by Adam Cohen
On December 30, Douglas presented Roosevelt with a sharply written ten-page memo in which he made a “last plea” to slash spending. Attempts to “prime the pump” through deficit spending, he argued, would “cause infinitely more harm through the consequent paper inflation than any amount of good which might flow from them.” Douglas took direct aim at Roosevelt’s favorite program, the CCC. “Desirable as this activity may be,” he said, because of its inflationary impact “it falls naturally within the category of those things which we might like to do but which in the public interest we cannot and should not do.” Douglas argued that if Roosevelt stuck to his high-spending ways, “I prophesy many years of intense suffering on the part of millions—many, many millions of American citizens.” Roosevelt was not persuaded, and the memo troubled him. He wondered “whether the man writing such a memorandum wasn’t trying to make a written record.”22
The following year brought more defeats. In March of 1934, Congress rebelled over the Economy Act. Given the enormous increase in federal spending, members of Congress argued that it was unfair to stick with the cuts that had been imposed on veterans and federal workers. Congress passed a bill restoring $228 million in funding for veterans’ benefits and federal workers’ salaries. When Roosevelt issued a veto, Congress overrode it. The override “entirely changed the President’s attitude toward economy measures,” Senator James F. Byrnes, one of the Economy Act’s biggest supporters, wrote in his memoirs. Roosevelt concluded, according to Byrnes, that “whatever may have been the wish of the Congress in 1933, it was no longer willing to support him in his efforts to economize.” At the same time, Douglas was forced to look on as New Dealers expanded the government’s regulatory power. He opposed the Securities Act of 1934, and the creation of the Securities and Exchange Commission, which he saw as the “Tugwellians” making further inroads toward a centrally planned economy. Douglas’s declining influence was clear even to people outside the administration. “No man in Washington has been so unhappy as Douglas, who sees disaster at every turn,” one journalist observed. “Why Douglas remains in the New Deal is something of a mystery.” Douglas became increasingly embittered. In a March 2 letter to his father, Douglas called Henry Wallace “absolutely financially irresponsible” and Secretary of the Navy Claude Swanson “a man of no mental fiber at all.” Douglas was most contemptuous of Tugwell, whom he called “cunning” and “a Communist at heart.” Douglas had also found a larger force to blame for the New Deal’s excesses. Jews “as a race,” he decided, were pulling Roosevelt astray. “The Hebraic influence in the Administration is very strong,” he told his father. “Most of the bad things which it has done can be traced to it.”23
Douglas and Roosevelt had another confrontation in June over Roosevelt’s plan to ask Congress for a multibillion-dollar “kitty” that he could use for various relief projects. After this heated encounter, Roosevelt would not meet with Douglas for two weeks. At the end of the summer, Douglas traveled to Hyde Park to offer his resignation. Roosevelt did not want to lose Douglas, and he worried about the political fallout of having the administration’s best-known fiscal conservative leave in a fit of pique. He insisted that in ten years Douglas would regret his decision, but Douglas was resolute. “I have a deep conviction that the Budget must be balanced,” he wrote to Vice President Garner. “I could not find evidence of the same conviction elsewhere, so I did what I thought was right as courteously as I know how to do it.” Appealing to party loyalty, Roosevelt asked Douglas to stay through December so his resignation would not affect the midterm congressional elections, but Douglas insisted on announcing his departure right away.24
Douglas’s departure was a victory for the administration’s progressives, but they were not all celebrating. Perkins, for one, had tried to convince him to stay. She did not hold his opposition to spending programs against him, and she thought Douglas had done an impressive job of overhauling the badly disorganized budget office he inherited, and of helping individual departments to prepare their budgets in a professional way. When Perkins talked to him about staying, Douglas was cordial, and noted that “you have been more persuasive than I have on some occasions.” Douglas felt his losses on policy matters deeply. He left the administration, he would later say, not because he had lost influence, but because he did not want to “destroy myself inside.”25
Douglas’s resignation did not prevent the Democrats from winning the 1934 midterm election handily. He considered running for governor or senator back in Arizona, but his fears that his budget cutting would doom his political career proved correct. Douglas received high-level job offers from several major companies, including Paramount Pictures, as well as from Harvard University, where President James Conant wanted to make him vice president. Douglas instead accepted a position with American Cyanamid, the large chemical company. He was at first reluctant to criticize Roosevelt, but by 1935, he was more willing to speak out. In a series of lectures at Harvard, Douglas attacked, as The New York Times put it, “nearly every economic measure the Roosevelt Administration has adopted since” the Economy Act. He had actually gone further, declaring that he regretted that as a member of Congress he had voted for the Reconstruction Finance Corporation, the anemic relief measure adopted by Hoover. When the lectures were published in book form, Douglas wrote a preface that attacked the Roosevelt administration for promoting a “collective system” of government.26
In the 1936 election, Douglas publicly opposed Roosevelt and offered himself to Republican nominee Alf Landon as a vice presidential candidate. With each passing year, Douglas’s opposition to the administration became more determined. In 1937, he helped organize a group of senators to challenge New Deal legislation. In 1940, Douglas, who had become president of Mutual of New York Life Insurance, helped found “Democrats for Willkie.” Roosevelt felt bad about his onetime protégé’s opposition, but whether out of respect for Douglas’s abilities, lingering affection, or simply a desire to co-opt an influential opponent, he allowed his former budget director to return to the administration as deputy to Averell Harriman, the Lend-Lease representative in London. In 1942, Roosevelt appointed Douglas deputy war shipping administrator, giving him a large role in ensuring that the American military had the supplies it needed to win World War II.27
Douglas ended his career in public service with a much-coveted position. In 1947, President Truman appointed him ambassador to the Court of St. James’s. In his four years in London, Douglas supported the Marshall Plan and opposed the creation of the state of Israel. He had done his best, he assured the British government, to clamp down on the “subversive activities” of American Jews who were working for a Jewish state. In 1949, he lost the use of an eye in a fishing accident, and he resigned as ambassador the following year. Douglas, who wore an eye patch for the rest of his life, returned to private life, splitting his time between New York and Arizona, where he became chairman of a bank. He backed Republican Dwight D. Eisenhower over Adlai Stevenson in 1952 and, two years later, denounced Brown v. Board of Education, the Supreme Court case that declared segregated public schools unconstitutional. Douglas would go on to oppose the civil rights movement as an infringement on states’ rights. Until his death in March of 1974 he remained “a bit of a tragedy,” as John Franklin Carter had observed back in 1934. “With a wider social outlook and a greater knowledge of economics . . . he would be one of the mainstays of the New Deal,” Carter argued. “As it is, he is a man who has confused the principle of laissez-faire with the Word of God.”28
Unlike Moley and Douglas, Henry Wallace settled comfortably into the new administration. The Agricultural Adjustment Act presented him with a vast administrative challenge: translating the law’s bold promises into a practical system of agricultural incentives and aid to needy farmers. His first major undertaking was paying farmers to produce less cotton, and his success in getting a quarter of the nation’s crop plowed under showed not only that domestic allotment could work, but that it was a force t
o be reckoned with. Wallace, the passionate lover of plants, thought having “to destroy a growing crop” was “a shocking commentary on our civilization.” He was able to accept it, however, “as a cleaning up of the wreckage from the old days of unbalanced production.”29
Wallace had a bigger problem with hogs and corn. There were six million excess hogs, and hog farmers did not want to wait another year to get rid of the surplus. They lobbied Wallace to call for the slaughter of pigs that weighed less than one hundred pounds, to cut down on the pork supply and reduce the need for corn feed. Wallace was not enthusiastic, but he went along. His decision to slaughter “six million baby pigs,” as the press invariably put it, caused a national uproar and led to furious personal attacks on him. Wallace could never see why the public was so up in arms. “Doubtless it is just as inhumane to kill a big hog as a little one, but few people would appreciate that,” he said. “They contended that every little pig has the right to attain before slaughter the full pigginess of his pigness.”30
Wallace had warned that if the AAA did not pass until after the spring crop was planted, it would not have a significant impact in its first year, and he was right. Agricultural prices moved up modestly in the first few months, largely due to speculation, but they slid back down. The Farmers’ Holiday Association was soon protesting again. The processors, who had been the fiercest opponents of the AAA, had the fewest grievances. They found that they had no trouble passing the processing taxes, and more, on to consumers. Wallace was soon flooded with complaints about the rising price of textiles and other goods made from processed crops. When he investigated and found that textile operators had “increased their margins as well as their prices,” he made sure the public knew that the processing taxes were responsible for only a small part of the increase. 31
The hostility in the Agricultural Adjustment Administration had by now broken out into full-scale civil war. Peek was using his position to promote McNary-Haugenism, and he was still bitter that he was not agriculture secretary. “I think that Fort Sumter was when he said to me, ‘I want you to understand that Wallace doesn’t mean anything here,’ ” recalled Jerome Frank, the AAA’s general counsel. Peek, who had tried to block Frank’s appointment in large part because he was Jewish and from a big city, was more frustrated than ever by the “urban liberals” in his agency, who he thought were more interested in remaking the world than in helping farmers. After Peek and Tugwell clashed over a proposal to dump butter overseas, Roosevelt replaced Peek with Chester Davis, Peek’s first lieutenant, who had warmer feelings toward domestic allotment and closer ties to Wallace. Peek’s departure did not end the schism between the agrarians and the urban liberals. Davis, a onetime farm leader from Iowa, clashed as sharply with Jerome Frank as Peek had. Frank stood up for consumers and took on powerful business interests like the meatpackers and the tobacco industry. He also pushed the AAA, which had done so much for rich landowners, to do more for tenant farmers, many of whom were being thrown off the land by domestic allotment. Davis and Frank’s final clash was over an order Frank sent out to administrators in the South defending sharecroppers’ right to remain on the land. Davis demanded that Frank and other leading liberals be purged from the agency, and Wallace—to the bitter disappointment of progressives—reluctantly agreed to put an end to the hostilities. “The farm people,” Wallace was said to have told Frank sadly, “are just too strong.”32
Although it got off to a slow start, the AAA had a dramatic impact on the prices of wheat, cotton, corn, and hogs, and on the income of the farmers who produced them. From 1932 to 1936, farm income increased 50 percent. The AAA also began moving the Farm Belt toward the long-elusive goal of “parity.” By the end of the New Deal, the ratio of farm to city income, which had fallen to 48 percent in 1932, would rise to 79 percent. The AAA did not instantly end the farm crisis, but it brought a badly needed infusion of money into the Farm Belt, made it possible once again to farm profitably, and defused the radicalism that had been sweeping the region. Relief came to the Farm Belt more quickly than to the industrial economy, where conditions were still dire.33
In January 1936, the Supreme Court ruled that the AAA was unconstitutional, holding that the processor tax was an abuse of the government taxing authority. Wallace, who had anticipated the possibility, was already at work on a substitute that funded domestic allotment directly out of the Treasury. On March 1, Roosevelt signed the Soil Conservation and Domestic Allotment Act, a new version of the AAA that did not rely on a processor tax. In 1937, after taking a lengthy and eye-opening trip through the South—“Two thousand miles of Tobacco Road!” one member of his contingent declared—Wallace belatedly turned his attention to the problems of tenant farmers. With his backing, Congress passed the Farm Tenancy Act, which offered government loans to help sharecroppers buy land and acquire farm equipment. The law ended up helping fewer than 50,000 of the nation’s 1.8 million tenant farmers.3435
The biggest problem with the New Deal farm programs was that once in place they proved impossible to dismantle. The AAA was supposed to end when “the national economic emergency in relation to agriculture” was over. The agricultural emergency ended when the Depression did, but the farm programs never went away. They continued to dispense subsidies as family farms gave way to agribusinesses, and an ever-shrinking percentage of Americans made their living through farming. At the start of the twenty-first century, more than 70 percent of the subsidies were going to large farms. The farm programs that emerged from the New Deal would frequently be criticized for wasting taxpayer money and artificially increasing food prices. According to one government study, as much as 30 percent of the $26 billion in agricultural subsidies the government handed out in a single year went to people ineligible to receive them. With the rise of globalism, it became clear that the farm programs were harming third-world farmers, who were unable to compete with highly subsidized American crops. Congress, under pressure from farm state representatives, continued to block even modest reforms in the subsidy programs.36
While Wallace was administering the agricultural programs he also become one of the administration’s greatest roving ambassadors. In 1934 alone, he traveled more than forty thousand miles, visiting each of the forty-eight states, and published two books and twenty articles. Wallace was so highly regarded that his name was mentioned frequently as a successor to Roosevelt. When Roosevelt decided to run for an unprecedented third term in 1940, Wallace became his running mate, replacing Vice President Garner, who had challenged Roosevelt for the Democratic nomination. Many conservative Democrats opposed the choice, but Roosevelt had great respect for Wallace, who he thought would make a good vice president and a worthy successor. Not insignificantly, Roosevelt also thought that Wallace would help him carry the Farm Belt. Wallace stepped down as agriculture secretary for the campaign, leaving behind a department that had grown from 40,000 employees when he took office to more than 146,000.37
After Roosevelt was reelected, without carrying Iowa, he named Wallace chairman of the Economic Defense Board, giving him a key role in war mobilization. Wallace became a major liberal voice in foreign policy. In a famous 1942 speech, he declared it “The Century of the Common Man,” a phrase he would long be associated with, and argued passionately against colonialism and fascism. He became increasingly outspoken, railing against greedy businessmen, isolationists, and “American fascists.” When it came time for Roosevelt to run again, Wallace had become a liability with urban bosses and southern Democrats. With Roosevelt’s quiet support, the 1944 Democratic National Convention dumped Wallace from the ticket and nominated the more moderate Senator Harry Truman of Missouri for vice president.38
Wallace felt betrayed, but he campaigned across the Farm Belt for the Roosevelt-Truman ticket. Roosevelt rewarded him after the election by naming him secretary of commerce. Roosevelt died in April 1945, which meant Wallace had only narrowly missed becoming president. Wallace was one of the few Cabinet members asked to stay on by Truman,
but he did not last long. In the fall of 1946, he gave a speech in Madison Square Garden that conflicted with the administration’s tough approach toward the Soviet Union. When conservatives inside and outside the administration attacked the speech, and Wallace, Truman asked for Wallace’s resignation. Wallace went on to become editor of The New Republic and threw himself into progressive politics. As liberals splintered over their responses to communism, Wallace sided with those who worried that the anti-Communists were going too far. His critics charged that he was sounding like a Communist himself.39
In 1948, Wallace waged a third-party run for president. As the Progressive Party nominee, he ran on a platform of freedom and international cooperation abroad and civil rights and civil liberties at home. On a southern campaign swing, he broke with tradition and refused to appear anywhere that was not open to blacks on an equal basis. Wallace was strongly attacked from the right, however, and he spent much of his time trying to dispel charges that he was a Communist or a fellow traveler, and hopelessly naïve about the Soviet threat. He was not entirely successful—51 percent of the respondents in a Gallup poll said they believed the Progressive Party was Communist-controlled. With the race between Truman and Dewey a dead heat, many of Wallace’s supporters cast their ballots for Truman in the end. Wallace won 2.4 percent of the vote, and finished fourth behind Truman, Dewey, and Dixiecrat Strom Thurmond.40
