently, and the salesman seemed such an earnest fellow, Mr. Smith invests again : this time the gold mine gets the two hundred and fifty dollars plus nearly all of Mr. Smith's savings account and the money of several of his friends, besides. This time Mr. Smith should profit even more heavily than before, but the salesman leaves town for parts unknown, and Mr. Smith and his friends have a collection of beautifully-engraved papers to show for their hun- dreds of dollars. "Blue-sky" Laws You will say, and rightly so, that the salesman is a criminal. Are there no laws to punish him? There are, and have been, in these United States, since Kansas in 1911 instituted the first "blue-sky" laws. Let us see what a "blue-sky" law is. It has been defined thus : "Blue-sky laws, or more particularly, statutes which have for their purpose the detection and prosecution of frauds in the sale of stocks, bonds, securities, and commodities, are of general existence throughout the United States arid other countries. . . . No citizen with experience and no court has ever doubted the wisdom or power of legislatures to prevent stock frauds. . . . 'Blue-sky' laws . . . have been defined as legislation intended to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines, and other fraudulent exploitations." 1 1 Mills, Charles H. : Fraudulent Securities, p. 2. 56 (g)NO SBM« DIVISION Q? ASSETS. accommodate - State law. \ TRffgsg for y° u to -This looks 't true. too. '®^r^& 1NG ANX The laws were thus fancifully named from the re- mark of a rural legislator who said that the State of Kansas was "overrun with unscrupulous promoters who would sell shares in the bright blue sky itself !" 2 Basically, the "blue-sky" laws are about the same in all the states. If the fraudulent security seller as such were not caught in one state, it is possible that he would be arrested in another state. It is a long, tedious, and intricate process, this apprehend- ing of fleeing criminals, although the state bureaus of commerce, under whose supervision the blue-sky laws are administered, have done their parts. How Does the New Deal Safeguard You? Where, then, does the blame lie? Who is at fault? President Roosevelt in his New Deal policies has seen to it that the national government take a hand in the administration of what we might call a uni- fied national system of "blue-sky" legislation. The Securities Act of 1933, finally effective in all its provisions on July 26, 1933, reads in substance that the Federal Government will henceforth regu- late the type of securities placed on the market and that state laws must conform to this minimum set up by Uncle Sam. Previously, individual states have required pros- pective security-sellers to apply for and receive licenses permitting them to offer for sale to the pub- lic their particular security. This, briefly, is the general procedure followed : (1) the dealer procures a license from the state bureau of commerce; (2) the license is granted after the submission of desig- nated information of various kinds. A fee is paid for the license to the bureau granting it after due investigation — which, it must be confessed, has not always been so thorough ! Under a Federal system designed to prevent in- vestment in false securities, there would be centrali- zation and thorough investigation. The complete report any citizen may know if he will only apply to the Federal Trade Commission, an organization similar in basic function to the Pure Food and Drugs Division of the Department of Agriculture, the Federal Radio Commission, the Federal Power Commission, the Federal Farm Board, the Federal Oil Conservation Board, Federal Public Health Service, and the like. 2 Ibid., p. s. To sell securities under the New Deal Federal Securities Act, the dealer must follow this pro- cedure : (1) file with the Federal Trade Commission a registration statement which must be signed by the principal officers, and a majority of the direc- tors. This statement must (1) include the names of persons holding more than 10% of any class of its stock; (2) present a detailed account of cap- italization and funded debt; (3) indicate the re- muneration paid or estimated to be paid to officers and directors for the past year and the ensuing year ; (4) state the specific purpose of the proposed security issue as well as the net proceeds expected from it; (5) estimate commissions or other ex- penses to be paid; (6) name the price at which the issue is to be sold to the public with any variations from that price for any reasons; (7) explain the general effect of every contract not in the ordinary course of business which either has not been entirely executed or was entered into within the preceding two years; (8) present a detailed balance sheet of a date not more than ninety days before filing the statement. Registration becomes effective twenty days after the filing of the statement. 1 At the outset we see clearly that most of the rules for spotting false stocks necessarily would be ob- served according to the purposes of the Securities Act. We, the public, would thus be familiar with the dealers in the securities, our acquaintance based on what the Federal Government has discovered about the dealer in question. We could not be too hasty, for all this procedure takes time. Any "ballyhoo" or high-pressure advertising would be offset and tamed down by the Federal Trade Commission's impartial, scientific, cool-headed analysis of the se- curity to be sold. Severe Penalties The penalties involved for the selling of false se- curities under the Securities Act of 1933 are ex- tremely severe, as, indeed, they should be. Much more so than in any of the states. Briefly, there is a fine of $5,000 and not more than five years' impris- onment for the dealer in false securities. In addi- tion, all those who signed the registration statement, sent per federal requirement to the Federal Trade Commission, are personally liable to suit for dam- ages by the buyer if he has been criminally done out 1 Nation'3 Business, July, 1933: The Securities Act of 19S3. 57 of his invested money. Of course, this elaborate and canny Federal set-up will make many a prospective dealer in securities or his possible associates in the proposition think a long time before he will try to deceive the national government and defraud the average investor, thereby laying himself open to great personal hazards and stern and severe punish- ment by a powerful centralized authority. The Other Side Tritely, but truly, there are always at least two sides to every question, and naturally, since the en- actment of the securities legislation indicates that it is primarily John Public and not the business man who is being protected, business men are rais- ing the following questions: (1) "Will the rigid re- strictions and penalties make borrowers hesitate to issue and register securities? (2) Will participat- ing houses be reluctant to share in an issue since they may find themselves bound by statements made by others and which they have not had an opportu- nity to investigate? (3) If these conditions exist and if borrowers and investment houses are re- luctant to make new issues, what then will result? (4) How will the bill affect the make-up of boards of directors?"* In other words, exactly how will the Securities Act affect the business man? That ques- tion is out of our scope, so we shall leave it with you as the other side of the Securities Act of 1933. But what is the most vital point involved in the Securities Act of 1933, as far as Mr. John Public is concerned ? Just this : the purpose of an economic system such as the one President Roosevelt and the "Brain Trust" are trying to perfect and administer. This purpose has been clearly stated by Stuart Chase, to this effect : "An economic system is to provide a means, without ex- cessive waste or loss, whereby those who live under it may eat. It has a function, and the function is to provide food, shelter, clothing, and comforts in as dependable and adequate quantities as natural resources and the state of the technical arts will permit. . . . When used as a channel for personal aggrandizement, 2 a system's function and meaning col- lapse." 1 Someone has said that the true object of the New Deal is "... an enriched life rather than an en- riched pocketbook." We have said that a New Deal to be worthy of the name must offer greater economic security to the common man. The protec- tion of a man's savings and investments against fraudulent speculators is a governmental responsi- bility. Is Gambling Our National Came? We find that in recent years the United States has had upward of 4,500,000 stock and bond holders, that is, people who own securities of one kind or an- other. As a fantastic, but entirely true, example of what speculation in securities will do, we read in Time that after the war, Armour, the meat packer, •Nation's Business: What the Securities Act May Do, July, 1933, p. 39. 1 Chase, Stuart: The New Deal. p. 22. -Italics are the quoter's. lost $1,000,000 a day for 130 days and died insolvent — plainly speaking, "broke" — in 1927. 1 All of which probably indicates that the people of the United States have in previous times gone "investment crazy". Some writers of unquestion- able reputation have insisted that Americans are inherent gamblers. It is only human, we easily recognize, for us to be intrigued and thrilled at the idea of "getting rich quick" — in other words, get- ting something for nothing. But remember, there is no economic Santa Claus ! The Federal Government is doing its part to help the public protect itself against unscrupulous or dubious security sellers. What can the public itself do? The obvious answer is: we must educate our- selves in terms of the New Deal ! The information is awaiting us there in the offices of the Federal Trade Commission in Washington, D. C. We have only to take advantage of the government's sincere desire to protect us. True enough, we cannot always prevent the mis- guided George F. Babbitt from unloading on us white elephant real estate projects. How did he manage to do it in the first place ? By high pressure or "ballyhoo" advertising! We are warned to be dubious of such advertising methods. And if Mr. Babbitt must give detailed information of all his projects to the Federal Trade Commission, by the time the registration is completed and the govern- ment sends out a complete analysis of the situation, John Public will have had time to reconsider. Do State Laws Conflict? Possibly it has occurred to you that the Securities Act of 1933 is in danger of conflicting with the "blue-sky" laws the various individual states have had in operation prior to the present time. What will the Securities Act do to these "blue-sky" state laws? That, of course, is the old, familiar question of states rights and cannot be answered here. We leave it for your consideration. Too, you may regard the "blue-sky" laws of your own state as being more — or less — efficient in their scope than the Federal Securities Act of 1933. There is, obviously, not time and space herein in- dividually to compare and evaluate the state laws for the suppression of fraudulent security dealers as against the new Federal law, but again we see another side to the question: what are the larger implications of the Securities Act of 1933 ? Making the Matter Personal Even though we be in danger of repeating, let us remember that the Federal Trade Commission is there to warn us against throwing our money away on worthless securities, that its principles are soundly backed by a national law, the Securities Act of 1933, that the commission is not concerned with personalities but with cold figures. Remember, "investigate before you invest". 1 "Time", August 7, 1933, p. 46 : Economics. 58 UNIT XVIII Balancing the National Budget Problem ! Can an individual or a nation whose income is less than his expenses maintain his credit? If so, how? After reading this chapter you should be able to decide whether the Economy Act and its program for balancing the budget really solves the problem or only postpones it. The Financial Condition of the U. S. on March 4th President Roosevelt, in his first message to Con- gress on March 10, stressed the necessity of reduc- ing government expenses and balancing the national budget. For the past three years the Federal Gov- ernment had been spending more than its revenue produced and we were on the way toward bank- ruptcy. For the fiscal year 1931 the deficit was $402,000,- 000. In 1932 it was up to $2,472,000,000. It ap- peared that this deficit would reach 5 billion dollars by 1935. What was to be done about it? One of the chief issues in the presidential campaign of 1932 was this question of balancing government expendi- tures and receipts. The whole nation now waited to see how it would be done. Our Director of the Budget The first thing that President Roosevelt did was to look for a man who was courageous enough to assume the leadership in the Economy Program. The man selected was a young Congressman from Ari- zona, Lewis W. Douglas, a Westerner by birth and of Scotch ancestry. His interest in government economy had made him well known in Congress and had attracted the attention of the President. Mr. Douglas was born July 2, 1894, and gradu- ated from Amherst College in 1916. He had served overseas in the World War, being cited for bravery by the American and Belgian Governments. Here was an ideal man for this difficult task. As a Congressman, he began the study of the enormous expenditures for pensions and other com- pensation for the veterans of our wars. He found that about $1,000,000,000 was spent annually for veterans' benefits and he estimated that this would amount to about 1 \ ^ billions per year within ten years. This meant that out of every dollar spent for taxes, thirty-five cents would go to veterans and their dependents alone. "This thing," he said, "must be reduced." He next proceeded to a study of the whole field of government spending. He went from bureau to bureau for first-hand information. Here and there he found places where expenses could be cut down without reducing efficiency. In other departments he found that useless commissions and offices could be abolished. Others could be consolidated, and all should be reduced in salary to correspond with the reduced prices of the necessities of life. Thus he proposed to balance the budget by two methods, first, by drastically reducing government expenses, and second, by finding new sources of rev- enue. The deficit was estimated at one billion dol- lars for the fiscal year of 1933. His economy meas- ures would save about $750,000,000 and the re- Euza Crossing the Ice — Columbus Dispatch mainder would be raised by new taxation on gaso- line and beer. President Roosevelt gave him wide powers "to assemble, correlate, revise, reduce, or increase the estimates of the several departments or establish- ments." But to this young Scotchman there was no such word as "increase". An Economy Bill was formulated and passed. The Economy Bill Summarized 1. Salaries of Senators and Representatives are reduced from $10,000 to $8,500 per year. 2. The President has authority to reduce all other Federal salaries up to a maximum of 15 r ; . 3. Civil War pensions are reduced 10 '< . 4. World War and Spanish-American War pen- sion laws were repealed and the President given authority to establish a new pension system with broad limits. 5. Salary reductions are not to extend beyond June 30, 1934. The pension schedule set up by the President brought forth a storm of opposition on the part of veterans' organizations and certain members of Congress. The veterans had been cut from about $900,000,000 annually to about $320,000,000 on the advice of Mr. Douglas, and they thought that they 59 were unjustly discriminated against. Letters from disabled veterans poured in to their Congressmen by the thousands. Finally the Connelly Amendment to the Economy Act raised the veterans' allotment to about $420,000,000. It was found that much of the money paid out through the Veterans Bureau was going to men who were not disabled in defense of their country. Many of them were using their military service as an excuse to raid the Treasury. The Two Budgets According to the Administration estimates the government will finish the fiscal year which began July 1, 1933, with not more than $100,000,000 defi- cit. Perfect balance may be attained if business picks up, and if the increasing revenues from taxes continue. However, these budget-balancing claims apply only to the Ordinary Budget, or ordinary expenses of the government. It does not take into considera- tion the extra-ordinary expenses for relief, public works, and other emergency purposes. These ex- penditures are enormous, in fact, the greatest spending in a 100-day session in the history of our government. They are so great that it is doubtful if all the bonds authorized can be sold. Many economists say that these expenses should not be charged against the year in which they are incurred, but should be spread over a term of years. The Republicans charge that they must be kept in the same books and that the Democrats are not bal- ancing the budget but getting farther and farther in debt, since they will eventually have these debts to pay. "Is there any economy in reducing expendi- tures by one billion dollars on the one hand, and adding eleven billions for future generations to pay?" they ask. Study the taxation unit, Who Pays the Piper? before forming your conclusions. UNIT XIX Who Will Pay the Piper? HAVE you ever heard — or taken part in — a dis- are listed the expenditures of the United States cussion of household expenses ? If you do not Government for the fiscal year 1932. own the house in which you live, the monthly rent TABLE I will be one of these expenses. Grocery, electricity, Expenditures of the United States Government for the Fiscal Year 1932 telephone, insurance, newspaper, gasoline, coal, j regular EXPENSES- paint, water, and many other such family bills may ' i. For War: $2,821,079,046. be included. You have learned, probably, two things Interest on War Debt $1,011,831,381 about these expenses. First, they have been neces- V ?v^tt&i«m Bureau, sary because other people have done things for your Bureau of National Homes) 784,841,820 family which have kept each of you healthy, com- Veterans' Adjusted Certificate Fund.... 200,000,000 4. , /, , , A- , • I .,,"" ,, War Department 466,788,011 f ortable, and happy ; things which you either could Navy Department 357;617;834 not or WOUld not do for yourselves. Second, they 2. For Normal Services: $i, 150,940,625 must be paid for by your family, either by doing Refunds of Customs, Income Taxes, ,, 1 vi 1 n ,, 11 i j etc., on Amounts Erroneously Paid.... 101,124,721 equally valuable work for those who have worked Department of Agriculture and all for you, or else by giving the money equivalent of Other Departments except War, the services which you have enjoyed. That is, the „ Nayy, and Postal 513,350,521 , . .-, !.i. i j> • . Postal Department 536,465,383 laws of society demand that you make a fair return to Others who have given you the things which you Total Regular Expenses $3,972,019,671 nee d II. SPECIAL EXPENSES OF OVERCOM- ING THE ECONOMIC DEPRESSION: TL r j 1 /- 1. a c -i I- Reconstruction Finance Corporation $ 500,000,000 The Federal Government As a Family 2 Subscription to Stocks of Federal Land You may think of the Federal Government as a Banks ■;•--•--■-. ■•-•-•• - ■-• 125,000,000 k,-~ -p„-~,;i,t T„o+ «„ +v,« \,™A ~-p o l,^„c^v,^l^ ™„o4- 3. Agriculture, (Including Market Fund) 405,214,673 big family. Just as the head of a household must 4 p* blic Bui i d ' ings 6 287,946,003 pay the bills for the things which he has enjoyed, so 5. Postal Deficiency 202,876,341 must the Federal Government meet the expenses of Total Special Expense $1,521,037,017 the many group services which its citizens have re- • jTi. u f s -i a GRAND TOTAL EXPENSE. ...$5,493,056,688 quired. Just as you, as a member of your family, do x^±^^ 1JA1LJ1,ou * * • " ' all you can to help pay the family bills, so should These expenditures divide themselves into two every good citizen of the United States help to pay groups : those for regular operating costs, including the government's necessary expenses. In Table I debt charges; and those for overcoming the eco- 60 nomic depression. The table shows that during 1932 the regular expenses totaled $3,972,019,671, while the special economic depression costs were $1,521,- 037,017. For the year 1933, the regular budget was fixed at about $4,500,000,000, or at an increase of 12Y2 % over the total of the regular expenses of the previous year. You will notice, too, that the cost of "So It Can Be Done, Hey?" — Los Angeles Times war, included in the regular expenses, was $2,821,- 079,046 in 1932, or 71 % of the cost of that year's regular, governmental services. You should study the items of this table in relation to national budget figures, and try to understand how each item has helped you as a member of the big family of the United States Government. Why Have Government Costs Increased? The costs of operating the Federal Government, like those of running our homes, have steadily in- creased since the United States became an inde- pendent Nation. The total cost of Federal services in 1789 was $649,000. Our 1933 cost will be about $4,500,000,000 without the extra budget for the cost of the depression. These figures, at first glance, seem alarming. Why such a tremendous increase? Of course, the increase in our population has accounted for some of the increase in the cost of our government. The chang- ing value of our dollar, as reflected in what it will buy for us at different times, makes some difference. The tendency of our government, just as it is the custom of individuals, to borrow large sums of money for improvements, and even for current ex- penses, makes it necessary to pay out large sums in interest charges. But one of the most important reasons for this large Federal bill, today, is to be found in the cost of the many more and better serv- ices which we, as members of its big family, demand of our government, as compared with what our forefathers received from theirs in 1789. Consider the satisfaction and comfort which you enjoy in making an automobile trip of 200 miles, over a graded and hard-surfaced road, with all kinds of protection, convenience, and service along every mile of it ; a trip which can be made in a few hours. Compare this trip with one made by a trav- eler in colonial days, on foot or on horseback, through the unbroken forests infested with hostile Indians and with dangerous wild animals; a trip which required many days to make, at great peril to the traveler. Must-we not expect to pay for these improvements in the means of travel? If you live near a river, you have seen the protec- tion given to adjacent property and to its owners, as well as to the general public in supplying boating and fishing facilities, by costly dams, levees, and other means of flood protection. You ask the Postal Department to deliver for you, to your very door, speedily and safely, your letters and packages from distant cities and countrysides, for very small fees which you pay in stamps. You need only to look in your medicine cabinet to see evidences of the pro- tection which the government gives you through its Pure Food and Drug Act. Think of the meat inspec- tion, of the water supply supervision, of the agri- cultural experiment stations at work on improve- ments to plant life and on controls for insect and weed pests. These are but a few of the services which the Federal Government is furnishing you in its program of promoting social welfare. Is it any wonder that the bill is a large one? How You May Help Pay the Bill There are a number of ways in which you may help pay the government's bills. You may do it either directly or indirectly. Generally speaking, the payment will be called a tax of some sort. The government levies a tax upon many of the articles which you use. Sugar and coffee, for example, are taxed when they come into one of our ports. This tax is added to the sale price and is paid by you, indirectly, when you buy some of either of these commodities. Many imported articles are taxed in this way and the list of the taxes charged is called a tariff. When you buy tobacco, send a telegram costing over thirty cents, use the long distance tele- phone where the charge is over fifty cents, buy motor oil or gasoline, purchase stamps, or write a check you pay a direct tax to the United States Gov- ernment. Taxes are levied on incomes, inheritances, and on many luxuries directly. In many cases, how- ever, the tax is paid by the importer, by the manu- facturer, or by the distributor and paid by you, indirectly in increased cost of the articles. The Benefits of Government Is it not apparent that taxes are levied to pay for services which government gives you? You must be careful, though, to get another idea of taxes clearly in your mind. A very great authority on the subject of taxation, Doctor Seligman of Columbia University, has truly said that "A tax is a compul- 61 sory contribution from the person to the govern- ment to defray the expense incurred in the common interest of all, without reference to special benefits conferred." The food you eat for breakfast is thoroughly inspected to insure its purity and whole- someness in order that large numbers of people may not become sick and the welfare of the whole com- munity suffer. You go to school and some of the courses you like best are paid for by the Federal Government in order to help your local community to support its schools for the education of all of its children. The bridges you cross, the roads you travel, the conveyances in which you ride are made safe for all of the people. The money which is allowed to be circulated in exchange for the things you buy is guaranteed by the Federal Government in order to insure its value throughout the whole country. Some of the expenses of government are paid for by you in direct proportion to the individual benefits which you yourself receive. This is the case when you buy and use a postage stamp. Do you realize, though, that many of the expenses of gov- ernment for furnishing necessary services to the nation as a ivhole are added together and paid for by people in proportion to their ability to pay for the enjoyment of certain other selected privileges? For example, the money which a tobacco manufac- turer pays for the privilege to make and sell ciga- rettes and cigars may be used for paying food in- spectors or may go to an agricultural experiment station to pay for a study of corn or wheat, rather than to protect the tobacco manufacturer in his business. Do you see, here, another similarity to family life? Is it the practice in your family for all the income to go into a family fund, or at least that a large portion of it shall be banked in a single account and all bills paid from this general account, regardless of what they are for? Is it not true, too, that a small amount might be allotted to each mem- ber of the family to spend as he sees fit, an amount from which he receives individual benefits ? Is there this sort of financial cooperation in your family? It is a good thing in family and government alike. How Does the New Deal Increase the Federal Bill? The Seventy-third Congress appropriated more money, levied more and heavier taxes, and author- ized larger bond issues with heavier interest charges than any other Congress in the history of the United States, with the single exception of the Congress in session during the World War. The total appropriation for regular expenses, as has been said, was about $4,500,000,000. The emergency provisions for dealing with the economic depression total the enormous sum of $10,954,500,000. Truly, vast sums of money are to be employed to finance the new functions of government set up by this Congress. Some of it is to be raised by in- creased taxation. For example, the new special taxes levied by the Revenue Act of 1932 are to con- tinue. They amount to $400,000,000 a year. $62,- 000,000 is to be raised by a new one-half cent a gal- lon tax on gasoline. Changes made in the income and profit tax sections of the Revenue Act of 1932 are expected to yield $165,000,000. A tax of five per cent on stock dividends is estimated to yield $70,- 000,000. The tax on beer — at five dollars a barrel — is expected to produce a sum variously estimated at from $125,000,000 to $200,000,000 annually. Much of the total sum of money to be raised, however, will have to be borrowed. Does the New Deal Insure Economic Stability? It remains to be seen whether this tremendous investment will insure economic stability. Of one thing we are certain. In the end all government costs are paid by the people. There is no economic Santa Claus. The final test of the New Deal will be in its func- tioning in our economic life. Will it bring economic security to the unemployed? Can the cost of in- creased economic welfare of the people of the Ten- nessee Valley be justified in terms of the increased cost to the whole nation ? Will the economic security brought to debt-burdened home owners be sufficient to overcome the added burdens of taxation to the citizens of all the United States? Will the process tax on wheat make it too costly for the consumers ? Can the New Deal be justified in the increased cost to those who have to pay the bill? Time only can answer these questions. It is to be hoped it will answer them for the ultimate welfare of all the people of the Nation. \J.- ■■- <5J'- J - "■' "V~ " We Know Just How You Feel, Sam! — St. Louis Post-Dispatch h A great test of democracy is being made. Can democracy control and direct an economic system fairly and efficiently to the best inter- ests of all? To quote President Roosevelt: "When Andrew Jackson, 'Old Hickory', died, someone asked, 'Will he go to heaven?' and the answer was, 'He will if he wants to.' If I am asked whether the American people will pull them- selves out of this depression, I answer, 'They will if they want to'." 62 UNIT XX Who's Who in the New Deal THE program of the New Deal is not the work of any one man, nor is it the work of the so- called "brain trust" alone. The term "brain trust" is just an apt way of describing a research and ad- visory committee. It is not new in government. Many previous Presidents have used committees of this kind but few on so large a scale or in so public a manner. In the past most Presidents have leaned on the Cabinet or on the advice of party leaders and poli- ticians. President Roosevelt seeks the counsel and advice of everyone, including politicians, party lead- ers, practical business men, industrial leaders, legal experts, economists, and even professional theorists. With a highly competent mind, and a superabun- dance of enthusiasm and good fellowship, he ham- mers out ideas, plans, and programs in personal and group conferences. The President of the United States is always one of the most overworked men in the world. His is a killing job as witnessed by the fact that six widows of ex-Presidents are now living. The extraordinary authority given to President Roosevelt would be apt to kill any man who attempted to exercise it single- handedly, nor would it be wisdom to attempt to do so. Aware of this, the President adds to his advisory group specialists in particular fields as emergencies arise. The "brain trust" is not permanent in any sense. It is a very flexible body and this is one of its chief advantages. Men are added or subtracted as needs arise. Furthermore, one type of adviser tends to check another, thus sanity and balance are pre- served. The "brain trust" is a very malleable un- official group of men, gathering facts, weighing, comparing, discussing, searching, planning, and replanning ways of clarifying our economic horizons. The Cabinet and Supreme Council In a sense the usual President's Cabinet is also a "brain trust". President Washington's advisers at first were not known as members of the Cabinet. The word "Cabinet" is not in the Constitution, therefore the Cabinet is extra-constitutional. There are now ten great government departments and the head of each department is a Cabinet officer. These officers are not bureaucrats. They are prominent politicians, business men, attorneys, economists, and students of government. They are the intimate advisers of the President and Cabinet membership is one of the highest honors that the President can bestow. In fact, in case of the death of both the President and Vice President, Cabinet members may succeed to the Presidency. The members of the Roosevelt Cabinet are : Secretary of State, Cordell Hull; Secretary of the Treas- ury, William H. Woodin; Secretary of War, George H. Dern; Attorney General, Homer S. Cummings; Postmaster General, James A. Farley; Secretary of the Navy, Claude A. Swan- son; Secretary of the Interior, Harold L. Ickes; Secretary of Agriculture, Henry A. Wallace; Secretary of Commerce, Daniel C. Roper; Secretary of Labor, Frances Perkins Many New Officers The New Deal creates, for the time being at least, PRESIDENT ROOSEVELT'S CABINET MEMBERS Cordell Hull William H. Woodin George H. Dern Homer S. Cummings lames A. Farley Claude A. Swanson Harold L. Ickes Henry A. Wallace 63 Daniel C. Roper Frances Perkins many new and powerful officers of the joveinment. These men are not always members of the biain trust" nor are they Cabinet members in the tradi- tional meaning of this term. They have been espe- cially selected to meet the emergencies of the hour and are paid executive officers of the government. The salary of each is lixed not to exceed $10,000 per vear while Cabinet officers receive $15,000 minus 15 per cent cut. The members of the Cabinet and the chief officers of these new divisions of the gov- ernment have been designated as the Cabinet and Supreme Council. The two groups may sit sepa- rately or jointly as the President desires. Ten Executive Heads A brief biographical sketch of each of the ten executive heads of the principal agencies is given below. Lewis W. Douglas. Miner, soldier, farmer, teacher, and legislator have been some of the occupations fo lowed by the new Effector of the Bureau of the Budget. He is 39 years of age and was born in Bisbee, Ariz. Graduating from Amherst cSleee in 1916, he entered Massachusetts Institute of Tech- nnlno-v the same year for a special course in metallurgy and Oology He served overseas during the World War and was dtec by General Pershing during the Argonne offensive. Mr. Douglas was elected to the Arizona House of Repre- sentatives in 1923. Two years later he was elected to Con- S-ess as the Representative-at-Large from Arizona. He was '^ekTcted to t h e 71st, 72d, and 73d Congresses and resigned to accep th Directorship' of the Budget Bureau and guide President Roosevelt's economy program. Background for his new position was obtained by his long and active service as member of the House Committee on Appropriations. Jesse H. Jones. The new chairman of the R^n^jon Finance Corporation was born in Tennessee, 1874 educated n public schools; went to Houston, Texas, where he organ- za lumbercompany, engaged in banking and bought ^ nowsnaner put up $200,000 to bring the 1928 Democratic SaUoS.rcon'vcntiSn tc .'Houston; has extensive business interests in Texas and New York City. Henry Morgenthau, Jr. The Governor o ! the 'Federal Farm Credit Administration was born in New YoikUy, 1891 son of U. S. Ambassador to Turkey during the Wilson administration; two years at Cornell University;. served in US Navy during World War as a lieutenant, junior grade; chan-mar 7oi New York State agricultural advisory com- nKunder Governor Franklin D. Roosevelt; operates a successful live stock and dairy farm. George N. Peek, born in Palo, 111, 1873; attended North- west em University two years; president and general man- ager of the Moline Plow Co.; member of the war industries board during the World War, decorated with Distinguished Sen-ice Medal and French Legion of Honor; champion of M,'\4.y-Haugcn farm relief bill, writer on agricultural subjects; is the new Administrator of Agricultural Adjust- nC HARRY L Hopkins was born in Sioux City, Iowa, August 17 1891 graduated from Grinnell College with honors Phi Beta Kanpa entered settlement work with the Association For Improvement of the Condition of the Poor, served with he board of child welfare and the American Red Cross. Governor Roosevelt appointed him executive director of the N ew York State emergency relief administration which ob paying $15,000, he gave up to accept the $8,500 job as head of the national relief administration. \rtmir E. Morgan was born in Cincinnati, Ohio, in 1878; had a common school and high school education, prevented by iU health from attending college; entered government serv- ice in 1907 as superintendent of U. S. drainage investiga- tions in charge of reclamation work in Southern States; designed and constructed Dayton flood-control system; presi- dent of Antioch College since 1922. He is chairman of the Board of the Tennessee Valley Authority. Joseph B. Eastman was born in Katonah, N. Y., 1882, graduated from Amherst College with honors, I hi Beta Kappa- member of the Massachusetts public service com- mission four years, member of the Interstate Commerce Com- mission since 1919. He is now the Federal Coordinator of Transportation. Robert H. Fechner, born in Georgia, 1876; left school at 15 to earn a living; became a railroad "boomer" and worked as machinist for railroads in Mexico, Central America, South America, and United States; became member and organizer of railroad machinists' union, promoted to vice •president of the International Association of Machinists. He is the Director of the Civilian Conservation Corps. Hugh S. Johnson, soldier, lawyer, and business man, was born in Kansas in 1882; graduated from West Point; went with Pershing into Mexico in 1916. He was in charge of pur- chases and supplies for the Army during the World War; organized and managed the selected draft act of 1917-18, manager of the Moline Plow Co. since 1919. He is now Administrator of the Industrial Recovery Act. Frank C. Walker, as executive secretary, will be the council's chief coordinator, liaison officer, and general utility man Through him the President will keep in constant con- tact with the council's deliberations. He was born in Plymouth, Pa., in 1886, but went to Butte, Mont., with his parents at the age of three. He attended Gonzaga College, Spokane, Wash., and was graduated from Notre Dame Uni- versity Law School in 1909. He served three years as Prose- cuting Attorney of Butte and then went to the Montana Legislature. In 1925 he went to New York as general counsel for Comerf ord Theaters, Inc., and subsidiary corporations. He is a trustee of Notre Dame University and was a member of the Roosevelt prc-convention committee. Other Assistants to the President Raymond Moley, former professor of public law at Colum- bia University, was Mr. Roosevelt's right hand man during the months before and after the inauguration. He attended all of Mr. Roosevelt's conferences with President Hoover on war debts and was named Assistant Secretary of State. Later he headed a special investigation designed to abolish the crime of racketeering but in ^id-summer he resigned to become editor of a new weekly paper sponsored by Mi . Roose- velt's friend, Vincent Astor. Differences of policy between Mr Moley and Sec. Hull, which arose at the London Eco- nomic Conference, may or may not have led to the change. | Rexford G. Tugwell, Assistant Secretary of Agriculture was born in Sinclairville, N. Y., in 1891; ^p^vivaTa in Wharton School of Finance, University of ? e nnsy van, a m 1915; was instructor in economics in the University of Penn- sylvania and University of Washington, and professor of Snomfcs in Columbia University at the time of his appoin - ment. He has been a contributing editor of the *?« jjg* 6 ?; and is the author of many books on econ omic subjec ts As Assistant Secretary he will have much to do with the admin istration of the Farm Relief legislation. Oliver M. W. Sprague, the executive assistant to Secre- tary of the Treasury Wood.n, was born in fomerville Mass., 60 years ago. He is a graduate of .Ha i vai d Umver sity; taught economics n the 1™?*™^™*™**. ^J^ets then returned as a faculty member of the Harvard Business School In 1930 he went to the Bank of England as economic advSr, but gave up^this much better paying position to help President Roosevelt. , Louib MCHENRY HOWE is secretary ; to President JJ^velt and his closest friend. Most of his life has been *Pent as£ political reporter. When President Ff, 086 ™ 1 ^ ^n^we Washington as Assistant Secretary of the , NavyV Loins Howe went along as his secretary. Today with the p ^« d ent in i ne White House, Lewis Howe has again come to Washington to be with him. , .,• Donald H. Sawyer will have general charge of the public works program of all branches of the Federal OoyerrnnenU He was lieutenant colonel in the construction division o the Army during the World War; Secretary of the Assoc ate General Contractors of America for six y^^'/^XSeS by President Hoover to be director of the Employment Stabilization Board. To- this list should be added the names of George Warren, James Rogers, Felix Frankfurter, Paul Douglas Jame. Warburg, Mordecai Ezekiel, Col. E. M. House, Adolphe A Bcrlc, William C. Bullitt, Feis, Taussig, Pearson, Baruch Swopc, and others. W 64 "In these times facts are needed by every man, woman, and child — in business, at home, in school.** TWO INEXPENSIVE BOOKS of FACTS OurNew Leaders In Government I Price 50c per copy NAUGURATION of a new governmental regime has always brought to every citizen the perplexing problem of where to find information about the new incumbents in the responsible positions of our National Government. 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It contains — a review of world events for the past twelve months. — the most recent statistical information. — new facts about world population, religion, governments, and world rulers. — membership of the Seventy-third Congress, Ministers to Foreign Nations, State Gov- ernors, etc., etc. INEXPENSIVE — Current Events Year Books cost 25c each; if four or more are ordered, 18c per copy. CURRENT EVENTS "YEAR BOOK. r« Ac ScLmI Y«b WH» —-* Price 25c per copy TEAR OFF AND MAIL // They Will Help Me Keep Pace With Progress I Want Them American Education Press, Inc., 40 S. Third St., Columbus, Ohio Inclosed is $..._ Please rush forward copies of Our New Leaders in Government and copies of Current Events Year Book. If they fail to please me, I will return them and you are to refund my money. Name..... Address „ PND CAN YOU ANSWER . . . What Caused the Depression? What Constitutes the Gold Standard? How Can Depressions Be Abolished? MODERN PROBLEM BOOKLETS QUESTIONS such as the above, and hundreds more, are answered clearly, quickly, concisely in the great new series— Modern Problem Booklets. Each booklet pre- sents an organized study of a vital, unsolved civic or social problem, with vivid facts and figures which make it clearly understood. The subjects considered are ones with which every intelligent individual today should be familiar, yet concerning which it is difficult to secure in a single source all of the really pertinent information. Newspaper accounts are insufficient because they bring only the day-to-day events, without adequate background information necessary for a clear understanding and apprecia- tion of the essential problem, the presentation often colored by prejudice. Clear, simple, unbiased; above all, timely and inexpensive, Modern Problem Booklets are admirably suited for either group or individual study. Each contains an outline, references, study suggestions, etc. The material itself has been prepared by a distinguished group composed of some of the outstanding economists, sociologists and writers of the country. Contemporary historians all agree that the world is passing through a major crisis in world history. Modern Problem Booklets aim, first, to present some of the major phases of this critical period; second, to bring from all related sources a well-rounded presentation of the available facts, and, third, to organize this material so that the essential information may be quickly grasped and understood. AMERICAN EDUCATION PRESS, Inc. Publishers 40 South Third Street, Columbus, Ohio Complete List of Titles«- 1. The Depression— What Caused It? 2. The Depression— What Can WE Do About It? 3. Economic Planning— Can Depressions Be Abolished? 4. Unemployment Insurance 5. Crime — Its Prevalence, Causes and Costs 6. The Services and Costs of Government 7. Recent Economic Changes and Their Meaning 8. Distribution Problem — Can Man Have Plenty Without Sharing It? 9. Vocational Opportunities in a Machine Age 10. Our Newest Problem — Leisure 11. Inflation— What Is the Cold Standard? 12. Balancing the Budget 13. The Banks and You 14. The Story of Insurance 15. Who Pays for War? 16. International Cooperation: World Court, League, Pact of Paris 17. Tariffs, World Trade, and the Pay Enveiope 18. Experiments in Government: Socialism, Communism, Fascism, Democracy 19. Land Utilization and State Planning 20. Have We Scrapped the Constitution? TEAR OFF AND MAIL" American Education Press, Inc. 40 S. Third St., Columbus, Ohio Yes. I am interested in Modern Problem ' ^^J^S*. sets Modern Problem Booklets (£0 titles per aet) ZZIwith Binder ™ thout Binder Name ... Address City State PRICES $2.00 Per Set, 20 Booklets, without binder J2.60 Per Set, 20 Booklets, with binder Cash with order, except when ordered for tchool ua*. UNIVERSITY OF ILLINOIS-URBANA 330.973L582P1933 C001 A PRIMER OF THE NEW DEAL 2D ED REV NY 3 0112 025289015