TIME: Almanac 1993/TIME Almanac 1993.iso/time/election/32elect/32elect.015

Text File | 1992-10-19 | 8.5 KB | 160 lines

                )-                                                            ╚May 29, 1933

INDUSTRY

Two-Year Plan



     "A national emergency productive of widespread unemployment
and disorganization of industry . . . is hereby declared to
exist."

     So began what might easily have been mistaken for a
dictator's proclamation upon first seizing national power.
Actually it was a measure about to become law of the land. The
striking words prefaced the national Industrial Recovery Bill
which President Roosevelt sent to Congress last week for
immediate enactment. After weeks of talk the 4,000-word measure
represented the grand climax of President Roosevelt's domestic
attack on the Depression, his Two-Year Plan "to put people to
work."

     The legislation, for all the powers it gave the President to
put Government and Business into "partnership," contained few
surprises. As a price for having the Anti-Trust laws suspended,
each industry was to draft and subscribe to a fair trade code to
be approved by the President. Each such code was to ration
production so that some plants would not work 24 hours per day
while others stood idle, to reduce working hours so that more
employes could find jobs, to set up a minimum wage so that
sweatshop operators could not steal the market, to give labor a
free hand so that it could organize and bargain collectively.
Industrial minorities which refused to subscribe to majority
codes could be put out of business, if necessary, by the
President's power to set up a rigorous licensing system. (Grave
constitutional doubts were raised as to the Government's power to
restrict or deny by license an individual's right to pursue
whatever honest business he chooses. Cited was last year's
Supreme Court decision in an Oklahoma ice case in which such a
license system was voided as a violation of the "due process of
law" clause.) Any industry which failed to draft a code
satisfactory to the White House could have a ready-made one
forced upon it by the Government. "Big Business," in the form of
powerful trade associations, was to be pampered back to economic
health while the little independent manufacturer, for whose
protection the Anti-Trust laws were first passed, was to become
an outlaw. On the surface and in most official explanations
voluntary partnerships were called for but deep down in the new
law were large penal powers which gave a determined Government
the whip hand over the toughest business.

     The new law's operation is definitely limited to two years
from the date of its enactment. If President Roosevelt cannot get
the country back on its feet in that time he may well feel that
no one else can. If he does the job sooner, he can terminate the
Government control system by simple proclamation, thereby
notifying the nation and the world that the Depression is over.

     Part Two of the National Recovery Act was President
Roosevelt's colossal public works program. For this purpose
$3,300,000,000 was to be raised by Federal bond issues which,
with other "extraordinary" budget expenditures, would probably
put the Public Debt to an all-time high. (On May 31, 1919 the
Public Debt reached a record of $26,596,701,648. On April 30,
1933 it stood at $21,441,209,176.) The proceeds were to be lent
to states, counties and municipalities on a 30-to-70 basis. It
was estimated that each billion dollars would put 1,000,000 men
to work constructing bridges, laying roads, clearing slums,
eliminating grade crossings, building war ships. Private industry
was to get no cash form the Government, on the ground that the
Treasury, unable to supply all-comers, should avoid
discrimination by supplying none.

     In his special message accompanying the measure President
Roosevelt pointed out that $220,000,000 per year would have to be
raised by fresh taxation to service the Treasury's borrowings.
But he left the job of finding new sources of revenue to the
House Ways & Means Committee. Only if it floundered in indecision
would he submit his own tax recommendations. Capitol Hill
grumbled that he was sponsoring the popular spending provision of
the bill but leaving the unpopular taxing duty to Congress. For
the first time since his election he mentioned Repeal by shrewdly
pointing out that liquor taxes eventually would yield enough new
revenue "wholly to eliminate these temporary re-employment
taxes." (Up to last week Michigan, Wisconsin, Wyoming, Rhode
Island, New York and New Jersey had ratified the Repeal
Amendment.)

     Promptly the Ways & Means Committee was summoned into
session by its new chairman, Robert Lee Doughton, a tall, lanky
backwoodsman who farms and raises stock at Laurel Springs, N.S.
For 22 undistinguished years he has served in the House, mostly
in his office doing small chores for his constituents. Seniority
rather than financial ability raised him to his present eminence.
A bitter opponent of the Sales Tax, he helped to lead last year's
House revolt against that levy.

     First witness before the committee was small, smiling
Secretary of the Treasury Woodin. He had not been asked to sit in
on the White House conferences which drafted the Industrial
Recovery Bill, was therefore unable to explain its operation.
After a few brief pleasantries, he introduced hard-driving young
Director of the Budget Douglas as his spokesman. Committee
members who had heard many a story that Mr. Woodin had been
sidetracked by the Administration, that Budgeteer Douglas was
actually running the Treasury, did not miss the significance. For
hours Director Douglas ably expounded the details of the measure
he had helped to write.

     He presented a variety of tax methods, by a combination of
which the needed $220,000,000 could be raised. Normal income
taxes increased from 4% and 8% to 6% and 10%, their application
to stock dividends and an additional $.04 tax on gasoline would
do the trick. The same income and dividend taxes added to taxes
of $.10 per lb. on tea, $.05 on coffee beans, %05 on cocoa beans
would also accomplish the purpose. If normal and dividend taxes
were upped to 8% and 12% slight increases in the telephone and
admission levies would put the revenue program across. By itself
a 1 1/8% general manufacturers' sales tax, without exemptions,
would raise $214,000,000.

     Budgeteer Douglas let the committee take its choice, hotly
refused to be pinned down as to which method was the
Administration's choice.

     The committee's choice was soon forthcoming. By a vote of
13-to-9, it proposed to: 1) jack up normal income tax rates to 6%
and 10% (revenue: $46,000,000); 2) apply these rates to dividends
(revenue: $83,000,000); 3) increase the gasoline levy from $.01
to $1 1/4 per gal. (revenue: $92,000,000). The sales tax went
down and out without a fight. Later, on White House instructions,
the committee voted to make the recovery bill a general tax
measure, continuing the current "nuisance taxes" for an extra
year.

     Hardly had President Roosevelt submitted his measure to
Congress than the Associated Press burst forth with a copy-
righted story to the effect that General Hugh Samuel Johnson had
been chosen to administer the new law. The A.P. was premature.
President Roosevelt had not yet picked General Johnson as
industrial dictator but probably would. Modest behind his gruff
exterior, a small man with careless clothes and a tongue usually
tart, General Johnson humbly declared: "My major thought is that
I may not be the most competent man to handle this bill."

     Born 50 years ago in Kansas, Hugh Johnson was graduated form
West Point in 1903, later took a law degree at the University of
California. He has written boys' books about the army (Williams
of West Point, Williams on Service). To him is generally credited
the machinery for the Wartime draft, of which he was in executive
charge under General Crowder. He set up the General Staff's
Purchase, Storage & Traffic Division to eliminate competitive
government buying, sat on the War Industries Board with Bernard
Mannes Baruch. Resigning from the army in 1919 as a Brigadier
General, he joined the Moline (Ill.) Plow Co. of which George
Nelson Peek, new administrator of the Farm Relief Act, was
president. In 1927 he went to Mr. Baruch at No. 120 Broadway as
economic expert and fact-finder, Mr. Baruch lent him to President
Roosevelt to help draft the Industrial Recovery Act. With his man
Peek running agriculture and his man Johnson running industry,
Mr. Baruch indeed loomed as Washington's greatest backstage
power.