“In Hoover we trusted… Now we are busted.”
Iowa Protest Sign 1932 Election
One reason to study the past is to learn about the various options which were tried – what worked, and what did not work. We will examine Hoover Economics, why it has not worked in the past and is not likely to work in the present. We will then review Progressive Economic solutions used by FDR and Progressive Democrats in Washington State to reduce human suffering during the Great Depression.
Since 2008, there has been a sad trend of following in the footsteps of Hoover Economics – by vacillating between doing nothing at all and repeatedly claiming that “Recovery is Just Around the Corner” - and slashing essential public services such as schools, colleges and health care and firing millions of public sector workers, thereby digging our economic hole much deeper than it already was.
The most detailed account of our nation’s history prior to the New Deal is Arthur Schlesinger’s three part series on FDR. The 1930 and 1932 elections are covered in the first book, called “The Crisis of the Old Order.” It described a time much like today. Beginning in 1929 and continuing right up through the 1932 election, Hebert Hoover repeatedly and falsely claimed that “Recovery was Just around the corner.” What was really around the corner was the Great Depression.
“When Hoover announced in late January that employment had started to increase, Francis Perkins (one of FDR’s employment advisors) promptly showed on the basis of Labor Department statistics that the situation was getting worse.” (Crisis of the Old Order, page 391).
By March 1930, while the reality of the Unemployment Crisis was barely acknowledged by Hoover, FDR as governor of New York appointed a Commission on Stabilization of Employment in New York. In August, 1931, FDR called for the establishment of a Temporary Emergency Relief Administration. “Aid to jobless citizens must be extended by Government, not as a matter of charity, but as a matter of social duty.” (Crisis of the Old Order, page 392)
Roosevelt faced a Republican majority nationally and in the legislature in the State of New York. Republicans then as today were opposed to public power, labor rights, and social reforms. Roosevelt used radio addresses and public speeches to rouse the public to force Republican legislators to accept changes their originally opposed. In the 1930 election, Roosevelt was re-elected governor by 75% of the vote – one of the biggest margins of victory in the history of New York.
In the 1930 election, Hoover claimed that the solution to our nation’s economic problems was reducing government spending, slashing government services and balancing the budget. Even in the 1932 election, Hoover’s main campaign pledge was reducing government spending and lowering income taxes on the rich. Long before Reagan, Hoover promoted “Trickle Down” economics.
In 1930, most of the American people still believed Hoover that the key to economic recovery was balancing the budget and cutting funding for public programs. This compunction to ignore the economic need to create jobs rather than cutting jobs was a far greater contributor to the Great Depression than the Stock Market Crash in the Fall of 1929.
The 2010 election was much like the 1930 election in that American voters were willing to believe claims that if we would only slash public programs and increase tax breaks for the rich, we would have a rapid recovery.
By 1932, the voters were no longer believing that Recovery was just around the corner. Still, at Madison Square Garden in October 1932, Hoover began his speech by stating:
“This campaign is more than a contest between two men. It is more than a contest between two parties. It is a contest between two philosophies of government.” Hoover charged that Roosevelt was “proposing changes and so-called new deals which would destroy the foundation of our American system.” Hoover opposed public power or what he called “putting the federal government into the power business.”
Roosevelt supported public power as a way of controlling price increases from private corporate electric power monopolies. Roosevelt wanted to lower rates for consumers by providing a public electric power option.“The fight for cheap power, as he saw it, had two aspects: the promotion of public power, plus the effective regulation of the private utility companies.” (Crisis of the Old Order, Page389).
The debate was nearly identical to the call today for a Public Health Care option (Medicare for All) as a way to control price increases from private corporate monopolies.
Roosevelt also campaigned on promises of a Public Works program. In the Spring of 1932, recognizing that business leaders and political leaders had no real solutions to the employment crisis, Roosevelt created a Council of Economic Advisors by turning to leading University professors, including Columbia University professor, Rexford Tugwell. This group opposed the “anarchy of concentrated economic power.” (Crisis of the Old Order, page 401). Tugwell stated that “the failure of business to pass on the gains of improved productivity, either through higher wages or lower prices, had caused a deficit of purchasing power which made depression inevitable.” (Crisis of the Old Order, page 402).
Later that summer, focusing on the need for a redistribution of wealth, Roosevelt adopted the title of a Stuart Chase article in the New Republic called “A New Deal for America.” (Crisis of the Old Order, page 403).
Roosevelt adopted a campaign theme of reversing the trend toward economic concentration of wealth through rigorous regulation of investment banking and focusing on increasing the purchasing power of all. In a speech in San Francisco on September 23, 1932, Roosevelt said:
“A glance at the situation today only too clearly indicates that equality of opportunity as we have known it no longer exists… We are now providing a drab living for our own people. The independent businessman is running a losing race. If the process of concentration goes on at the same rate, at the end of another century, we shall have all American industry controlled by a dozen corporations and run by perhaps a hundred men… Our task now is.. distributing wealth and products more equitably, of adapting existing economic organization to the service of the people.”
(Crisis of the Old Order, Page 425).
Hoover was confident that Roosevelt would be the “easiest man to beat” because Roosevelt was advocating for change and most Americans were naturally afraid of change. Business leaders backed Hoover both financially and in propaganda to their workers. For example, Henry Ford posted a notice in his plants stating: “To prevent times from getting worse and to help them get better, President Hoover must be elected.”
Hoover’s only campaign theme was a pledge to “further reduce government spending.” (Crisis of the Old Order, Page 432).
“Prosperity can never be restored by spending less, but only by spending more.”
Rexford Tugwell, FDR’s economic advisor proposed a $5 billion public works program paid for by increasing income and inheritance taxes on the rich. He proposed to “take incomes from where they are and place them where we need them.”
To save the country by only bailing out the big banks was like “trying to revive a dying tree by applying fertilizer to its branches instead of to its roots.” (Crisis of the Old Order, Page 451).
Other common Roosevelt themes included increasing wages, and strengthening the bargaining power of unions. Businesses which could only make a profit by child labor, long hours, low wages and lying and cheating was not the kind of business our country wanted.
In remains to be seen how much longer American voters will believe the myth that “recovery is just around the corner” and tolerate political leaders who ignore the jobs crisis and spend their time cutting jobs rather than creating them. However, by 1932, the American people decided they had enough of their current ineffective leaders. Both in the State of Washington and in the nation as a hold, incumbents from both political parties were tossed out of office in record numbers and replaced with “Progressive Democrats” who took our nation and our economy in a new direction and eventually lifted our economy into the greatest expansion in history.
In 1932, there was a huge increase in turn out at the polls. Nationally, three million more Americans voted than had voted in the 1928 election. Still, that Fall 13 million Americans suffered through a cold dark winter without a job – hoping that come Spring Roosevelt would make good on his promise of a New Deal for All. The nation was in the grips of a deflationary economic death spiral.
In order to balance the federal budget, and reduce income taxes, that winter of 1932, Hoover proposed a national sales tax. Conservative Democrats in Congress quickly agreed. However, Roosevelt opposed the sales tax claiming it would place too great a burden on the poor and harm economic recovery. By Spring, the sales tax plan was defeated. Roosevelt was more concerned about how to increase buying power (bottom up economics). “By transferring income from the well-to-do to the impoverished, the government might generate enough buying power to keep the economy in motion. “ (Crisis of the Old Order, Page 450).
In the space of 4 years, from 1930 to 1934, as the unemployment rate skyrocketed from 3% to 30%, the number of Progressive Democrats in the Washington State House of Representatives also skyrocketed from fewer than 10 seats to more than 90 seats. This was the single greatest transformation in seats in the history of Washington State.
In 1932 alone, Democrats increased their number of seats in the Washington State House of Representatives from 8 seats to 70 seats. In the Washington State Senate, the number of progressive Democrats rose from 1 seat to 25 seats – creating a Democratic Majority in a single year. Many of these nearly 100 newly elected Progressive Democrats had come from the ranks of the unemployed. Some did not even have a suit to wear to their swearing in ceremony.
While FDR began several national Public Works programs, the newly elected Governor Martin passed a $10 million Bond Issue here in Washington State in February 1933 to immediately create jobs and reduce suffering. A bill was also passed promoting public power to end corporate power monopolies. The Business and Occupation tax was passed to increase State revenue. And an Old Age Pension program was passed providing $30 per month for those over 65. State support for public schools was more than doubled – saving the jobs of thousands of teachers. Funding for Higher Education was also increased. A Two year moratorium on home foreclosures was also enacted but vetoed by the Governor in February. The same happened to a bill reducing the work week to 30 hours per week and a bill which would allow public ownership of telephone utilities.
On March 4, 1933, FDR assumed office and immediately declared a Bank Holiday. Most of the banks around the nation had already closed their doors and the nation itself appeared on the edge of economic and social collapse. In our State, the legislature passed a bill regulating stocks and bonds. There was also a bill to take over the oil companies and have the State run gas stations. Two public works projects were started. One was Grand Coulee Dam. The other was a project to create a canal from Olympia to Grays Harbor. Numerous roads projects were started and/or expanded.
FDR Believed that the Solution included creating Public Works Programs
In a nearly identical financial crisis, FDR saved our nation by creating a Public Works Program:
We have not been brought to our present state by any natural calamity--by drought or floods or earthquakes…factories stand idle, merchants sell less and less, while millions of men and women, in dire need, are clamoring for the opportunity to work. This awful paradox is a stinging rebuke of the fairness of the economic machine we have created.
By December 1933, Progressive Democrats in the Washington State House of Representatives had created a 20 Point program for increasing jobs and expanding public social services.
At the federal level, FDR also focused on “Fair Trade Agreements” whereby trade agreements were negotiated with other countries which protected the rights of American workers while also reducing trade barriers as long as these basic rights to fair treatment were protected.
In the 1934 election, 91 Democrats were elected to the Washington State House of Representatives, leaving only 8 Republicans in the House of Representatives – a complete reversal of power from just 4 years earlier. Progressive Democrats advocated for a State Bank to compete with private banks, state control of gasoline stations, expanded public works, a moratorium on home foreclosures, pension funding and more adequate support for public schools. They also advocated for progressive taxation of out-of-state chain stores to protect local businesses. This bill was also vetoed by the Governor.
Conservatives in the Senate, who face election only every 4 years, had blocked much of the reform efforts between 1932 to 1936. They paid the price in the 1936 election as Progressive Democrats increased their majority in the Senate with 41 Democrats to only 5 Republicans. In the House, the margin increased to 93 Democrats to only 6 Republicans.
In 1937, the 30 Hour work week was finally passed in both the House and Senate only to be vetoed by Governor Martin. A bill increasing protection for labor unions was also passed. Other bills passed included authorization of Housing Authorities and reducing the monopoly of the Bar Association in terms of who could take the State Bar exam.
By 1940, war production eased unemployment which fell to 1% by 1944. Voters now feeling safer about their jobs and the economy returned Republicans to power in Washington State in 1946 – which led to an immediate rise in unemployment. Democrats have been in charge of Olympia for the majority of time ever since.