by Amity Shlaes
A lady who had placed her pension in utilities had written Mrs. Roosevelt earlier that year: “Personally, I had my savings so invested that I would have had a satisfactory provision for old age. Now thanks to his desire to ‘get’ the utilities I cannot be sure of anything, being a stockholder, as after business has survived his merciless attacks (if it does) insurance will probably be no good either…. I am not an ‘economic royalist’ just an ordinary white collar worker at $1600 per. Please show this to the president and ask him to remember the wishes of the forgotten man, that is, the one who dared to vote against him. We expect to be tramped on but we do wish the stepping would be a little less hard.”
Companies were also marking new lows. Leonard Ayres, the executive at Cleveland Trust who had called on Aif Landon with Anderson in 1936, tried to get a grasp on the story by comparing the profitability of corporations in the current decade to that in the preceding one. He found that close to two of three had been profitable from the midteens through the 1920s. Since the Depression, however, that ratio had dropped below one in three, so that “for nearly a decade now the great majority of corporations have been losing money instead of making it,” he would note. The editors at the Economist in London were also watching, trying to put what was happening to the United States in perspective. In 1930, the per capita national income of the United States had been one-third larger than that of Britain, the magazine wrote. At the end of the 1930s, it was about the same. The problem, the magazine would conclude several years later, was “institutional obstructions to a free flow of capital.” The 1930s, all in all, the magazine would decide, were a strange decade; maybe, as it wrote, the United States really had forgotten how to grow.
Roosevelt’s aides were perturbed, for they were seeing the president behave as he had around the time of the London monetary conference. He could not make up his mind which problem was the worst, or which must be addressed, and in what manner. And he could not see that it was important to be consistent. Regal, he was content to allow his men to joust. And the jousters duly performed, some new to the tournament of New Deal politics, some of them in the same roles as in the past, and some now taking different ones. But to the observer—although probably not to the king—the economic trouble now was too close to that of the early 1930s for the debate to amuse.
On the one hand there was Eccles, arguing now that there was insufficient money in circulation, and more must be spent. Joining Eccles in this view were other economists and New Dealers—Isador Lubin, Leon Henderson, and Lauchlin Currie. Currie, who had trained at the London School of Economics, was the intellectual leader of the spending group. (Currie, like Hiss, was also a Soviet spy whose arguments won a good reception from naïve colleagues.) What mattered, in any case, at the moment, was the policy. In November, Roosevelt held a meeting at the White House to talk over all these ideas. Eccles got the impression that Roosevelt was ready to come out for more deficit spending. And now there were institutions that stood ready to do that spending, from the Agriculture Department through the WPA to the Farm Security Administration, the National Youth Administration, and the Civilian Conservation Corps. Roosevelt might also loosen credit, and had backed legislation to increase spending on housing. Eccles involved himself deeply in the minutiae of plans to spend on housing to spur economic activity. Earlier and now, their solution was controversial. Still, while the early 1930s had been rough, Eccles believed they had taught them all something.
On the other hand there were the budget balancers. One of them, at least on some days, was Roosevelt himself. For as Anne O’Hare McCormick wrote in 1937 after another visit to Hyde Park, Roosevelt was still “the Dutch householder who carefully totes up his accounts every month and who is really annoyed, now that he is bent on balancing the budget, when Congress can’t stop spending.” Budget balancing also appealed to Morgenthau, now in his fourth year at Treasury.
Men become their offices, just as Coolidge had written a decade earlier. Morgenthau’s response to this situation was to try to behave as he thought a treasury secretary should. Morgenthau had watched as the gold flowed into the United States when its economy or interest rates lured, and he had watched it flow out. He found himself offended by the Keynesians and their loose talk about the dollar. And his disapproval mattered—“Eccles was in the doghouse,” blamed for the new downturn, Currie later remembered. Now Morgenthau was pushing hard for a balanced budget. At a lunch with Roosevelt on November 8, he tried desperately to convey his sense of fear to Roosevelt through a story about something that mattered to both men: their sons’ generation. Henry III was at Princeton. So was Philip Willkie, Wendell’s son—indeed, in 1940, Philip would be voted “most likely to succeed” in the graduating class. John L. Lewis’s son, John L. Lewis Jr., would graduate in 1941. The New Dealers might have seen themselves as anti-elite, but they created an elite of their own. Morgenthau told Roosevelt that this young generation had to explain to itself, in its own terms, what the parents were doing. So, as Morgenthau told Roosevelt, he, the treasury secretary, had tried to explain the New Deal to Henry. And he had found himself struggling a bit. What exactly was the correct New Deal response to a floundering country? What had the New Deal achieved, actually?
Finally what the secretary came up with to tell the boy was that “the United States had come through this terrific turmoil and that the individual in this country still had the right to think, talk, and worship as he wished.” Roosevelt, Morgenthau noted, merely replied by saying, “And add to that the right to work.” Later, Morgenthau wrote in his diary that he had not understood what message Roosevelt was sending. Within days, Morgenthau was even more distressed, for Roosevelt continued to press suggestions for spending. “If you want to sound like Huey Long, I don’t,” Morgenthau said hotly to President Roosevelt as the pair drafted a speech designed to reassure Wall Street of the Roosevelt administration’s intentions. In his memoirs Morgenthau would later take care to note that the speech had been “checked and double-checked—every word, every syllable, by the President.”
On November 10, the day after the Dow closed at 126, Morgenthau finally gave his speech to the Academy of Political Science at the Hotel Astor in New York. It may have been a comfort that Mellon’s own beloved aide and pallbearer, Parker Gilbert, introduced him. The war against the Depression, Morgenthau told the crowd, had required deficit spending. But the emergency was ending, and the “domestic problems which face us today are essentially different from those which faced us four years ago.” The government would have to cut spending—a painful argument for Morgenthau to make, given that the project would include many New Deal cutbacks. Still, he had to do it, for “We want to see private business expand.” And then he unfurled a conclusion that he imagined would please Wall Street: “We believe that one of the most important ways of achieving these ends at this time is to continue progress toward a balance of the federal budget.”
That was when the laugh had come from the crowd—someone’s laugh of contempt. Morgenthau and his adviser Herman Oliphant, caught up as they had been in convincing Roosevelt to stick with their plan, later recalled their own shock at the audience response. They had pushed the president this far, and Wall Street had not rewarded them. It even seemed to be siding with Eccles. “We sit here and lose the feel of what the typical leadership of American finance is,” Oliphant said of life in Washington, “and it’s very illuminating to realize the hopelessness of trying to work with them.” The hurt was also compounded by fear that they may have misunderstood the president. Or been made to seem the fool.
Eccles for his part was also hesitating. Morgenthau’s November 10 speech sounded to him like something from another century—not at all what he and Roosevelt had discussed. The Fed chief’s confusion was doubtless not reduced when the president, early the following month—and after more bad news nearly daily—told reporters that the idea of a business recession was merely “an assumption.” In the same press conference the president also threw a bone to the
business crowd—the announcement that he had recently received a very interesting memo from Willkie on a utilities matter, and that he intended to study Willkie’s thoughts very intently. Later, Eccles concluded sadly in regard to the recovery plan what others had concluded about the president on other matters: “It seems clear that the President assented to two contradictory policies because he was really uncertain where he wanted to move.”
THERE WAS YET A SECOND contest among Roosevelt’s men. It was between those who sought the cooperation of larger businesses and those who wanted to attack them. In New York, Berle considered that a solution might be guaranteeing wages in certain industries, “beginning with housing.” Such a plan, Berle reflected in his diary, “probably also means taking over the railroads,” as well as, perhaps, government “taking over both housing and construction.” He realized that would be an unparalleled infringement on private property. “But,” he wrote with a diarist’s sigh, “I do not see that it can be helped.” Balancing the budget would likewise have to go out the window.
Tugwell too was all for planning among economic leaders—and perhaps still hoping for an inroad back to Washington. The president, casting about, had him to dinner that month, and Tugwell took the chance to go over some basics with FDR. (“Rex was trying to educate the President in general economics,” noted Berle wryly.) In January, Tugwell and Berle would shepherd John L. Lewis, Thomas Lamont of J. P. Morgan, and others to the White House for a conference. The headline describing the meeting replicated headlines from the Hoover years: “Leaders with a Program for National Recovery to See Roosevelt Today: Cooperation Is Aim.” Donald Richberg was also pushing for cooperative planning.
Just as back in 1932, Roosevelt seemed to be receptive to the planning idea. Was charity the answer? In the autumn he had called for a nationwide charity drive: the names on the benefit lists were reported to include Lillian Wald, Ida Tarbell, Arthur Hays Sulzberger, Mrs. Roosevelt, Mrs. Dwight Morrow, and “Wendel L. Willkie.” At a press conference on the fourth day of January, the ambivalent president told reporters that he was thinking about renewing cooperation between government and business. Sensing ambivalence, Roosevelt scripted his way forward: “Don’t write the story that I am advocating the immediate reenactment of the NRA. But the fact remains that in quite a number of the code industries under NRA it was perfectly legal for the heads of all the companies in a given industry to sit down around the table with the Government.” Was allotting shares of business a good idea? asked a reporter, putting his finger on the old NRA problem. “Keep competition.”
At the same time, however, Roosevelt was listening to and following the advice of another set of advisers: the anti–big business crowd. From afar a bitter Moley—who, unlike Tugwell, was no longer coming down for occasional visits—noted that Corcoran, Cohen, Ickes, Hopkins, and Robert Jackson were telling the president he must use the opportunity of the downturn to move in for the kill when it came to big business. And the president was heeding them. In public remarks, Roosevelt’s men were speaking of “corporate tentacles” or “aristocratic anarchy.” Hugh Johnson, now out and embittered, called the group around Roosevelt “the janissariat,” a reference to Christian youths conscripted by the old sultans.
Corcoran and Cohen, whatever their ambitions, were mostly insiders, not ambassadors. Jackson, however, was someone whom Roosevelt increasingly viewed as a possible heir. Jackson, like Morgenthau or Eccles, had collected a set of specific instructions from Roosevelt—in Jackson’s case to define and prosecute antitrust violations, and, especially, to go after individuals. Sometimes—when he knew the targets involved, or liked them—Roosevelt suggested that Jackson soften. And always, Roosevelt took care not to harm those with special power to harm him. Learning from Jackson of a possible action against motion picture combines, Roosevelt said, “Do you really need to sue these men?” and asked that they be brought in for a talk. But other times he egged Jackson on.
In the fall of 1937 Roosevelt was thinking about whether Jackson might be a good man to run as candidate for his old job of New York governor. There was talk that Bob Wagner would run for that job, but Roosevelt wanted to keep him as an ally in the Senate. If Jackson, an attorney from Jamestown from a Democratic family, could capture the governor’s seat, then Roosevelt could have a twofer. Roosevelt’s feelings about Jackson made sense, for there were similarities between the two, as the columnists Joseph Alsop and Robert Kintner would note: “Both are upstate New Yorkers. Both are country squires turned political leftwingers.” Another commonality: “H” in Jackson’s name stood for Houghwout. He was descended from Dutchmen, like Roosevelt. At the end of November, Jackson accompanied the president on a fishing trip. Hopkins and Ickes—who at times had feuded bitterly—were also aboard the Potomac, sharing a cabin. The four prepared political strategy: specifically, an assault on the wealthy. Roosevelt caught a large mackerel early on, but it was Jackson who had the biggest catch of the trip, a barracuda of more than twenty-five pounds. If any of them considered the incongruity of planning a class war on a yacht, they did not mention it.
Just after Christmas, Harold Ickes gave a radio speech assailing America’s wealthy, charging that sixty families who ran the nation were on strike against the rest of the country. He was correct about the strike part. The sixty-family part Ickes had taken from a sensationalist book recently published by Ferdinand Lundberg, a writer for the Herald Tribune, Irita’s paper. Those families, Ickes said, were demanding that government give the country back the “suicidal license” it had had in 1929. Some listeners took the Ickes assault strike in good humor. One was Charles P. Taft, the son of the president. Taft told the New York Times that he felt about Ferdinand Lundberg’s decision to include the Taft name in his list as Mark Twain had upon hearing the news of his own death: that the charge was “grossly exaggerated.” But the message was clear: there would be more political attacks in 1938.
Next came Jackson, who now hoped to net the biggest fish of all for his boss: Willkie. The pair would go up against one another in a town hall meeting with a live audience. But it would also be a Town Hall Meeting of the Air, a show that the National Broadcasting Company aired across the country via its Blue Network. The public did not know it, but for Willkie the debate was a public reprise of those original meetings with David Lilienthal at the dark table in the Cosmos Club: “How Can Government and Business Work Together?” Both Jackson and Lilienthal were good fits for the town hall format, men who might actually have appeared at a genuine town hall meeting, the sort that Rockwell painted. Willkie, the son of Elwood’s German American attorneys; Jackson, who had skipped college and had become a lawyer the old-fashioned way, training as a clerk—these were two old country lawyers who through merit had risen and now were debating the biggest issues in the land.
The event took place on the first Thursday in January. Jackson started out graciously. Probably no two men had ever looked at the relations of government to business through “more differently colored glasses” than he and Willkie. Yet Jackson admired Willkie’s “consistent willingness to stand up man-fashion and submit his views to the test of dispassionate but frank discussion.” Then Jackson moved on, blaming business for its strike and for creating insufficient work; and, “if industry will not provide it, the people are determined to provide for themselves.” Small companies he would defend—indeed he as a young man had represented them himself once. Big companies, however, needed reining in. They were selfishly keeping their profits to themselves.
Next, Jackson moved to the topic of subsidy. Roosevelt’s opponents claimed that the New Deal had created the idea of subsidy. That was a fallacy. The United States had always subsidized the private sector. In the nineteenth century, pioneers had enjoyed a form of early WPA; they got “a quarter section of public land just for occupying it.” World War I had provided another sort of WPA, spending and jobs. The actual WPA was just a follow-on. Those who recalled Roosevelt’s 1932 speech about the end of the frontier saw that
Jackson was reprising an old theme.
Jackson also made a stab at explaining why there was conflict between government and business: “The man who is in government is brought in contact with the problems of all kinds and conditions of men. Everybody’s business is his business.” The private businessman, by contrast, “has been intensely preoccupied with a very narrow sector of the world.” Again, Jackson assigned blame: the conflict was business’s fault. Jackson concluded, somewhat irrationally for a trustbuster, with a plea for a “high volume, low price industrial economy.” Those who opposed his notions were trying “to destroy this kind of American life.”
Here Jackson had overshot. For Willkie this time was better prepared than he had been at the Cosmos Club, or against Lilienthal. What’s more, he was aware that the stakes were higher than they had ever been. Just days before, on January 3, the Supreme Court had refused to let power companies use injunctions to stop federal lending to cities for power plants. “Mr. Ickes’s delight over the court verdict was unconcealed,” the Times had written. Sixty-one projects in twenty-three states that had been held up could now proceed, and even Justice Sutherland had gone along. With Ickes at work, and Lilienthal rising, the next year or two would probably mean the end of Commonwealth and Southern.
The executive started out gently, calling Jackson’s bluff about the town hall. Was the very idea of business cooperation with government really so American? “I wonder,” Willkie asked the audience, “if it seems strange to you tonight that we should be discussing the question of whether or not government should cooperate with American business…They might ask, with some surprise, if it was not the function of American government to encourage the development of private enterprise.” Hoover’s monstrous Department of Commerce was odd. And the New Deal might dress itself up as a community project. But conceptually it lay very far from the country’s old community roots.
