Roosevelt (58 page)

Unhappily, the more Roosevelt turned for advice to the men around him and to others he called in, the more he risked becoming entangled in the arguments over economic policy within his own
staff, within his cabinet, within his whole circle of advisers. And the more he was plunged into the middle of the intellectual warfare among academic economists.

During the fall and early winter Roosevelt’s conservative advisers seemed to have the upper hand. Morgenthau’s budget-balancing speech, the President’s continued assurances on the same subject, his well-publicized demands for government economy, his frequent distinction between the great number of businessmen and the tiny minority of wrongdoers—all these were designed to bolster business confidence, to embolden investors, to shore up the stock market. In his “budget seminar” with reporters shortly after the new year began Roosevelt said that the most important fact was the cut of over half a billion in estimated spending for the next fiscal year.

The President’s caution did little to placate business. It served mainly to arouse the New Dealers around him. By the end of 1937 they were taking their case directly to the people. But this was a flanking effort—their main goal was to drive a salient into the economic mind of Roosevelt himself.

By this time the New Dealers had become a relatively stable and unified group. Their leaders in the cabinet were Ickes, Wallace, Perkins—and perhaps more influential with Roosevelt than any of these by 1938—Hopkins. Behind these notables was as remarkable and able a group of idea men as Washington had ever seen. The ebullient Corcoran was as active as ever, showing his uncanny capacity to move back and forth between exacting technical jobs and tough backstairs politicking. An official of increasing influence during this period was the chairman of the Board of Governors of the Federal Reserve System, a sharp-faced banker from Utah named Marriner Eccles. Two other rising stars were William O. Douglas, the sandy-haired ex-professor who now chaired the Securities Exchange Commission, and Robert H. Jackson, a New York lawyer who had won wide attention for his work in the Justice Department. Behind these men, backing them up with charts and memorandums and analyses, were a dozen barely known economists and lawyers—Isador Lubin in the Labor Department, Mordecai Ezekiel in Agriculture, Herman Oliphant in Treasury, Lauchlin Currie under Eccles, Leon Henderson and David K. Niles under Hopkins.

By the end of 1937 little knots of these and other New Dealers had been meeting secretly and holding feverish discussions on how to salvage the New Deal. They were at odds, however, over economic strategy. The out-and-out Keynesians wanted Roosevelt to start a bigger and better spending program. Others called for an old-fashioned, slam-bang attack on the trusts. The New Dealers were too unsure of Roosevelt’s current political mood to let him in on their
plans; besides, their tactic was to force his hand by building up pressure on the left.

As it turned out, though, Roosevelt unwittingly decided the issue between the spenders and the trust busters for a time. His private complaints during the fall that certain business interests were ganging up on him showed which way the presidential mind was leaning. Jackson, in the tradition of his namesake a century before the New Deal, opened up the counterattack on business by blaming monopolists and profiteers for the recession. Ickes followed with a denunciation of the “sixty families” that, he cried, controlled the American economy. The New Dealers were not content to deplore the economic power of the monopolists. They flayed them for seeking political power, for trying to defy the popular mandate of 1936, even for leading the country toward fascism. Ickes waited anxiously for the President to back up the onslaughts. Roosevelt did, after a fashion—but he took care to reiterate that only a small minority of businessmen were guilty of “poor citizenship.”

So trust busting was the order of the day. Nothing could have been better calculated to inflame the war between New Deal and business or to sharpen the alternatives facing Roosevelt. For the essence of the businessmen’s argument was that the recession stemmed directly from lack of confidence by investors in Roosevelt’s policies and ultimate intentions. Lack of confidence meant lack of investment, and faltering investment meant a slowing of the wheels of industry. As the New Dealers thwacked them hip and thigh, businessmen turned to Roosevelt for a repudiation of his radical advisers.

But the President was silent. He was still groping. As long as he could not see his way clear he steered cautiously between the New Dealers and the conservatives and avoided alienating either wing. And he continued to go to school. During the early weeks of 1938 businessmen flocked to the White House on the President’s invitation to tell him their ideas. The administration sponsored in Washington a conference of small businessmen that became so turbulent that the police had to be called. The Business Advisory Council met and its spokesman, Averell Harriman, asked the President to provide leadership around which they could rally, but the businessmen suspected that the President was still planless. Other meetings were more ominous. One hundred thousand workers turned out for a relief demonstration in Detroit; three thousand youth delegates convened in Washington to demand a “youth act” that would provide part-time jobs.

Pressed to act but not knowing what to do, Roosevelt turned from one scheme to another. For a time he toyed with ideas for a revival
of some kind of public and private national planning, although not to the extent of the NRA. Soon he was taking a different tack; in conferring with utility magnates he spoke strongly against utility holding companies, themselves a form of private planning. He denounced various marketing practices of big business, but he also made clear that he was not leaning toward any form of socialism. In the fashion of Hoover several years back, the President warned against wage reductions; but he expressed concern also over high prices in some fields and low prices in others. Roosevelt insisted that all his policies were designed to promote full employment. He failed, however, to back up his policies with more than cajolery, and as business conditions worsened, the nation saw only a policy of improvisation and drift.

A number of economists urged Roosevelt to increase government spending and thus prime the economic pump so that business could step up its own activity. These appeals—many of which came from academic men—did not move Roosevelt, at least at that moment. Pump priming had been proper in 1933, he believed, but it was not desirable in 1938 when business indices were off by only about a third. Here Roosevelt was somewhat a victim of circumstances. The two men close to him who had both an intellectual and vocational interest in spending were inactive, for different reasons. Hopkins had recently had part of his stomach removed because of cancer, and was recuperating in the early weeks of 1938. And Ickes during these months was putting virtually all his political energies behind his obsessive efforts to wrest the Forest Service away from the Agriculture Department and affix it to his own domain.

Roosevelt was now more sorely pressed than ever. Once again, as in early 1935, he was being squeezed by forces beyond his control. His enemies in Congress taunted him for his failure to come to grips with the recession. His friends pleaded for a reassertion of his moral leadership. “Mr. President,” wrote Wallace, “[you] must furnish that firm and confident leadership which made you such a joy to the nation in March of 1933.” It was all Roosevelt could do to get enough money out of Congress to meet immediate and essential relief needs. He warned a congressional leader that if Congress cut relief he would post a big sign in front of the White House announcing
WPA NEED NOT APPLY HERE—
with a big arrow pointing to Capitol Hill.

It was a condition, not a theory, that finally moved the President. In March the stock market’s halting decline turned suddenly into a panicky drop, and other indices slumped badly. Unemployment was still rising. In fact, the decline from the previous September was the sharpest the country had ever known. Even a number of business leaders were now calling guardedly for spending. When
Roosevelt left Washington for Warm Springs late in March he was worried and tense. He stopped off in Georgia to deliver one of the most bitter attacks of his life on minority selfishness, on feudalism that he described as virtual fascism. By now Hopkins was back in action, and, armed with memorandums from New Deal economists, he met Roosevelt at Warm Springs and urged on him a large-scale spending program.

Roosevelt knew that he must act. And he knew that he must act for the people—the people who loved him and who had sustained him. On the train back to Washington from Georgia he looked out of the window at the nondescript men and women who—five years after his inauguration—were still waiting for him along the track to wave and smile at him. He turned to an assistant. “
They
understand what we’re trying to do.”

Soon after arriving in Washington Roosevelt told Morgenthau that he had decided to scrap budget balancing and resume spending. When Morgenthau cried that he might resign, the President answered, “You just can’t do this!” It would wreck the administration, and Morgenthau would go down in history as having quit under fire. Morgenthau stayed.

As usual, when the President shifted, there was little looking back. In mid-April he proposed to Congress a three-billion-dollar spending program, and in a long fireside chat took his new program to the people. Two weeks later he asked Congress to launch a thorough study of the concentration of economic power in American industry and the effect of that concentration upon the decline of competition. Congress responded enthusiastically to his proposals and passed the legislation by heavy majorities within a few weeks. Three billion was appropriated for spending and lending during the next fiscal year, and the Temporary National Economic Committee, consisting of senators, representatives, and government officials, and staffed by scores of experts, was established under the chairmanship of Senator Joseph C. O’Mahoney to conduct a full-scale investigation of the economy. Within a few months business indices were edging up again, but a large lump of unemployment continued to weigh down the economy.

One day late in Roosevelt’s second term Marriner Eccles reported at the White House to raise some pressing economic questions with the President. He had been promised an hour-long luncheon engagement—a prize that an administrator might spend weeks conniving for. To his dismay, he found that Senator McAdoo was cutting into his time. When Eccles finally got into the President’s
study the burly old Californian was standing over Roosevelt and declaiming about the political situation back home.

“Bring up a chair, Marriner,” the President said. To McAdoo he added: “Marriner and I are just about to have lunch.”

McAdoo was too engrossed in his problems to take the hint. “Oh, that’s all right,” he said, “you two boys go right ahead—I’ll talk while you eat.”

Reaching to a warming oven next to his chair, Roosevelt pulled out a plate. It was burning hot. Juggling it awkwardly, he managed to place it before Eccles. While the President shook his scorched fingers and Eccles burned inside, McAdoo continued to talk. He finally wound up:

“Now, remember, Franklin. I want to leave one last thought with you. When it comes to appointing any of those federal judges in California, I wish you would take the matter up with me instead of with that son-of-a-bitch Downey.…”

McAdoo finally left. Marveling at Roosevelt’s good humor through all this, Eccles leaned forward to talk. But as the waiter rolled away the tray there was a new diversion. Fala bounded in, Roosevelt took a ball out of his desk, and for several minutes the dog played retriever for his master, while Eccles feebly voiced words of praise.

“That’s enough now,” Roosevelt said to Fala. “I’ve got to get back to work.” Eccles started talking, but after a few minutes he saw that he had lost his audience. Roosevelt was looking around the room for Fala. Suddenly the President burst out: “Well, I’ll be God-damned! Marriner, do you see what I see?”

Eccles did. Over in a corner Fala was committing an indiscretion on the rug. Several more minutes elapsed while Roosevelt summoned a guard, had Fala’s nose rubbed in the mess, and delivered a post mortem. By now Eccles’ time was almost up. He left in a blind rage. To his associates awaiting him expectantly at the Federal Reserve Building he could report only on California politics and on the doings of Fala.

This sort of thing happened many times. People were amazed at Roosevelt’s governmental habits—at his way of running through a series of wholly unrelated conferences like a child in a playroom turning from toy to toy, at his ability seemingly to put one matter out of his head when he turned to another, above all at his serenity and even gaiety under the pitiless pressures of men and events. The methods, of course, reflected the man. Roosevelt’s mental agility and flexibility were well suited to the experimental phase of the New Deal. In 1938 Roosevelt was still the improviser, still the pragmatist.

Was practicality enough? Roosevelt’s fumbling and indecisiveness during the recession showed his failings as an economist and thinker. His distrust of old and doctrinaire economic theories freed him
from slavery to ideas that would have been risky in the 1930’s. But at the same time, that distrust helped cut him off from the one economist and the one economic idea that might have provided a spectacular solution to Roosevelt’s chief economic, political, and constitutional difficulties.

The man was the noted British economist John Maynard Keynes. An academician who was yet a leader in the bizarre Bloomsbury set, an economist who had won and lost fortunes as a speculator, a Cambridge don who also ran insurance companies, a prickly intellectual who was close to men of affairs throughout the world, a reformer who believed in liberal capitalism, Keynes for two decades had been provoking British opinion with his unorthodox views of economics, industry, and international affairs. In 1936 he had published the capstone of his economic thought,
The General Theory of Employment, Interest, and Money.
Bristling with critical references to cherished theories and honored names, filled with strange terms and equations, punctuated by lengthy appendixes, the
General Theory
had been read by few. But its impact on liberal economists in America was already making itself felt.